Pennsylvania Supreme Court: One Cannot Exculpate For Recklessness

The Supreme Court of Pennsylvania recently held that exculpatory clauses that relieve a party of liability for “recklessness” are invalid as against public policy. Tayar v. Camelback Ski Corp. Inc., 2012 WL 2913750,* 10 ___ A.3d ___ (July 18, 2012). After a detailed analysis and discussion of the law applicable to exculpatory clauses, the Supreme Court concluded that it was against public policy to allow a party to exculpate itself in advance for reckless behavior. The Supreme Court reasoned that to find otherwise “would remove any incentive for parties to act with even a minimal standard of care.” Tayar, 2012 WL 2913750 at * 7 & 10. In so finding, the Supreme Court not only noted that the overwhelming majority of states find that exculpatory clauses releasing reckless conduct are against public policy, but also noted that the federal courts in Pennsylvania had previously barred the enforcement of releases for reckless conduct. Id. at * 9 & n.13.

The Court’s decision in Tayar left “for another day the question of whether a release for gross negligence can withstand a public policy challenge.” 2012 WL 2913750, at * n. 7. The Court cited federal court decisions from United States District Courts for the Eastern District of Pennsylvania and the District of New Jersey in its analysis of recklessness, and noted those courts found that exculpatory clauses in Pennsylvania cannot limit liability for gross negligence. Id. at * n.13. In doing so, the Court commented on the decision in Valeo v. Pocono Int’l Raceway, Inc., 500 A.2d 492 (Pa. Super. 1985) by saying that it “did not address the public policy of permitting such a release.” Id. at * n.7. . Valeo is sometimes cited as authority for the argument that one cannot circumvent the language in an exculpatory clause based on gross negligence. While the Court’s decision in Tayar now stands for the proposition that one cannot avoid liability for recklessness by relying on an exculpatory clause, the decision also opens up the possibility that, under the same logic, defendants can no longer escape liability for acts of gross negligence. 

New Rule for Hearings in Arbitration Forums

Recovery professionals handling claims in Arbitration Forums, Inc.’s Property Arbitration Forum should be aware that, as of March 1, 2012, Arbitration Forums will be implementing new rules for hearings. Rule 3-7 now states that the written Contentions and supporting evidence submitted are all that is to be considered by an arbitrator, and that a party attending the hearing is not allowed to verbally present its case or offer any argument that is not included within the written Contentions. Rule 3-7(a) also provides that a representative who attends a hearing may only clarify, at the arbitrator’s request, his or her party’s Contentions and/or submitted evidence. Consequently, under the new rules, a recovery professional presenting a claim can only answer the questions of the arbitrators and can no longer present arguments.

Rule 3-7 has been also been amended to state that additional evidence can no longer be submitted at the time of the hearing, rather it must be uploaded or submitted to Arbitration Forums by the Materials Due Date.

These new changes to Rule 3-7 go along with the trend in Arbitration Forums of holding “staff hearings,” which are hearings held via a conference call in which the parties are only allowed to answer the questions of the arbitration panel. When preparing your arbitration package, try to anticipate all of the potential written evidence and file materials that you may need to rely upon in presenting your claim. Given these changes, recovery professionals should err on the side of being over inclusive when submitting evidence and supporting documentation.

The Independent Contractor Doctrine is Not Always Applicable in Delivery and Installation Cases

Defendants often claim that the negligent work they are being sued for was done by “an independent contractor”—thus attempting to alleviate their responsibility. This defense is often raised in cases where construction is being performed. However, it can also be raised when one party contracts with another for a specific type of installation or delivery work. In these cases, the independent contractor defense may not be applicable if you can establish that there was no prior disclosure to the owner that independent contractors would be used.

For a variety of reasons, the recovery professional may wish to craft an argument that will allow continued pursuit the primary target for the work done by the independent contractor. While not every jurisdiction has addressed this issue in the context of installations or deliveries, some have adopted Restatement (Second) of Torts §429. Under this section of the Restatement, you may be able to diffuse the defense that an independent contractor did the work if you are able to show the general contractor failed to disclose the use of independent contractors or subcontractors.

Massachusetts has adopted Section 429 of the Restatement (Second) of Torts. In Harkins v. Colonial Floors, 8 Mass. L. Rptr. 127, 1998 WL 22075, * 8, No. CIV A 96 910 (Mass. Super. Ct. 1998), the court set forth a roadmap for how to defeat the defense of the independent contractor doctrine in a repair, installation or delivery setting.

When faced with the independent contractor doctrine in a setting that involves installation or delivery, recovery professionals should examine Section 429 of the Restatement to see whether it may apply in your state.