What is a Liability Waiver or a Release Form?

Release forms may lower risk

Bicycle race

Some businesses offer services or sponsor activities that can be risky for customers or participants. Examples are horseback riding lessons, aerobics classes, and bicycle races. If participants are injured they may sue your company for damages. You can discourage such lawsuits by requiring all participants to sign a release of liability form (also called a liability waiver) before they begin the activity.

What is a Release of Liability?

A release of liability form is a contract between your business and a customer, client, or participant. When your customers sign the form, they agree that they understand and accept the risks associated with the activity. They also waive their right to file a liability claim against your company for any injuries they sustain from the activity.

Release of liability forms are intended to limit the number of negligence suits filed by patrons against your business. Your liability insurer may demand that you use them as a condition of providing insurance. Release forms help head off costly lawsuits so you should consider using them even if they aren't required by your insurer.

Myths About Release Forms

As a business owner, you may have heard these myths about liability waivers:

A patron who has signed a waiver can't sue me. A liability waiver may not prevent an injured party from suing you. It simply shifts some liability for injuries from your business to the injured party. A waiver may release you from ordinary negligence claims but it does not eliminate the right to sue. Patrons can still sue you for gross negligence and intentional torts.

Individuals who are under the legal contract age cannot release liability. This means that releases are not enforced against minors. Only minors' parents and guardians can release liability on their behalf.

I don't need to notify my liability insurer about an accident. The customer signed a release before he was injured and won't sue my company. You are obligated to report any occurrence that may result in a claim. This is clearly stated in the policy conditions. You must notify your insurer of any accident whether or not you have obtained a waiver of liability from the injured party. Send your insurer a copy of the waiver form when you submit your report. Don't try to handle the injury or claim yourself.

I don't need insurance if I use release forms. A liability release form is not a substitute for commercial liability insurance. It may discourage some lawsuits but will not prevent all of them. A customer who has signed a waiver may still file a claim. Moreover, lawsuits can arise from activities not covered by the waiver. Remember that release forms should be used in addition to, not in place of, general liability insurance.

Make Sure Your Form Is Enforceable

A release form has value to your company only if it is enforced. The laws regarding releases vary by state. Some states enforce releases as they are written while others enforce them only if they meet certain requirements. A few states don't enforce liability releases at all. If you aren't sure how the law applies in your state, ask your attorney for an explanation.

While the laws differ from state to state, your liability release is more likely to be enforced if you follow some basic guidelines. First, be sure your release is properly worded. It should be written in clear, unambiguous language that complies with your state's law. Generally, the location of the activity will determine which state's law applies. 

Where can you obtain a release form if you don't have one? One obvious source is your attorney. Other possible sources include your liability insurer, your insurance agent or broker, your business associates, and trade or professional organizations.

Once you have obtained a release form ask your attorney to review it. Your attorney can tell you whether the release is suitable for your business. If it isn't, your attorney can draft one that's more appropriate. The fee for drafting such documents will be much less than the cost of a lawsuit. Because laws change periodically, you should have your attorney review your form annually.

Avoid These Mistakes!

Here are some mistakes to avoid when using liability release forms.

  1. Don't use forms you've downloaded from the Internet. Forms you find online may not be appropriate for your business and may not meet your state's legal requirements.
  2. Don't draft your own release form. Unless you are an attorney, don't write the form yourself. The cost of hiring an attorney to draft a properly-worded document is money well spent.
  3. Avoid confusing language, including legalese. To be enforceable, a liability waiver must be clear and understandable to the customer or patron.
  4. Don't bury the release in fine print. A release must be clearly visible to the patron, not hidden in tiny print or buried it in another document. Present it in a separate document so it is easy to identify.
  5. Don't use forms that contain blank spaces. Don't hand a form to a patron that is missing information. Be sure all blank lines are filled in except those that are to be completed by the patron.
  6. Don't use forms your patrons can't understand. Some patrons may have language, eyesight, or other issues that might impair their ability to understand the release. You should provide these patrons the release in a format (such as braille, large print, or a foreign language) they can comprehend.

Train Your Employees

Your employees are your first line of defense against liability claims so they should know how to use releases properly. Your workers should insist that all patrons read the release carefully so that they understand its terms. They should not rush patrons through the signing process and should encourage patrons to ask questions. They should also ensure that all blank lines are filled out. Workers should reject any release form a patron fails to complete, even at the risk of losing a sale.