On October 30, the Utah Supreme Court issued an opinion in the case of Berry v. Greater Park City Company, 2007 UT 87, which didn’t deal directly with community associations; in fact, upon first blush, it would seem to have no relevance.
The Berry case dealt with a competitive skiercross race, promoted as the “King of the Wasatch.” Mr. Berry, before participating in the race, signed a “Release of Liability and Indemnity Agreement.” He was seriously injured in the race, and brought suit against several entities, including the ski resort and several sponsors. Before he could pursue his claims, he needed to challenge the enforceability of the release.
The court’s analysis of the enforceability of the release is what makes the case of interest in the community association realm. Regular readers will recall that several weeks ago, I referenced a Georgia case in which the Georgia court upheld exculpatory language in an associations covenants. The new Utah case may shed some light on whether or not Utah courts will follow the Georgia court in enforcing similar provisions. And, it may assist drafters in making their language more likely to survive judicial scrutiny.
In Berry, the Court declined the plaintiff’s request to rule pre-injury releases of negligence to be unenforceable based upon public policy. The Court did, however, reaffirm that “sound reasons exist for the law to treat pre-injury releases with greater suspicion than post-injury releases.” The Court adopted the considerations of an old California case Tunkl v. Regents of the University of California, 383 P.2d 441 (Cal. 1963), as establishing the standards which a court should evaluate in considering the enforceability of these clauses. The factors of Tunkl, adopted by the Court, included:
“ [The transaction] concerns a business of a type generally thought suitable for public regulation.  The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public.  The party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards.  As a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services.  In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence.  Finally, as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.”
Hawkins, 2001 UT 94, ¶ 9 n.3 (quoting Tunkl, 383 P.2d at 445-46).
Several of the factors in this analysis obviously argue against the enforceability of a pre-injury release of damages arising from negligence in performing construction services; on the other hand, the injuries arising from defective construction offer differ significantly from the injuries arising from negligent operation of a competitive or recreational activity. That is one of the underpinnings of the economic loss doctrine, and that is a discussion for another day.