Maine Nonprofit Law E-Bulletin – June 2011

In this Issue:

• Introduction
• A Primer on Waiver and Release Forms
• Upcoming Event – How to Keep Tax-Exempt Organizations in Compliance

Introduction

Welcome to the latest issue of the Maine Nonprofit Law E-Bulletin.  I send E-Bulletins 3 or 4 times per year to provide updates and analysis on legal and policy matters respecting Maine nonprofit organizations.  I do my best to keep the messages brief, timely, and useful to nonprofit staff, board members, volunteers, advisors, and donors.  At the same time, no one may rely on these E-Bulletins as legal advice, and I encourage you to consult a qualified attorney for advice on any particular situation.

If you find this free E-Bulletin to be valuable and interesting, please share it with a friend or colleague.  Subscriptions remain free, and I respect my subscribers’ privacy.  Anyone who would like to receive this E-Bulletin or the Maine Land Conservation Law E-Bulletin can e-mail me at rob [at] roblevin.net.  If you’d like to be removed from the distribution list, simply drop me a line at that same address.

A Primer on Waiver and Release Forms

One of the most common requests I receive in my practice is to draft or review waiver and release forms (also sometimes called a “hold harmless agreement,” “indemnification agreement,” or “assumption of risk agreement”).  These are written forms that nonprofit organizations and businesses use to limit their liability exposure in the event that a person is injured while participating in an activity.  If you have ever been white water rafting, downhill skiing, or participated in just about any kind of organized recreational event, you have been asked to sign one of these forms.  Through such forms, one supposedly waives and releases any personal injury or property damage claims against the organization arising from the activity in question.

Before going any further into the details of waiver and release forms, it should be pointed out that the best way to protect an organization from liability is to prevent accidents in the first place.  It is far better for an injury never to have occurred at all than for an organization to not be held liable for an injury.  Having said that, even getting out of bed in the morning carries some degree of risk, and certain very worthwhile activities are particularly risky.  Therefore, if drafted very carefully, a waiver and release form can be an effective component of a broader risk management program.

A key starting point to understand about waiver and release forms is that any ambiguity in them will be resolved in favor of the person who has been harmed.  Thus, the waiver and release language should be clearly and prominently stated, and not hidden in the fine print of a larger agreement.  There are many examples of courts declining to enforce waiver and release forms because of one flaw or another.

More specifically, in order to be enforceable against negligence claims, a waiver and release form must “expressly spell out with the greatest particularity the intention of the parties contractually to extinguish negligence liability.” Doyle v. Bowdoin Coll., 403 A.2d 1206, 1208 (Me.1979) (waiver and release form for hockey clinic sponsored by Bowdoin College held unenforceable).  In other words, the form must clearly state that any negligence claims are waived and released.  A general release or waiver of all claims will not suffice.  I have reviewed many waiver and release forms without negligence-specific language, and these forms likely would be ineffective if challenged by an injured person.  An example of a waiver and release form that the Maine Supreme Court did find enforceable can be found in Lloyd v. Sugarloaf Mountain Corp., 2003 ME 117.

The form is also more likely to be enforced if it is specific in describing the activity that is expected to be covered, and the kinds of risks that are involved.  For example, one issue that arose in the Lloyd case is whether the form, which expressly applied to injuries arising from a mountain bike race, also covered practice runs leading up to the race itself.  The Supreme Court held that because the practice run was mandatory to participating in the race, the two were intimately connected, and the form did cover practice runs.  But in hindsight it would have been better to expressly cover practice runs in the form itself.

A form goes beyond a waiver and release if it also states that the signer will “indemnify” the organization for its expenses in defending a claim.  Such indemnification language can be an effective way to reduce the likelihood that the form will be challenged in court, because it means that not only is the injured person likely to lose on the negligence claim, but s/he will also have to pay the organization’s legal costs in defending itself.  For an example of a successful indemnification provision, see Lloyd.

Finally, it is generally understood that a waiver and release form is not effective to protect against instances of gross negligence (an extreme form of carelessness) or willful or malicious actions.  So even a well-drafted form cannot protect against all risks.

Upcoming Event – How to Keep Tax-Exempt Organizations in Compliance

Date: Monday, August 29, 2011, 9:00 a.m. – 4:30 p.m.
Location: Fireside Inn and Suites, Portland

Sponsor:  National Business Institute

Do you know all the ins and outs of tax-exempt compliance? Even inadvertently breaking the rules can jeopardize tax-exempt status.  Join us at this seminar to get the information you need to stay current on the latest regulations, avoid IRS penalties, and ensure accounting practices are up to par. Get answers to all of your tax-exempt compliance and operational questions.  Presented by a panel of three Maine attorneys, including Robert H. Levin.

• Gain strategies for safeguarding directors, officers and executives from potential liability.
• Create an environment of accountability by establishing comprehensive internal controls.
• Follow annual reporting requirements and comply with the rules governing disclosures and solicitation.
• Know how to identify what qualifies as unrelated business income – and what the exceptions are.
• Adhere to the accepted guidelines for determining appropriate executive compensation.

For more information and to register, click here.

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             CIRCULAR 230 DISCLOSURE: Any federal tax advice contained in this communication or attachment is not to be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending any transaction or matter addressed in this communication.

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