CLE program offers vital legal advice for outdoor businesses

Each year most attorneys are required to take continuing legal education classes to stay current in the law. For those attorneys who work in the outdoor recreation and adventure travel industry, CLE International, with the help of attorneys Cathy Hansen-Stamp and Charles “Reb” Gregg, have put together a two-day training program titled “Recreation & Adventure Program Law and Liability.” However, in a unique twist to normal CLE programs, Hansen-Stamp and Gregg have designed this program for both attorneys and their clients — meaning owners and managers of outdoor businesses could benefit by attending.

April 1 and 2 marked the second year of the Colorado-based program and attendance was double that in 2003. A dozen speakers covered the key areas of outdoor recreation law and many of the legal issues involved, and no, it wasn’t dry. On the contrary, speakers were quite entertaining and made digesting the material that much easier.

We’ve provided a quick summary of covered topics that stood out to our expert on the scene — Jim Moss — as most useful to an outdoor industry in the business of selling products, as well as to retailers offering clinics and in-store or out-of-store instruction and trips.

Insurance — Be sure you are carrying sufficient liability coverage

Several years ago one large broker in the industry suggested buying minimum levels of general liability coverage to discourage large lawsuits. Not having enough insurance puts your business at risk. You should have the amount of insurance to cover the value of your business. If you have a million dollar business, you should have a minimum $1 million in general liability coverage. A plaintiff will sue for the value of the business and if you are short on insurance, your business will be at risk.

Written policies, standards or other company documents — craft them well

Poorly written documents may eliminate assumption of risk and create a higher standard of care for your business. Written standards, manuals or operational documents create this higher standard. “Always,” “never,” “shall,” and “we provide safe environment” are words that should never be used in any manual or written material. “The thinner the better” when creating your written company materials. Each violation of written material is a strike against you in a courtroom; three strikes and you are out.

Never put unachievable expectations in any documents, especially in marketing materials.

Industry standards are being replaced and called “customs and practices.” Standards have such a heavy legal value attached to them. Violation of industry standards is negligence. Violation of a custom or practice is bad business and does not bear great weight against you in court. Even in using the term standard as a guideline and treating it as something else, you have created dual liabilities.

Standards are the lowest acceptable level of operation, not goals.

Equipment and product liability affects everyone in the supply chain

Laura L. Horton provided an excellent presentation on product liability issues in the industry. She can be reached at Laura L. Horton, Law Offices of Laura L. Horton, 18919 Nordhoff St., Ste. 6C, Northridge, CA 91324, 818-349-8288, 818-772-4613 (fax), laura@horton-law.com.

All recreational activity has a “product” associated with the activity. The service provider (retailer) is as liable as the manufacturer for product liability claims. Especially when faced with a strict liability claim. All people in the chain, retailer, distributor and importer will be sitting together at the defense table in court.

There are three types of product liability claims:

>> Manufacturing defects are a problem in the manufacturing process, which causes injury to the consumer. The individual product is defective rather than the entire group of products. Examples are improper assembly or malfunction during assembly.

>> Design defects are the manner or the way the product is designed causes injury. Fo example, a scuba computer with defective algorithm in it or a belay device that fails to work when wet.

>> Marketing defect or a failure to warn occurs when the manufacturer knew or should have known of a hazard by the way the product was designed. These claims are prompted by prior injuries using the product. The lack of warnings and instructions were the proximate cause of the injury.

Marketing defect claims occur in the outdoor recreation industry with greater frequency because information is not widely circulated. Consequently, the industry has a tendency to repeat the same mistakes.

Theories of Liability

In a strict liability claim, the manufacturer must have actual or constructive knowledge of the problem. Strict liability means the product is dangerous when placed in the market. The focus is on the product only, not on the conduct of the parties.

Everyone in the chain of the sale is held liable under a strict liability claim. Strict liability is a reasonable forcibility test: Was it reasonably foreseeable that the product would malfunction or cause injury? The big problem is when the manufacturer and/or importers/distributors disappear, the retailer is left holding the bag.

The negligence theory claims there is a duty to warn or instruct. In other words, the lack of warning was the proximate cause of the injury.

The big issue in product liability claims is causation: Who caused the damage. This becomes the pass the buck contest between defendants. The plaintiff’s attorney sits back while the retailer, distributor, importer and manufacturer argue and fight each other. The plaintiff’s attorney then attacks the weakest link.

Retailers are at the greatest risk for recall issues. If the manufacturer sends out a recall notice and the retailer does not pass on the information and/or conform to the manufacturer instructions on the recall this will create liability for the retailer. While it might seem unfair that the retailer is then stuck with the costs of a manufacturer-created problem, the courts see this as a communication issue. The courts have determined the lack of communication is as great of a problem as the defective or poorly-made product. If the retailer had acted as instructed or informed the public during the recall, there would not be an injury.

Issues about the sales of the product also create liability: The retailer must be aware of what the customer is being told. You may be unintentionally negligent by providing the consumer with bad or incorrect information. Also intentional or fraudulent misrepresentations create liability. “Puffing” creates liability nowadays where it did not in the past.

Some manufacturers, such as Burton, have turned to producing releases that must be signed prior to purchasing a product. Whether those types of releases work in winning a lawsuit is not uniform across the country. The majority of the states do not allow a release to bar a product liability claim. California will not allow a release to bar a strict liability claim, possible on the other claims. The third restatement of torts always does not support the use of a release in a product liability claim.

However, the release still has value because it can show the manufacturer warned the consumer of the risks of the product. There are already cases that have been won because a release was signed prior to a product purchase.

Post sale duty to warn is an emerging area in the law. Consequently, this claim varies from state-to-state. There is a continuing post sale duty to warn consumers of dangers in a product or the use of the product. The duty is to remedy the product or give warnings and instructions for methods to minimize the danger. Another way to look at it is if consumers begin to use the product in a way that was not intended and thereby create a danger to the consumer by using the product in that manner, it becomes the duty of the manufacturer and retailer to begin informing customers NOT to use the product in that manner.

Understand products you sell as a retailer. Make sure all of your employees are trained on the use, maintenance and care of the products used in your business. Your employees should demonstrate proficiency in the use of the product.

As a manufacturer you should explore every possible use of a product. Too often a manufacturer only sees the product the way it is intended to be used, not the many different ways a consumer may or does use it. Our legal team advises regularly giving your products to folks that have little or no familiarity with it, to see how it might be used.

If you are renting equipment, make sure you purchase quality equipment. Ensure the rental equipment meets the applicable industry standards. Don’t purchase used equipment to rent. Make sure your documentation can identify the specific piece of equipment. Also have a routine inspection program for all rental gear. Document routine inspection whatever it may be either after every rental, or quarterly as long as the inspections are regular and scheduled, not arbitrarily conducted when someone feels like it or has time. Make sure the manufacturer specifications are met during all maintenance.

If possible, have the manufacturer train your maintenance people on maintaining equipment. NEVER modify or alter the equipment used in rentals. Warnings and labels are there for a purpose. All warnings and labels must go with the rentals. Make sure the consumer cannot misuse the equipment. Either eliminate or train around the possible misuse.

Be aware of changing industry practices. Be conscious of whether the information you see is correct. Just because it has been printed or posted on the web, does not mean it is correct or from the manufacturer.

Releases, waivers and covenants not to sue

Always have your releases written by an attorney and reviewed regularly. Pay the attorney to notify you if the law changes. Take the time to discuss your activity and your concerns with your attorney. Review the releases when the attorney writes them so you understand and can spot problems in the releases. If you do not understand your releases, your clients will not.

Don’t assume your insurance company or a nationally recognized organization has reviewed your release or the release they give you. Do not use a home grown release. Don’t Internet search or cut and paste your release. Don’t steal my release. Your attorney should be knowledgably in release law and your business and the activities you provide or product you manufacture or sell.

Allow your clients adequate time to read and review the release. Send your release to them in advance if possible. Your release should identify all the potential defendants, independent contractors and employees. You do not need to have someone you think is on your side helping the plaintiff.

Prominent release language should be clear and unambiguous. Your release should identify a possible product liability claim.

If your guest does not sign the release, then they should not participate in the activity.

Rule #1: If the release is unsigned, updated or lost, the participant will injure themselves.

Certification and Accreditation

Certification and accreditation is a double-edged sword. Certification and accreditation works for you if you follow the rules, works against you if you do not. Insurance companies are saying, OK you’re accredited or certified, but what did it do for you and how does that help your insurance company.

The Good Samaritan standard should be used in adopting a standard for an industry by the industry association. The association that creates the standards may be liable if the association standard increases the risk to the consumer.

If the membership takes action against a member for violating the standards, the standards are no longer voluntary.

SNEWS® View: Typically, when attorneys speak, fear tends to be more the broadcast message, rather than answers. However this group worked harder than normal to provide answers to the warnings they created. In addition, this year’s Continuing Legal Education program was vastly superior to the prior year. While the second day fell off in terms of legal value for lawyers, for non-lawyers, the two days provided excellent tips and information vital to running a business and protecting that business. However, while this is targeted for clients of lawyers, as well as the lawyers themselves, we would not recommend anyone attending who does not have at least a basic understanding of the law and risk management. We’d recommend, if you do have a basic understanding of law and risk management, that you get in touch with the CLE International folks and put next year’s conference on your calendar. We’ve provided complete contact information below for several organizers and key individuals, including CLE:

Catherine Hansen-Stamp, 13245 Willow Lane, Golden, CO 80401; 303-232-7049

Charles R. Gregg, 1415 Louisiana, 42nd Floor, Houston, TX 77002; 713-982-8415

James H. Moss, P.O. Box 16743, Golden, CO 80402; 303-807-2275 or email at jhmoss@earthlink.net

CLE International, 1620 Gaylord St., Denver, CO 80206; 303-377-6600 or email to sarah@cle.com