In August 2010, the New Jersey Supreme Court for the first time approved the use of a liability waiver contained in a contract of adhesion that waived the plaintiff’s ability to recover damages for the negligent acts of a fitness club. In a case of first impression, Gina Stelluti v. Casapenn Enterprises LLC (August 5, 2010), the court sent its strongest signal of approval for such exculpatory clauses.

Plaintiff and gym patron, Gina Stelluti, upon contracting with the defendant gym, signed a liability waiver stating that she assumed all risks of negligence on the part of the defendant, including injury from faulty equipment. Shortly after signing the waiver, she was injured during a gym spin class when the handlebars on her stationary bicycle dislodged, causing her to fall. She sued the gym, arguing that it was negligent in failing to properly maintain the bike and properly instruct her on its use. The trial court granted summary judgment (and the Appellate Division affirmed) based on the waiver Stelluti had executed.

In analyzing Stelluti’s appeal, the Supreme Court determined that, while the liability waiver was a contract of adhesion, there was not unequal bargaining power sufficient to make it procedurally unconscionable, because Stelluti could have chosen to exercise at another facility or on her own. Importantly, the court accepted the trial court’s finding that Stelluti had read and understood the waiver before she signed it. Then, the court analyzed whether enforcement of a liability waiver between a fitness center and its customers would violate public policy. The court noted that injuries are common at fitness centers, and that such gyms “perform a salutary purpose by offering activities and equipment so that patrons can enjoy challenging physical exercise.” The court concluded that while patrons cannot waive their rights to be compensated for gross or reckless negligence on the part of a fitness center, a liability waiver can protect a fitness center from mere negligence. The court was particularly concerned that “[a]ny requirement to so guarantee a patron’s safety from all risk in using equipment, which is understandably passed from patron to patron, could chill the establishment of health clubs.”

While this decision is generally favorable to exculpation clauses – indeed, Judge Albin’s dissent claimed that “[f]or the first time in its modern history, the Court upholds a contract of adhesion with an exculpatory clause that will allow a commercial, profit-making company to operate negligently” – some caution is in order. The decision in Stelluti is not broad enough for the enforcement of all liability waivers, only waivers of negligence in limited circumstances. Businesses looking to shield themselves from liability via a prospective waiver should (1) present the waiver (limited to negligence) to the customer in a separate, well-labeled document to better ensure that the customer reads and understands what he or she is signing, which will assist in rebutting an argument that the contract or waiver is one of adhesion that is unconscionable; (2) make sure that the activity to which the waiver is intended to apply is not an activity that has statutory or regulatory imposed duties and (3) only expect the waiver to be enforceable if the activity involved has a salutary impact on the public or is otherwise in the public’s general interest. Only then will a court consider enforcing a liability waiver under the “risk-sharing” approach endorsed by the Supreme Court in Stelluti. While Stelluti is not blanket approval of all liability waivers, a business dealing with the public and offering risky but beneficial services now has a valid argument that a properly crafted and presented waiver is enforceable under New Jersey law.