§32.3 Gross Negligence and Exculpatory Clauses

The Case: Planters Gin v. Federal Compress, 78 S.W.3d 885 (Tenn. 2002).

The Basic Facts: Defendant leased warehouse space to plaintiff. The lease agreement provided that defendant was held harmless for any loss at the warehouse.

The Bottom Line:

• "This freedom to limit liability by contract is subject to some exceptions. By statute, indemnity agreements relative to construction contracts are deemed void as against public policy, Tenn. Code Ann. § 62-6-123 (1997), and residential rental agreements in certain counties may not limit the liability of the landlord or indemnify the landlord for liability. Tenn. Code Ann. § 66-28-203(a)(2)(1993). Our Court has also found indemnity or exculpatory clauses violate public policy in certain distinct fact situations. In Crawford, we held that an exculpatory clause in a residential lease releasing a landlord from liability for future acts of negligence, even when executed in a county not covered by Tenn. Code Ann. § 66-28-203, is void as contrary to public policy. 839 S.W.2d at 760. And in Olson v. Molzen, 558 S.W.2d 429, 431 (Tenn.1977), we held an exculpatory contract signed by a patient as a condition of receiving medical treatment was contrary to public policy and void. Furthermore, we have found indemnity clauses are invalid as to damages caused by gross negligence or willful conduct on the part of the indemnified party.Adams v. Roark, 686 S.W.2d 73, 75-76 (Tenn.1985); see William K. Jones, Private Revision of Public Standards: Exculpatory Agreements in Leases, 63 N.Y.U.L.Rev. 717, 732 (1988). No such policy considerations are present in the case before us." 78 S.W.3d at 893.

Other Sources of Note: Thrasher v. Riverbend Stables, LLC, No. M2008-02698-COA-RM-CV, 2009 WL 275767 (Tenn. Ct. App. Feb. 5, 2009) (genuine issue of material fact on whether defendant committed gross negligence in caring for horse, thus voiding exculpatory clause in boarding agreement); Buckner v. Varner, 793 S.W. 2d 939, 941 (Tenn. Ct. App. 1990) (exculpatory clause in a contract "will not operate to protect a party who is guilty of gross negligence").