In Oregon, contracting parties may agree to disclaim tort liability. However, to do so requires unambiguous contract language such that the waiving party undoubtedly knows what they are bargaining for. Oregon recognizes a general “policy favoring the freedom to contract as one pleases[,]” except in certain circumstances in which “some contravening policy outweighs it.” Irish & Swartz Stores v. First National Bank, 220 Or. 362, 378 (1960). There is a strong public interest in deterring negligence. Rather that prohibiting parties from agreeing to tort liability disclaimers, Oregon law imposes “a presumption . . . against an intention to contract for immunity from the consequence of one’s own negligence and that a contract will not be given that meaning unless so expressed in unequivocal language.” Waterway Terminals v. P.S. Lord, 242 Or. 1, 19 (1965).
The Oregon Supreme Court recently decided Certain Underwriters v. TNA NA Manufacturing, 372 Or. 64 (2024), clarifying what is and is not “unequivocal language.” In Underwriters, the plaintiff was the insurer and subrogee of a food product company, the “Buyer,” and the defendant was a food processing equipment manufacturer, the “Seller.” The Buyer contracted with the Seller to purchase certain equipment used in sunflower seed production. The Buyer lost nearly 20 million dollars after a listeria outbreak led to a voluntary product recall. The Buyer alleged that the equipment caused the listeria outbreak as a result of the Seller’s negligence. The Seller moved for summary judgment based on several provisions of the contract which the Seller claimed immunized it from tort liability, including Buyer’s negligence claim.
The trial court granted summary judgment, and the Court of Appeals affirmed on the basis of only one of the provisions. A section entitled “DISCLAIMERS” provided, in relevant part, that “Seller shall not be liable, in any event, for loss of profits, incidental or consequential damages or failure of the equipment to comply with any federal, state or local laws.” In a previous case, Kaste v. Land O’Lakes Purina Feed, LLC, 284 Or. App. 233 (2017), the Court of Appeals had held that a “contract that contains a broad reference to ‘any liability’ suggests that the parties intended for the provision to limit ‘any liability’ regardless of whether that liability arose in tort or contract.” The Court of Appeals applied that same logic to the broad language in Certain Underwriters and affirmed summary judgment in favor of defendant Seller.
The Supreme Court of Oregon disagreed. In order for a contract to effectively waive tort liability, i.e., immunize one party from liability for its own negligence, the contract must overcome the presumption articulated in Waterway Terminals. “[C]ontracts are strictly construed to ensure that the releasing party did, in fact, knowingly bargain for the release of tort liability.” Certain Underwriters, 372 Or. at 72 (citing Commerce & Industry Insurance v. Orth, 254 Or. 226, 231 (1969)). The Court reiterated that waivers must be clear and unequivocal, and that evaluating this clarity depends both on the language of the contract as well as “the harsh or inequitable result” that may befall the immunizing party. Id. at 73 (quoting Estey v. MacKenzie Engineering Inc., 324 Or. 372, 376 (1996)). To overcome the presumption, the contract must be “beyond doubt,” i.e., the “contract must make it crystal clear that the releasing party has absolved the other party from the consequences of the party’s own negligence and product defects.” Id. The Court rejected the idea that broad catch-all language is necessarily unequivocal. In the context of the agreement at issue, the Court noted that the applicable section of the contract could reasonably be understood to refer only to damages other than those arising from the Seller’s own negligence. Id. at 75–76.
The Court stopped short of holding that any specific magic words were necessary for a contract to overcome the presumption, and it declined to hold that broad language could never be sufficiently clear to overcome the presumption. As a practical matter, however, parties should remove any ambiguity if they want their tort liability waiver to be enforced. The Court opined as follows:
We reiterate that, to effect a waiver of liability in tort, a contract must be clear, explicit, unequivocal, and place the waiver beyond doubt. Arguments that seek to infer such an express waiver through inference or implication are unlikely to succeed. . . . [N]o magic words are, per se, required. However, to overcome the strong presumption against waiver of tort liability, the contract must make explicit that the liability being waived is outside of liability arising under contract.
Id. at 77–78.
The upshot of Certain Underwriters is that contracting parties must remove any ambiguity from their tort liability waivers or else risk those waivers being ineffective. If the waiver language could be interpreted as applicable only to contract liability (or UCC liability, regulatory liabilities, etc.), it may be so applied, even if it uses sweeping language such as “all liabilities,” “any liability,” or “in any event,” which may colloquially suggest absolute immunity. The Court even continued on to suggest that “prudent and cautious contract drafters in Oregon” should consider explicitly referring to “negligence” or “tort liability” in their disclaimer provisions. Id. at 78.