The case of MK v. Auburnfly, LLC raises complex questions about the enforceability of parental indemnification agreements in Michigan. These agreements, often presented as prerequisites for participation in recreational activities, have significant implications for public policy and the rights of minors. At the center of the dispute is whether such agreements are consistent with Michigan public policy, particularly when a parent is required to indemnify a recreational business for injuries sustained by their child due to the business's alleged negligence.
Pertinent Facts and Procedural Backgrounds
Auburnfly, LLC operates TreeRunner Rochester Adventure Park, a recreational facility in Michigan. In June of 2020, Karen Knaack and her minor child, MK, participated in an event at the park. As a condition of MK's participation, Knaack signed a "Participant Agreement" electronically, both in her capacity and on behalf of her child.
The agreement included a section titled "Release, Indemnity, and Hold Harmless," which required participants or their guardians to release Auburnfly and related entities from liability for injury, disability, or death arising from negligence. Additionally, it required indemnification, obligating signers to defend and reimburse Auburnfly for claims brought by third parties, including claims related to the minor participant.
Despite these stipulations, MK sustained injuries during the event, prompting Knaack, as MK's representative, to file a lawsuit against Auburnfly alleging negligence, premises liability, and gross negligence. Auburnfly then filed a third-party complaint seeking to enforce the indemnification agreement.
The trial court ruled in favor of Knaack, granting summary disposition on the grounds that the agreement was void as against public policy and potentially violated the parental-immunity doctrine. Auburnfly appealed, and the Michigan Supreme Court remanded the case to the Court of Appeals to consider the enforceability of such agreements under Michigan law.
Was the Indemnification Agreement Enforceable?
In determining whether the indemnification agreement was enforceable, the court applied long-standing principles governing contracts. Auburnfly asserted that the lower court was incorrect in its ruling that the contract violated public policy or the parental-immunity doctrine. A valid contract requires the following:
- Parties competent to contract
- A proper subject matter
- Legal consideration
- Mutuality of agreement, and
- Mutuality of obligation. AFT Mich. v. Michigan, 497 Mich. 197, 235; 866 NW2d 782 (2015).
Auburnfly contended that the indemnification agreement was valid because it did not explicitly bind the minor, MK, but rather the parent, Knaack. The court acknowledged this distinction but emphasized that the agreement's substance, not its form, determined its enforceability. The Michigan Supreme Court in Bronner v. City of Detroit, 507 Mich. 158 (Mich. 2021) held, "The general rule of contracts is that competent persons shall have the utmost liberty of contracting and that their agreements voluntarily and fairly made shall be held valid and enforced in the courts." However, if a contract clause violates public policy, that provision will be rendered unenforceable. Bronner at 166. Regarding the parental immunity clause present in the contract at issue, the court looked to the case of Terrien v. Zwit, 467 Mich. 56 (Mich. 2002) which stated, "The Michigan common law rule is clear: a guardian, including a parent, cannot contractually bind his minor ward." That court even went so far as to rule that "a parent possesses no greater authority to waive the property rights of any other nonconsenting third party, such as his neighbor or co-workers." Id.
Protection of Minors Under Michigan Law
Michigan courts have consistently held that contracts seeking to limit the liability of entities for injuries to children are subject to heightened scrutiny. In Woodman v. Kera LLC, 486 Mich. 228 (Mich. 2010). The Michigan Supreme Court affirmed that parents cannot waive their children's legal rights through preinjury liability waivers. This precedent reflects Michigan's longstanding public policy preventing parents from binding their minor children to contracts.
In this case, the court reasoned that by obligating parents to indemnify Auburnfly for claims brought on behalf of their children, the agreement effectively undermines that policy. The financial burden placed on parents would deter most families from pursuing claims, thereby limiting a child's ability to sue a recreational activity provider if they are injured while using their facilities.
The court also looked to MCL 700.5109 (enacted after Woodman was released) which states “Before a minor participates in recreational activity, a parent or guardian of the minor may release a person from liability for economic or noneconomic damages for personal injury sustained by the minor during the specific recreational activity for which the release is provided.” MCL 700.5109(1). It is important to note that the statute “only applies to a recreational activity sponsored or organized by a nongovernmental, nonprofit organization.” MCL 700.5109(2). The statute only allows such entities to secure a release of “liability for injury or death that results solely from the inherent risks of the recreational activity.” MCL 700.5109(4). Put plainly, the statute does not limit liability when the activity is provided by a for-profit entity, even though the legislature recognizes that injuries can be inherent to the recreational activity.
The liability shield applies as to the assumed risk that is akin to participation in the activity itself. Based on these conclusions, the court found that it could not rule in contradiction to the common law or public policy expressed by the Legislature. Auburnfly's attempt to enforce the indemnification agreement conflicted with both common law and statutory protections. The court concluded that any changes to this framework should come from the Legislature or the Michigan Supreme Court. At present, it is not clear whether further appeal will be taken.
Implications of this Case Looking Forward
This decision puts recreational entities in a difficult position as there is little that can be done to protect against lawsuits arising from use of their facilities if they operate as a for-profit business. Parental indemnification agreements, while common in recreational settings, will not be effective going forward, unless the Michigan Supreme Court or Legislature steps in. The repercussions of the ruling mean any attempts to mitigate the risk of litigation has to come from further limiting the type of activities allowed in recreational entity attractions, rather than securing agreement from Parents that they will indemnify the proprietor for any injuries that may occur. Even then, there will be more litigation and eventually, less recreation.