Yang v. Voyagaire Houseboats, Inc., No. A03-1842

• Decision Date: 04 August 2005
• Docket Number: No. A03-1842, No. A03-2000.
• Parties: Doua YANG, et al., Plaintiffs, Lao Xiong, Appellant, v. VOYAGAIRE HOUSEBOATS, INC., defendant and third-party plaintiff, Respondent, B.J.M., Inc., defendant and third-party plaintiff, Respondent, v. Lao Xiong, Appellant, Doua Yang, et al., Third-Party Defendants.
• Court: Minnesota Supreme Court

701 N.W.2d 783

Doua YANG, et al., Plaintiffs, Lao Xiong, Appellant, v. VOYAGAIRE HOUSEBOATS, INC., defendant and third-party plaintiff, Respondent, B.J.M., Inc., defendant and third-party plaintiff, Respondent, v. Lao Xiong, Appellant, Doua Yang, et al., Third-Party Defendants.

Nos. A03-1842, A03-2000.

Supreme Court of Minnesota.

August 4, 2005.

Patrick J. Sauter, Steven M. Sitek, Paula Duggan Vraa, Rider, Bennett, LLP, Minneapolis, MN, for Appellant.

John M. Colosimo, Mitchell J. Brunfelt, Colosimo, Patchin, Kearney & Brunfelt, Ltd., H. Jeffrey Peterson, Andrew R. Peterson, Cope & Peterson, Ltd., Virginia, MN, for Respondent.

Heard, considered and decided by the court en banc.

OPINION

RUSSELL A. ANDERSON, Justice.

This case concerns the enforceability of exculpatory and indemnification clauses in a houseboat rental agreement between appellant Lao Xiong and respondent Voyagaire Houseboats, Inc.¹ After Xiong and members of his vacationing party suffered carbon monoxide poisoning on board the houseboat, they brought personal injury actions against Voyagaire. In this appeal from summary judgment, we are asked to review the decisions of the courts below that (1) the exculpatory clause in the houseboat rental agreement is enforceable, barring Xiong's claims against Voyagaire; and (2) the indemnification clauses in the houseboat rental agreement are enforceable, requiring Xiong to indemnify Voyagaire for the claims by the other members of his vacationing party. We conclude that the exculpatory and indemnification clauses in the houseboat rental agreement are not enforceable, holding that Voyagaire's rental of the houseboat to Xiong constitutes a public service and that the exculpatory and indemnification clauses violate public policy. We therefore reverse and remand to the district court.

Voyagaire is located on the shore of Crane Lake, near Voyageurs National Park in northern Minnesota. Voyagaire promotes itself as having "the largest houseboat rental operation in the Midwest." Voyagaire's website describes the houseboats as "floating homes," which for over 40 years "have been accommodating small and large groups of explorers, families and fishing parties." Voyagaire offers at least seven models of houseboats, for daily and weekly rental. In addition, Voyagaire operates a lodge with a restaurant and 12 lodge rooms.

In 2002, Xiong began planning a vacation with his girlfriend and her extended family. Xiong contacted Voyagaire by telephone to inquire about renting a houseboat. After several calls, Xiong reserved a houseboat for a week. As required by Voyagaire's policy, Xiong paid in advance for the houseboat — "a couple thousand" dollars. Xiong later contacted Voyagaire and upgraded to a "Deluxe Sportcruiser — 440" model, a houseboat with five double beds; a penthouse bedroom; toilet and shower facilities; a kitchen area, including a refrigerator, stove, microwave, and sink; air conditioning; a built-in generator; and a swim platform with a water slide.

On June 8, 2002, Xiong's vacationing party, consisting of six adults and four children, met in Minneapolis and traveled as a group to Crane Lake. When they arrived, Xiong met with James Janssen, an owner of Voyagaire, who presented Xiong with a houseboat rental agreement. No one representing Voyagaire had mentioned the rental agreement before. After looking at the agreement, Xiong told Janssen that he did not understand it. The rental agreement contained exculpatory and indemnification clauses, which provide in relevant part:

In consideration for being permitted the use of Voyagaire Houseboats equipment, the Renter, Lao Xiong, his/her family, relatives, heirs and legal representatives do hereby waive, discharge and covenant not to sue Voyagaire Houseboats * * *, any affiliated companies, or any of its officers or members for any loss or damage, or any claim or damage or any injury to any person or persons or property, or any death of any person or persons whether caused by negligence or defect, while such rental equipment is in my possession and/or under my use as in accordance to the terms stated in this agreement.

I agree to keep said equipment safe and return it to Voyagaire Houseboats station from which it was rented and in as good condition as when received, and in default thereof, I agree to pay all loss and damage they may sustain by reason of any such failure and I further agree at my cost and expense, to defend and save Voyagaire Houseboat[s] harmless on account of any and all suits or demands brought or asserted by reason of injuries to any person, persons or property whatsoever caused by the use or operation of said equipment while in my possession and to pay all judgments, liens or other encumbrances that may be levied against Voyagaire Houseboats or the said equipment on account of the use thereof. It is further understood and agreed upon that the undersigned will be liable for all fines, penalties, citations, warnings, and forfeitures imposed for violations of the law while the equipment is being held used or operated pursuant to this agreement. Renter agrees that the Owner maintains no control over Renter's use of vessel except as set forth in this Agreement. Therefore, Renter shall indemnify and hold harmless Owner from and against all claims, actions, proceedings, damage and liabilities, arising from or connected with Renter's possession, use and return of the boat, or arising at any time during the term of this rental.

Janssen reportedly told Xiong that he did not understand the rental agreement either, but assured Xiong that an optional $25 per day insurance fee "would cover everything that could happen to the boat." Xiong "took his word," accepted the insurance, and signed the rental agreement. If Xiong had not signed the agreement, Voyagaire would not have allowed him to rent the houseboat.

After Xiong signed the agreement, he was taken to the houseboat. Xiong was unfamiliar with houseboat operations, so a Voyagaire employee showed him certain features of the houseboat. The employee also told Xiong about Voyagaire's hospitality service for guests who had problems or needed supplies while using the houseboat. According to Xiong, Voyagaire never specifically warned him about the risks of carbon monoxide poisoning.

Near the end of the week — the evening of June 13 or the early morning of June 14, 2002 — several members of the vacationing party began feeling drowsy and nauseated. A member of the party radioed for help, and Xiong and five other persons were taken to Falls Memorial Hospital in International Falls. Each was treated for carbon monoxide poisoning and released the same day.

The Voyagaire employee who responded to the emergency call discovered that a carbon monoxide detector wire, which was located behind the back of a kitchen drawer, had been disconnected. Xiong denies that he or any member of his party disconnected the detector, and Xiong denies hearing an alarm sound.

The source of the carbon monoxide was not determined. Xiong suggested that a defective generator led to the carbon monoxide exposure. Voyagaire suggested that the carbon monoxide exposure was caused by the party's efforts to make adjustments to the cooking stove and furnace on the houseboat.

Xiong sued Voyagaire in St. Louis County District Court, alleging that he "sustained severe and permanent injuries, including permanent brain damage," as a result of his exposure to carbon monoxide. According to the complaint, Voyagaire's negligence included failing to maintain the houseboat in a safe and habitable condition; failing to perform proper inspections of the houseboat; failing to comply with applicable regulations and requirements relating to "proper ventilation of vessels" and "proper safety equipment and devices"; and failing to warn of dangerous conditions aboard the houseboat, including potential exposure to carbon monoxide. The other nine members of Xiong's party also sued Voyagaire in three separate actions, making similar allegations of negligence. The district court consolidated the cases for trial.

Voyagaire denied that it was negligent and alleged that Xiong's claims were barred by the exculpatory clause in the rental agreement. Voyagaire also brought a third-party action against Xiong, alleging that he had agreed to indemnify Voyagaire from any claim or lawsuit arising from his use and operation of the houseboat. Voyagaire moved for summary judgment, seeking to enforce the exculpatory and indemnification clauses in the rental agreement. Xiong filed a cross-motion for summary judgment, arguing that the exculpatory and indemnification clauses are unenforceable. The district court granted Voyagaire's motion for summary judgment. The district court later issued a clarifying order dismissing Xiong's claims and requiring Xiong to indemnify Voyagaire for the claims of the remaining nine plaintiffs.²

The court of appeals affirmed summary judgment. Yang v. Voyagaire Houseboats, Inc., Nos. A03-1842 & A03-2000, 2004 WL 2049843 (Minn.App. Sept.14, 2004). The court of appeals concluded that Xiong's claims are barred by the exculpatory clause because "(1) Voyagaire does not provide a necessary or public service; (2) renting a houseboat is a recreational activity; (3) there was no disparity in bargaining power; and (4) the contract is not ambiguous." Id. at *4. The court of appeals also concluded that Xiong is required to indemnify Voyagaire for the claims of the other nine plaintiffs because "the indemnification clause is sufficiently clear, sufficiently broad, and is not void on public-policy grounds." Id. at *6. We granted review to determine the enforceability of the exculpatory and indemnification clauses in the houseboat rental agreement.

I.

On appeal from summary judgment, we determine whether there are any genuine issues of material fact and whether a party is entitled to judgment as a matter of law. Christensen v. Milbank Ins. Co., 658...