Premises Liability

Is the Franchisor or Franchisee Responsible When a Guest is Injured on Hotel Property? 
By Robert Zarco, Esq.

AAHOA Hospitality, January 2000

A guest has an accident and is injured on your hotel property. Afterward, he or she tells you that the cause of the accident was some defect in your hotel equipment or a dangerous landscape condition. What should you do? Are you solely responsible for the guest's injuries or will your franchisor also be held accountable? Accidents that take place on the property of a business are known as premises liability claims, and these kinds of cases are among those most frequently litigated in courts across the country.

In general, a property owner's duty to a guest or visitor depends upon that person's status, i.e., is that person a registered guest, a visitor, or perhaps a trespasser? Your registered guests are considered invitees. Ordinarily, a property owner owes three (3) duties to invitees: (1) a duty to keep property in reasonably safe condition, (2) a duty to warn of concealed dangers which are known or should be known to the property owner, and (3) a duty to refrain from wanton negligence or willful misconduct. Overall, a property owner owes an invitee a duty of "reasonable care" while the guest is using the premises. 

What about your guests' visitors, and others who are not registered guests of the hotel? These individuals are generally known as licensees. Your duty to a licensee consists of warning about dangerous conditions about which you have actual knowledge. (You do not necessarily have a duty to inspect your premises to uncover non-obvious dangers for visitors, as you would for an invitee). A court will interpret the facts of the situation under the applicable state law to determine whether a property owner is legally and financially responsible for expenses resulting from an injury. 

When an individual is injured on your property, the most important inquiry is whether you, as a property owner, were aware, or should have been aware of the danger that existed. It is a property owner's legal responsibility to provide a safe environment for his or her guests -- and to monitor that environment to prevent any hazards from developing. For example, spills on a restaurant floor are common occurrences, but if left unattended, they also pose a serious danger to patrons. For those reasons, a restaurant owner has an obligation both to monitor, and to clean up spills on the floor. Because these are readily observable conditions, the property owner will usually be held accountable when he or she fails to correct or take reasonable steps to correct the hazard. 

In contrast, other dangers lurking on the property may not be as obvious. For example, certain structural defects may not be visible, and the defects may not become apparent until years after construction. A critical issue is notice to the property owner whether anyone has reported a problem with the situation. If another guest or employee has notified you about a potential problem, you are on notice about the situation. Thereafter, if you have failed to investigate the complaint, or to repair the item before allowing the next guest to occupy the premises, you may be liable for subsequently occurring injuries. 

Frequently an injured party will sue both the franchisee and the franchisor. If the injured party sues you as the property owner, what responsibility does your franchisor share for compensating the guest? The key to determining the franchisor's liability is the extent to which it exercises control over the franchisees activities related to the cause of the injury. If, for example, the franchisor actually selects the particular equipment or a building design for the franchisees and/or requires its franchisees to construct their facilities in a certain way, the franchisor assumes a risk of harm to third persons, such as guests. Therefore, a franchisor who undertakes this role must exercise reasonable care if it inspects, endorses and/or requires specific equipment or construction designs. 

Significantly, over the past ten to fifteen years, most franchisors have become very aware of how their involvement in operational details affects their liability to third parties down the road. Most sophisticated franchisors know precisely how much control to exercise over their franchisees operations -- and just where to stop -- to avoid this additional legal exposure. Instead of prescribing an exact building design, franchisors often "make suggestions", but specify in the franchise agreement that franchisees themselves be responsible for compliance with all applicable local building code requirements. In this way, the franchisor can retain control over the result and the quality of the work, but not the means of performance -- and therefore, the responsibility for constructing a safe structure will remain with you, the franchisee. 

In one recent case, a hotel franchisor had merely "suggested" a design for its franchisees construction of a handicap parking ramp; the franchisee actually designed and built the ramp, which included a defective drop-off point. When a guest was injured and subsequently sued both the franchisee and the franchisor, the court found that the franchisor was not legally responsible for the guest's injury despite its extensive control over various other details of the franchisees daily operations. Because the franchisor had not assumed any responsibility for the actual design and construction, the liability for the defect remained exclusively with the franchisee. 

Franchisors also take other measures to protect themselves against third party claims, including careful drafting of certain terms in their franchise agreements and operations manuals. Franchisors often require franchisees to publicize their individual company's identity on business cards, stationery, advertising, etc., to as to avoid claims of apparent agency, or the guests' belief that he or she was dealing directly with the franchisor, who was guaranteeing the safety of the premises. 

Franchisors frequently require in the franchise agreement, that a franchisee indemnify them against third party claims. This means that a franchisee must defend and reimburse the franchisor for a judgment which a third party obtains against them. In addition, franchisors often demand that you name them as an additional insured in any insurance policies which you purchase for your business. 

It is important to remember that it is always the franchisee's obligation to maintain the property in a safe condition regardless of how closely the franchisor monitors other facets of the franchisee's operations. No amount of franchisor-supervision will relieve you of full responsibility for property maintenance. Routine property inspections may help you avoid a guest's injury altogether; being vigilant in property maintenance may spare you the legal expense and ill-will that a guest's injury may generate toward your business. Be sure to keep detailed records of all property inspections, as well as records of all the recommended repairs which you have made as a result. Provide copies of these records to your franchisor, if the franchise agreement so requires. In the event that you end up in court with your franchisor as a co-defendant, you will want to establish that you followed the franchisor's instructions and took reasonable steps to keep your property safe for your guests. 

Finally, if a guest or any other person is injured on the premises, you should consult legal counsel immediately. Do not speak with an attorney for the injured party, or with the general counsel for the franchisor, without consulting your own attorney first. In this situation, keep in mind that your interests are not necessarily the same as those of the franchisor, and the statements that you make to the franchisor's attorney may not be protected by the attorney-client privilege as would those statements that you make to your own attorney. Above all, you must always be attentive to protecting yourself, your guests, and the substantial investment that you have already made in your business. 

All Copy Rights Reserved (1998). This article or portions thereof cannot be reproduced without the express written permission of Zarco Einhorn Salkowski & Brito, P.A.