We study the influence of quenched disorder on quantum phase transitions in systems with overdamped dynamics. For Ising order-parameter symmetry disorder destroys the sharp phase transition by rounding because a static order parameter can develop on rare spatial regions. This leads to an exponential dependence of the order parameter on the coupling constant. At finite temperatures the static order on the rare regions is destroyed. This restores the phase transition and leads to a double exponential relation between critical temperature and coupling strength. We discuss the behavior based on Lifshitz-tail arguments and illustrate the results by simulations of a model system.