Facts reported in the case from a 2008 decision (available here) held that:
"Sonitrol's services included remote monitoring of microphones that could detect sounds made by intrusions into the warehouse. These microphones, or audio detectors, would send an audio activation signal [**4] when they detected a sound exceeding a minimum volume, and record and store five seconds of the audio. The alarm system would also make an automated telephone call to a central monitoring facility. The operators monitoring the console in that facility were instructed to replay the five seconds of stored audio recording and listen to live audio transmission for at least forty-five seconds. If the operator heard a burglary in progress, he or she would dispatch the local police. However, if the operator determined the activation was a false alarm, the operator could reset the alarm. Resetting the alarm erased the stored audio and terminated the telephone connection to the monitored premises.
In December 2002, a burglar entered Core-Mark's warehouse while it was closed over the weekend. He returned a little later with two confederates, and the three looted the warehouse for approximately three hours. They made no effort to be quiet, but shouted to each other, threw boxes around, and used a noisy gravity chute lined with steel rollers to move boxes. When they were ready to leave, one of the burglars smashed boxes of flammable liquids, pulled down large jugs of methanol, and set two fires [**5] at 8:42 a.m. The fire department arrived on the scene eleven minutes later at 8:53 a.m., alerted by a passerby, but it was too late to save the property.
During this episode, Sonitrol's off-site monitoring center received audio activations caused by the noise the burglars created. Two different Sonitrol employees received the alarms and reacted as follows: (1) audio activation at 1:35 a.m., no replay of stored audio, alarm reset in 36 seconds, no call to police; (2) audio activation at 6:50 a.m., no replay of stored audio, alarm reset in 4 seconds, no call to police; (3) audio activation at 7:29 a.m., no replay of stored audio, alarm reset in 40 seconds, no call to police; (4) audio activation at 7:56 a.m., no replay of stored audio, alarm reset in 1 minute and 49 seconds, no call to police; (5) audio activation at 8:36 a.m., no replay of stored audio, alarm reset in 2 minutes and 10 seconds, no call to police; (6) audio activation at 8:44 a.m., operator replayed stored audio, no call to police; (7) 8:46 a.m. (four minutes after fire started), the telephone connection between warehouse and monitoring center- was severed. At 9:05, the Sonitrol employee called the fire department, which [**6] had been at the scene for twelve minutes.
Despite the fire department's efforts, the fire burned for a week and destroyed the building and all the inventory, resulting in a loss of approximately $ 20 million." Click Here to view OUR WEBSITE with COMPLETE DECISION.
***********
The case was sent back to the trial court for a jury trial. The trial ended with an award of over $25 million dollars against Sonitrol. An appeal was taken and the appellate court has upheld the finding of liability but has ordered a new trial on the damages because certain witnesses were excluded from testifying at trial. This new case can be read on my web site HERE.
The case is long from over. It has to go back for another trial on the damage issue and perhaps back to appellate courts. You should read the case. This appellate court recognized that exculpatory and limitation of liability clauses are enforced. Here negligence cause of action was distinguished from the breach of contract action, and the court spends too much time analyzing alarm law in other states and blurring the tort and contract distinction. The court noted that Colorado recognizes a cause of action for "wonton and willful breach of contract" even though commenting that wonton and willful conduct is usually associated with tort claims.
The analysis could and should have been much easier. Exculpatory and limitation of liability provisions will be enforced for ordinary negligence and for breach of contract, but will not be enforced if there is "gross negligence". The "wonton and willful breach of contract" is nothing more [in my opinion] than the legal equivalent of "gross negligence". Sonitrol's attorneys argued this but it was rejected by the court which did its analysis based on the "wonton and willful breach of contract" cause of action argument. I don't know if you'll find the analysis as troubling as I do [yes, I am being kind or cautious]. The court concluded its discussion on this topic this way:
"Though, as Sonitrol points out, section 13-21-102.5(6)(a)(I), C.R.S. 2011, now limits the circumstances in which noneconomic damages are awardable for willful and wanton breach of contract, it does not limit the types of contracts as to which a party may seek recovery for a willful and wanton breach of contract."
So there is liability, which is not necessarily the wrong result because there is a finding by the jury or willful and wonton contract - whether you want to call it breach of contract or negligence - I get to the same result as well.
At the trial the judge did not permit Sonitrol's expert to testify. The trial judge refused the testimony
"concluding that it was "irrelevant and unreliable" and unsupported "by a scientific and/or technical analysis which supports opinions regarding the effect an upgraded fire sprinkler system or the effect that code violations would have had on the spread of the fire inside the warehouse."
Here the legal discussion continues to complicate matters because of Colorado's cause of action for wonton and willful breach of contract [as opposed to another kind of breach of contract I suppose]. Damages for breach of contract are not the same as damages for a tort. The argument is that Sonitrol's expert would offer testimony that Sonitrol could not have foreseen all this damage and the subscriber should be responsible for the damages. Here is what the appellate court had to say on this issue [some citations omitted]:
"Contract damages are recoverable only to the extent they "were the foreseeable result of a breach at the time the contract was made." Although the test is an objective one, if the defendant did not have a reason to foresee that a particular loss was the probable result of a breach at the time of contracting, "[t]he mere circumstance that some loss was foreseeable, or even that some loss of the same general kind was foreseeable" does not make the defendant liable for the portion of the loss that was not foreseeable. The defendant must have had a reason to foresee both the type and the general magnitude of damages.
We assume that Sonitrol could have foreseen that if it failed to detect a break-in at the warehouse, a burglar could start a fire. However, the jury should have been able to consider Sonitrol's proffered expert testimony relating to whether Sonitrol could have foreseen that the fire set by Mr.
Ottersberg would prove so calamitous due to the alleged code violations. Cf. Sunnyland Farms, Inc. v. Cent. New Mexico Elec. Coop., Inc., (the trial court's refusal to reduce contract damages was not sustainable when it was clear the court believed that the plaintiff should have avoided or mitigated against the spread and magnitude of the fire).
Further, the proffered testimony supported Sonitrol's theory that its conduct was not the cause of all the damages Core-Mark claimed. In this regard, the district court incorrectly assumed that, to be admissible, the testimony at issue had to include an analysis of how the alleged code violations
actually impacted the spread of the fire or precisely how the result would have differed under a compliant suppression system. Such a conclusive analysis is not required [**26] of expert testimony; rather, it is sufficient that the testimony permits the jury to infer the proposition for which it is offered. Here, though further explanation might have been more helpful to the jury, the jury could have inferred from the experts' testimony that storing more than twenty-five times the permissible amount of
flammable liquid without taking appropriate precautionary measures resulted in the fire causing more damage than it would have otherwise -- in short, that Sonitrol was not responsible for all the damages plaintiffs sought. See Ramirez, (though there was "no evidence that the manner in which the chemicals were stored constituted the proximate cause of the fire, nevertheless, the jury may have premised its finding of negligence on its determination that the city ordinances relating to fire safety had been violated and their violation was the proximate cause of the fire"). Any doubts about the extent to which the code violations contributed to the fire's spread would have been "sufficiently
addressed by vigorous cross-examination [and] presentation of contrary evidence, . . . rather than exclusion."
*****************************************************************************