THE HOME INDEMNITY COMPANY, AS SUBROGEE OF STORMIN HARDWARE SUPPLY, INC. AND
STORMIN REALTY, INC., PLAINTIFF v. NATIONAL GUARDIAN SECURITY SERVICES
CORP.; RIDGID FIRE SPRINKLER SERVICE, INC.; WILLIAM D. MC KANE, trading as
RIDGID FIRE SPRINKLER SERVICE, INC.; WILLIAM D. MC KANE, DEFENDANt
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
1995 U.S. Dist. LEXIS 6603
May 8, 1995, Decided
May 11, 1995, FILED
CASE SUMMARY
PROCEDURAL POSTURE: Defendant subrogor sought partial summary judgment
against plaintiff subrogee, in an action for breach of contract.
OVERVIEW: The subrogee brought an action against the subrogor to recover
fire insurance payments. The subrogee claimed that the damages to the
insured's warehouse were a proximate result of failures in the alarm system
installed and monitored by the subrogor. The alarm monitoring agreement
between the subrogor and the insured contained an exculpatory clause, which
limited the subrogor's liability. The subrogor filed a motion for partial
summary judgment. The court granted the motion in favor of the subrogor and
held that exculpatory clauses per se were not illegal or in violation of
public policy. Furthermore, the court held that gross negligence was a
failure to perform a duty in reckless disregard of the consequences or with
such want of care and regard for the consequences as to justify a
presumption of willfulness or wantonness. Finally, the court held that
summary judgment was appropriate when there was no genuine issue of material
fact, and one party was entitled to judgment as a matter of law.
OUTCOME: The court granted the subrogor's motion for partial summary
judgment.
COUNSEL: [*1] For THE HOME INDEMNITY COMPANY, AS SUBROGEE OF STORMIN
HARDWARE SUPPLY, INC. AND STORMIN REALTY, INC., PLAINTIFF: PETER T.
PARASHES, WHITE AND WILLIAMS, PHILADELPHIA, PA.
For NATIONAL GUARDIAN SECURITY SERVICES CORP., DEFENDANT: E. DAVID CHANIN,
BOLGER, PICKER, HANKIN & TANNENBAUM, PHILA, PA. MICHAEL J. REVNESS, BOLGER,
PICKER, HANKIN & TANNENBAUM, PHILA, PA. For RIDGID FIRE SPRINKLER SERVICE,
INC., WILLIAM D. MC KANE, t/a RIDGID FIRE SPRINKLER SERVICE, INC., WILLIAM
D. MC KANE, DEFENDANTS: JOHN B. DAY, ROHDE & DI DOMENICIS, PHILA, PA.
JUDGES: Donald W. VanArtsdalen, S.J.
OPINIONBY: Donald W. VanArtsdalen
OPINION: MEMORANDUM AND ORDER
VanARTSDALEN, S.J.
May 8, 1995
Plaintiff, the Home Indemnity Company (Home), brought this action as a
subrogee of Stormin Hardware, Inc. and Stormin Realty, Inc. (Stormin)
against National Guardian Security Services Corp. (National), Rigid Fire
Sprinkler Service and William D. McKane. Home seeks to recover fire
insurance payments made by Home for a fire which occurred at Stormin's
Philadelphia warehouse on October 29 - 30, 1992. Home avers that, as
Stormin's insurer, it paid over $ 545,000 to Stormin for the damage to
Stormin's property and other [*2] expenses Stormin incurred as a result of
the fire. (Complaint at 9.) Home now seeks to recover that amount from the
defendants because Home claims that the damages to Stormin's warehouse were
a proximate result of failures in the "central station monitoring" alarm
system which was installed, maintained and monitored by National. (Complaint
at 3).
On April 14, 1995, National filed the instant motion for partial summary
judgment. National argues that the "Alarm Monitoring and Services Agreement"
(contract) that it entered into with Stormin contained an exculpatory
clause, limiting National's liability for any damages "due to a failure of
the installation, maintenance or monitoring service to ten percent of the
annual charges or $ 250, whichever is greater." (Contract P 17). Home
maintains, inter alia, that the exculpatory clause does not apply because
National was grossly negligent. I find that even when viewing the evidence
in the light most favorable to Home, a reasonable jury could not conclude
that National was grossly negligent. The exculpatory clause applies and
partial summary judgment will be entered in favor of National.
Facts
1. The Contract
In August, 1988, Stormin [*3] and National Guardian entered into the
Contract at issue. (National's Motion for Partial Summary Judgment
(National's Motion) at 4). National agreed to monitor burglar and fire alarm
system signals from Stormin's warehouse at 5101 Unruh Avenue in
Philadelphia. National was responsible for testing the fire alarm system at
the warehouse every month. (Home's Memorandum in Opposition to National's
Motion for Partial Summary Judgment (Home's Opposition) at 2). The signals
emitted from the system include burglar alarms, supervisory signals
(indicating low air pressure), n1 fire alarms, and water flow alarms.
(National's Motion at 7).
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N1 Apparently, Stormin's sprinkler system was a "dry pipe system." In such a
system, there is a source of water but the pipes throughout most of the
system do not have water in them. When a sprinkler head is opened by heat
from a fire, the air in the pipes escapes out of the head, lowering the
pressure of the air in the pipes, and allowing water from the source to flow
into the piping and out of the sprinkler head.
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Paragraph 9 of the contract spells out National's obligations upon receipt
of a "signal" from the alarm system. Id. In the event of a burglar alarm
signal, National agreed to telephone the police and also to contact
Stormin's general manager, Mr. Haldis. Upon receipt of a fire alarm signal,
National agreed to telephone the fire department and also to contact Mr.
Haldis. Id. Upon receipt of any other signal, including a supervisory
signal, National agreed to notify Mr. Haldis. Id. at 8.
2. The Night of October 29, 1992
At approximately 9:00 p.m. on the night of October 29, 1992, National
received a number of burglar alarm signals from Stormin's warehouse. Id. at
8. At around the same time, National also received a supervisory signal,
indicating that the air pressure in the sprinkler system pipes was low. Id.
As provided for in the contract, National notified the police about the
burglar alarm signals, and notified Mr. Haldis about the burglar and
supervisory signals. Id. at 9.
Based on Mr. Haldis' deposition testimony, he was not overly concerned about
the signals when informed of them by National. He suggested that stray cats
in the warehouse may have caused [*5] the burglar alarm signals.
(National's Motion, Ex. C at 197). Mr. Haldis never visited the warehouse
that night, nor, apparently, did the police.
Despite the fact that water flowed through the sprinkler system for a number
of hours that night, National Guardian never received a water flow signal
from the sprinkler system; nor a signal from the fire alarm itself. (Home's
Opposition at 3).
On the morning of October 30, 1992, one of Stormin's employees discovered a
fire in progress at the warehouse. Id. at 171. At some point during the
night, the sprinkler system was activated, and the water continued to flow
through the night. It is undisputed that the fire and the water caused
severe damage to the Stormin warehouse.
3. The Exculpatory Clause
Paragraph 17 of the Contract states:
[Stormin] agrees that [National] is not an insurer, that insurance, if any,
shall be obtained by subscriber, that the payments provided for herein are
based solely on the value of the service as set forth herein and are
unrelated to the value of [Stormin's] property or the property of others
located on [Stormin's] premises; that [National] makes no guarantee or
warranty, including [*6] any implied warranty, of merchantability or
fitness that the service supplied will avert or prevent occurrence or the
consequences therefrom which the service is designed to detect or avert.
[Stormin] acknowledges that it is impractical or extremely difficult to fix
the actual damages, if any, which may proximately result from a failure to
perform any of the obligations herein, including but not limited to,
installation, maintenance, or monitoring service or the failure of the
system to properly operate with resulting loss to [Stormin] . . . [Stormin]
further agrees that if [National] should be found liable for loss or damage
due to failure of the installation, maintenance, or monitoring service, or
equipment in any respect whatsoever, [National's] liability shall be limited
to a sum equal to ten percent of the annual charges or two hundred fifty
(250) dollars, whichever is the greater, n2 as liquidated damages, and not
as a penalty, and this liability shall be exclusive, and that the provisions
of this section shall apply if loss or damage, irrespective of cause or
origin, results directly or indirectly to persons or property from
performance or non-performance of the obligations [*7] imposed by this
agreement or from the negligence, active or otherwise, of [National] . . .
(emphasis added)
Discussion
A motion for summary judgment is appropriate only when there is no genuine
issue of material fact, and one party is entitled to judgment as a matter of
law. Williams v. Borough of West Chester, 891 F.2d 458, 463-64 (3d Cir.
1989). In a motion for summary judgment, the court may examine evidence
beyond the pleadings. The court must always consider the evidence, and the
inferences from it, in the light most favorable to the non-moving party.
United States v. Diebold, Inc., 369 U.S. 654, 655, 8 L. Ed. 2d 176, 82 S.
Ct. 993 (1962); Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir.
1987); Baker v. Lukens Steel Co., 793 F.2d 509, 511 (3d Cir. 1986). If a
conflict arises between the evidence presented by both sides, the court must
accept as true the allegations of the non-moving party. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
For a dispute to be "genuine," a reasonable fact finder must be able to
return a verdict (or render a decision) in favor of the non-moving party.
Anderson, [*8] 477 U.S. at 248.
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n2 According to the contract, the annual service charge was $ 1225. Ten
percent of that would be $ 122.50. Therefore, the $ 250.00 amount is the
amount at issue.
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I find that there is no genuine issue of material fact on the question of
whether the exculpatory clause applies. On its face, the clause plainly
limits liability that results from negligence on the part of National. Home
argues, however, that the clause does not apply here because National's
behavior amounted to gross negligence, n3 and the clause does not
specifically state that it applies to gross negligence. Even when viewing
the evidence in the light most favorable to Home, a reasonable jury could
not find that National was grossly negligent in this case.
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n3 I note that in its complaint Home includes a count for negligence, but
makes no mention of gross negligence.
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Although varied definitions of gross negligence abound, it safely can be
said that courts generally view gross negligence as a want of even scant
care, and something less than intentional indifference to consequences of
acts. Fidelity Leasing Corp. v. Dun & Bradstreet, Inc., 494 F. Supp. 786
(E.D. Pa. 1980). See generally W. Prosser, The Law of Torts 180-85 (4th ed.
1971). Pennsylvania courts have defined gross negligence as "a failure to
perform a duty in reckless disregard of the consequences or with such want
of care and regard for the consequences as to justify a presumption of
willfulness or wantonness." Williams v. State Civil Service Comm'n, 9 Pa.
Commw. 437, 306 A.2d 419, 422 (1973), aff'd, 457 Pa. 470, 327 A.2d 70
(1974).
National received a burglar alarm on the night of October 29, 1992. As it
agreed in the contract, National contacted the police, and Mr. Haldis.
National also received a supervisory signal that night, indicating low air
pressure in the sprinkler system pipes. As per the contract, National
notified Mr. Haldis of the signal. No reasonable jury could find that
National acted with gross negligence in its response to these two signals.
It is [*10] striking that National never received a signal indicating water
flow in the sprinkler system despite the fact that water must have been
flowing for most of the night. Home, in its Opposition, indicates that the
water flow switch, which was under the supervision of National, was not
functioning correctly. Home also asserts that National had allegedly
inspected that switch and reported no problems. Assuming this is true,
National may very well have been negligent. However, failure to properly
inspect, replace, or repair a faulty switch, without more, does not justify
a finding of "reckless disregard" or a "presumption of wilfulness or
wantonness" and is, therefore, not gross negligence.
Even if National was grossly negligent, the exculpatory clause might
nevertheless apply. n4 The clause states that National's liability will be
limited in cases where damage results from National's negligence, "active or
otherwise." It appears from the plain terms of the contract that the
exculpatory clause would apply to gross negligence.
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n4 There is no question that exculpatory clauses per se are not illegal or
in violation of public policy. Many courts in Pennsylvania have enforced
these clauses. See Valhal Corp. v. Sullivan Associates, Inc., 44 F.3d 195
(3d Cir. 1995); Lobianco v. Property Protection, Inc., 292 Pa. Super. 346,
437 A.2d 417 (1981); Wedner v. Fidelity Sec. Systems, Inc., 228 Pa. Super.
67, 307 A.2d 429, 432 (1973). There is no dispute between the parties that
the law of Pennsylvania applies.
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The Superior Court of Pennsylvania, in Valeo v. Pocono Int'l Raceway, Inc.,
347 Pa. Super. 230, 500 A.2d 492 (Pa. Super. 1985), so interpreted a similar
exculpatory clause. In Valeo a race car driver who was injured while racing
sued the owner of the race track and a sponsor of the race for allegedly
negligent maintenance of the track. The race car driver, after inspecting
the track, had signed an exculpatory clause relieving the defendants of
liability "for all loss or damage . . . whether caused by the negligence of
[the defendants] or otherwise." The Superior Court, in affirming the trial
court's grant of summary judgment in favor of the defendants, stated that
"the language of the exculpatory clause was broad enough to exclude
liability for all degrees of negligence." Valeo, 500 A.2d at 493.
National argues that there are no "degrees of negligence" in Pennsylvania,
and, therefore, that there is no such thing as "gross negligence." In
support of this contention, National relies principally on Ferrick
Excavating & Grading Co. v. Senger Trucking Co., 506 Pa. 181, 484 A.2d 744
(1984). While there is undoubtedly language to that effect in that opinion,
I note that [*12] there are post-Ferrick opinions in the Pennsylvania state
courts and in the federal courts in this district clearly recognizing gross
negligence under Pennsylvania law, and, more specifically, holding that
gross negligence does not defeat exculpatory clauses like the one in this
case. See The Stark Company, Inc. v. National Guardian Security Services,
89-8880 (E.D. Pa., November 18, 1994). However, since I conclude that no
reasonable jury could find gross negligence here, I make no holding as to
Pennsylvania law on this issue.
The exculpatory clause applies to any allegedly negligent behavior on the
part of National, and effectively limits National's liability in this case
to ten percent of the annual charges or $ 250, whichever is greater."
An appropriate order follows.
ORDER
For the reasons stated in the accompanying memorandum, the exculpatory
clause in the contract between Stormin Hardware and National Guardian
Security Services Corp. applies, and National Guardian Security Services
Corp.'s liability for any "failure of the installation, maintenance or
monitoring service" is limited to $ 250.00. It is Ordered that partial
summary judgment in favor of the defendant, [*13] National Guardian
Security Services Corp. is entered on this issue.
BY THE COURT:
Donald W. VanArtsdalen, S.J.
May 8, 1995