634 So.2d 969, 25,685 (La.App. 2
Cir. 3/30/94)
Court of Appeal of Louisiana,
Second Circuit.
ROSENBLATH'S, INC., Plaintiff-Appellee,
v.
BAKER INDUSTRIES, INC. and Baker Protective Services, Inc., Defendants-
Appellants.
No. 25685-CA.
March 30, 1994.
Security contractor's customer under alarm protection agreement sued
contractor, seeking to recover damages arising from burglary to which
contractor had ineffectively responded. The First Judicial District Court,
Parish of Caddo, Frank H. Thaxton, III, J., rendered judgment for customer,
and awarded damages for loss incurred that exceeded amount paid by
customer's insurer. Contractor appealed, and customer answered. The Court of
Appeal, Stewart, J., held that: (1) conduct of contractor's employee in
investigating alarm constituted "gross negligence," and (2) customer's
damages were limited to those not covered by customer's insurer.
Affirmed.
West Headnotes
[1] KeyCite Notes
125 Detectives
125k4 k. Authority of Private Detectives. Most Cited Cases
Conduct of security contractor's employee in responding to alarm at
customer's store constituted "gross negligence" which resulted in burglars
stealing more than $50,000 in merchandise from customer's store, and, thus,
limitation of liability clause of alarm protection agreement did not apply
to limit contractor's liability; burglars entered through back door of store
and, while contractor's employee knew that store had rear entrance, he did
not check it because he believed it to be blocked or otherwise inaccessible.
[2] KeyCite Notes
372 Telecommunications
372IV Special Services or Activities
372k463 k. Alarm Systems. Most Cited Cases
Alarm protection agreement that unambiguously released security contractor
from liability for hazards covered by its customer's insurer limited
customer, in its action against security company to recover damages
sustained in burglary that resulted from company's gross negligence, to
award of damages that did not include amount covered by customer's insurer.
[3] KeyCite Notes
95 Contracts
95I Requisites and Validity
95I(F) Legality of Object and of Consideration
95k114 k. Exemption from Liability. Most Cited Cases
Party may legally contract with another party to exclude liability for his
negligence if exculpatory agreement clearly expresses that intent.
[4] KeyCite Notes
95 Contracts
95I Requisites and Validity
95I(F) Legality of Object and of Consideration
95k114 k. Exemption from Liability. Most Cited Cases
All exculpatory contracts are not ipso facto null and void; parties are free
to make their own contracts except in instances and under conditions
inhibited by law, morals, or public policy.
Didriksen & Carbo by Michael D. Carbo, Denise A. Bostick, New Orleans, for
defendants-appellants.
Stone, Pigman, Walther, Wittmann & Hutchinson by Phillip A. Wittmann,
Douglas D. Dodd, S. Ann Saucer, New Orleans, for plaintiff-appellee.
Before NORRIS, LINDSAY and STEWART, JJ.
STEWART, Judge.
Rosenblath's men's clothing store filed suit against Baker Industries, Inc.
and Baker Protective Services, Inc. [FN1] (hereinafter referred to as Wells
Fargo, the name under which defendants operated), for damages arising from a
burglary to which Wells Fargo had ineffectively responded. The trial court
rendered judgment in favor of Rosenblath's, and awarded damages for the loss
incurred which exceeded the amount paid by Rosenblath's insurer. Wells Fargo
appeals the trial court judgment, asserting as error the determination that
its actions in responding to the business burglary constituted gross
negligence. Rosenblath's answers, asserting that the trial court erred in
deducting its insurance recovery from the total assessed against Wells
Fargo. Finding no error in the trial court judgment, we affirm.
FN1. The parties to the alarm protection agreement were Rosenblath's and
Shreveport Alarm Company. Shreveport Alarm Company was succeeded by
defendants, Baker Industries, Inc. and Baker Protective Services, Inc.
However, by the time of trial, Baker Industries, Inc. was no longer a party.
Hence, the only defendant is Baker Protective Services, Inc., consistently
referred to herein as "Wells Fargo."
FACTS
Rosenblath's retail store in Shreveport, Louisiana was burglarized on
September 5, 1983. The burglar(s) gained access to the store through the
rear entrance. Rosenblath's [FN2] sued Baker Industries, Inc. and Baker
Protective Services, Inc. (hereinafter referred to as Wells Fargo, the name
under which defendants operated), for damages arising from the burglary.
FN2. Although begun by Rosenblath's, Inc., upon voluntary liquidation of the
corporation, store owner Philip Rosenblath was substituted as plaintiff for
the corporation. However, for convenience, we shall refer to plaintiff as
"Rosenblath's."
Evidence showed that Patrolman Best responded to the alarm, checked the
front entrance and windows and looked into the store, and radioed to the
dispatcher that the building was secure. Best knew that the store had a rear
entrance, but believed this entrance to be blocked or otherwise inaccessible
due to construction on the Louisiana Tower behind Rosenblath's. He did not
check whether the rear entrance either was blocked or breached. Best
testified that had he known there was an alley behind Rosenblath's, he would
have checked it. While Best was at the store, the dispatcher called the
owner, Mr. Rosenblath, and assured him that although the alarm had sounded,
it was not necessary for him to go to the store because the building
appeared to be secure. The following day, Rosenblath found the interior of
the store a disaster. More than $50,000 in merchandise had been stolen. The
burglars had entered through the back door of the building. The motion
detectors, which were maintained by Wells Fargo, were inoperable and had not
signaled any movement.
The trial court found gross negligence on the part of Wells Fargo because,
upon responding to an alarm at Rosenblath's, the Wells Fargo patrolman, Mr.
Best, (1) failed to check the rear entrance of the store and (2) reported
the premises secure. The trial court rendered judgment in favor of
Rosenblath's and against defendant in the amount of $63,592.19, plus
interest and costs. In its written opinion, the trial court arrived at the
$63,592.19 figure after deducting the amount paid by Rosenblath's insurer
because Rosenblath had assigned his rights to collect amounts paid by the
insurer.
Defendant, Wells Fargo, appeals the trial court judgment, asserting that as
a matter of law, these facts do not constitute gross negligence.
Rosenblath's answers the appeal, contending that the trial court erred in
deducting the amount paid by the insurer because the alarm protection
agreement ("the contract") provides that no insurer will have the right of
subrogation against Wells Fargo.
DISCUSSION
Was Wells Fargo Grossly Negligent?
[1] The Wells Fargo patrolman, Mr. Best, checked the front of Rosenblath's,
looked inside the front windows and concluded the store was secure. He knew
of a back entrance to the store from the alleyway between Edwards and Market
streets, but did not check it because he believed it was blocked due to
construction. It was not, in fact, blocked, and the store was subsequently
burglarized. Mr. Best testified as follows:
BY [Plaintiff's Counsel]:
Q. [Defense counsel] asked you would you have checked this alleyway if you
had known it was there. In fact, if you had simply driven around the block,
you could have seen that the alley was there, isn't that correct?
A. Sure.
Q. But as I understood your testimony, you never once drove around the block
during the entire time you were there. A. That's correct.
Q. But did you drive back down Texas Street again later that night?
A. I stayed downtown most of the night--or most of the day that day.
Q. And during the entire time that you were downtown on September 5th, you
never once drove down Edwards Street or Market Street?
A. I'm sure I came down Market Street, but never down Edwards Street, no,
sir.
Q. Did you ever check the alley?
A. No, sir.
The trial court found that the Wells Fargo employee was guilty of gross
negligence, which could not be waived by the contract.
The sole issue before this court is whether the trial court properly
determined that these facts constitute gross negligence by Wells Fargo. The
parties do not dispute the validity of the limitation of liability clause,
which provides as follows:
16. CONTRACTOR NOT AN INSURER AND LIQUIDATED DAMAGES. It is understood that
Contractor is not an insurer, that insurance, if any, shall be obtained by
the Subscriber and that the amounts payable to Contractor hereunder are
based upon the value of the services and the scope of liability as herein
set forth and are unrelated to the value of the Subscriber's property or the
property of others located in Subscriber's premises. The Contractor makes no
guaranty or warranty including any implied warranty of merchantability or
fitness, that the system or services supplied will avert or prevent
occurrences or the consequences therefrom, which the system or service is
designed to detect. The Subscriber does not desire this contract to provide
for full liability of Contractor and agrees that Contractor shall be exempt
from liability for loss or damage due directly or indirectly to occurrences
or consequences therefrom, which the service is designed to detect or avert,
that if Contractor should be found liable for loss or damage due to a
failure of service or equipment in any respect, its liability shall be
limited to a sum equal to ten percent (10%) of the annual service charge or
$250.00, whichever is the least, as liquidated damages and not as a penalty,
as the exclusive remedy, and that the provisions of this paragraph shall
apply if loss or damage, irrespective of cause or origin, results directly
or indirectly to person or property from performance or nonperformance of
the obligations imposed by the contract or from negligence, active or
otherwise of Contractor, its agents or employees.
However, the parties also agree that this clause does not apply to acts or
omissions which constitute "gross negligence." Specifically,
defendant-appellant, Wells Fargo, correctly states in brief that "[t]he
effect of an exculpatory clause, however, is limited to those instances
where the party seeking to exculpate or limit its liability is guilty of
ordinary negligence." Thus, if the conduct of Wells Fargo constituted gross
negligence, then the exculpatory clause does not apply to relieve it from
liability under the contract.
At issue is whether the exculpatory clause is applicable, rather than
whether it is valid. Wells Fargo concedes that its actions were negligent
but contends that the contract's limitation of liability clause applies to
bar judgment against it because its negligent actions did not rise to the
level of gross negligence. Rosenblath's, however, asserts that the trial
court correctly determined that the contract's liability limitation does not
apply because Wells Fargo's acts and omissions constituted gross negligence.
For the following reasons, we agree with the trial court's finding of gross
negligence.
The contract neither refers to nor defines "gross negligence." The
contractual limitation from liability for damages occasioned by negligence
is inapplicable for damages resulting from gross negligence. "Gross
negligence" is a delictual term. The distinction between negligence and
gross negligence, in the context of liability for contractual damages
arising from tortious acts, has not been well defined in Louisiana law. In
the Civilian tradition, we look first to the expressions of the legislature,
the primary source of law in Louisiana, to determine whether the legislature
has given this term any common and approved usage or "peculiar and
appropriate" meaning. See and compare, Ardoin v. Hartford Accident &
Indemnity Co., 360 So.2d 1331, 1334 (La.1978).
Words and phrases are read in context and are construed according to the
common and approved usage of the language. LSA-R.S. 1:3. Where the meaning
of a legal term such as this is unclear, the meaning may be sought by
examining the context with which the ambiguous term may be compared, in
order to ascertain its true meaning. See Article 16 of the Louisiana Civil
Code of 1870 (applicable at the time of the instant facts). Terms which have
acquired a peculiar and appropriate meaning in the law shall be construed
and understood according to such peculiar and appropriate meaning. LSA-R.S.
1:3. The following current statutory definitions of gross negligence are
drawn from various areas of the law and provide a point of comparison to
examine the generally prevailing, and/or technical, meaning of gross
negligence: LSA-R.S. 6:2(8):
"Gross negligence" means a reckless disregard of, or a carelessness
amounting to indifference to, the best interests of the corporation or the
shareholders thereof, and involves a substantial deviation below the
standard of care expected to be maintained by a reasonably careful person
under like circumstances.
LSA-R.S. 6:703(9) and 6:1191(A)(2):
"Gross negligence" means a reckless disregard of, or a carelessness
amounting to indifference to, the best interests of the financial
institution or the shareholders thereof, and involves a substantial
deviation below the standard of care expected to be maintained by a
reasonably careful person under like circumstances.
LSA-R.S. 13:5108.2(B):
In the case of a contract or assigned physician, gross negligence is an act
or omission in gross deviation from the standard of care required to be
proven under provisions of R.S. 9:2794.
LSA-R.S. 51:2155(A):
[T]he term "gross negligence" shall mean the exercise of so slight a degree
of care as to justify the belief that there was an indifference to the
particular work of fine art.
Thus, we see that the legislature has defined "gross negligence" as
"reckless disregard," or "careless indifference," which may involve a gross
or substantial deviation from an expected or defined standard of care.
Louisiana jurisprudence also has struggled for a singular definition of
gross negligence. For example, in Ambrose v. New Orleans Police Department
Ambulance Service, 627 So.2d 233, 243 (La.App. 4th Cir.1993), the court
observed that
"Gross negligence" has been defined as "the want of even slight care and
diligence" or the "want of that diligence which even careless men are
accustomed to exercise." State v. Vinzant, 200 La. 301, 7 So.2d 917 (1942).
It is "the entire absence of care" or the "utter disregard of the dictates
of prudence, amounting to complete neglect of the rights of others." Hendry
Corp. v. Aircraft Rescue Vessels, 113 F.Supp. 198 (E.D.La.1953).
It has been said that gross negligence involves conduct which falls far
short of knowledge to a substantial certainty of harmful consequences. See
Williams v. Gervais F. Favrot Co., Inc., 573 So.2d 533, 542 (La.App. 4th
Cir.1991), writ denied, 576 So.2d 49 (La.1991). Gross negligence requires no
intent. Ciambotti v. Decatur-St. Louis, Lupin, Properties Ventures, 533
So.2d 1352, 1358 (La.App. 3d Cir.1988). Thus, the prevailing meaning, as
defined by the legislature and the courts of this state, falls somewhere in
the range between ordinary negligence and intentional conduct.
Wells Fargo strenuously argues that, under Banner Chevrolet v. Wells Fargo
Guard Services, 508 So.2d 966 (La.App. 4th Cir.1987), the instant conduct of
Mr. Best cannot be deemed gross negligence. However, for the following
reasons, we do not find Banner controlling. In Banner, our brethren of the
fourth circuit stated that the trial court correctly found that the conduct
of the Wells Fargo employee fell below the standard of conduct for security
guards. Nevertheless, they reversed the trial court's judgment against Wells
Fargo because they did not agree with the trial court's conclusion that the
negligence constituted a breach of the contract for alarm protection
services. The Banner court held that the exculpatory clause was effective to
relieve Wells Fargo of liability. The exculpatory clause in Banner differs
from that in the instant case, and the Banner opinion does not directly
address the issue of what constitutes gross negligence. For these reasons,
we are not persuaded by Wells Fargo's argument that the Banner reasoning or
analysis, if applied to the instant facts, would yield a reversal of the
instant trial court judgment.
The Louisiana statutes and cases generally define gross negligence as
conduct which falls below that which is expected of a reasonably careful
person under like circumstances, or which is less than that diligence which
even careless men are accustomed to exercise. Gross negligence is also
"reckless disregard" or "careless indifference," and may involve a gross or
substantial deviation from an expected or defined standard of care. Wells
Fargo asserts that gross negligence is (1) a willful or deliberate disregard
of contractual duty in cases involving alarm systems, and (2) conduct that
shocks the conscience or that falls greatly below the standard of care
appropriate under the circumstances.
Wells Fargo's obligation under the instant contract was performed
improperly, hurriedly, and negligently. We are not persuaded by Wells
Fargo's assertion that the patrolman simply made a mistake which amounts to
ordinary negligence. See and compare, Birdsong v. Barber, 176 So.2d 239, 241
(La.App. 4th Cir.1965). Whether we use the definitions suggested by Wells
Fargo, or those from legislative and jurisprudential sources, we find that
the trial court correctly determined that the conduct of the Wells Fargo
patrolman constituted gross negligence. Accordingly, we find no error in the
trial court's factual and legal determination that the conduct of Wells
Fargo's employee constitutes gross negligence, which resulted in
Rosenblath's damages, and for which Wells Fargo, under the contract, is
liable. See and compare, Charbonnet v. Orkin Exterminating Co., 254 So.2d
148, 151 (La.App. 4th Cir.1971). It follows that the trial court also
correctly determined that the limitation of liability clause of the contract
does not apply under these circumstances, therefore Wells Fargo's liability
is not limited to the amount stated in that clause.
We now turn to the issue of whether the subrogation agreement between
Rosenblath's and its insurer affects the amount of Wells Fargo's liability
to Rosenblath's.
Subrogation and the Collateral Source Rule: Is Wells Fargo's liability
offset by that which was paid by Rosenblath's insurer?
[2] The trial court found that the Rosenblath's loss was $97,653.19 in
sales and inventory. Neither party challenges this finding. In its written
reasons for judgment, the trial court stated that,
From this amount plaintiff received from his insurer, the sum of $28,484 for
loss of contents, and $5,577 for loss of profits. In exchange for that
payment, plaintiff assigned all of his rights to collect that amount to his
insurer. He reserved only the right to collect any amounts over and above
the amount paid by the insurer.
The plaintiff is not the owner of the right to collect the amounts paid by
the insurer. As a result, plaintiff is entitled to recover $63,592.19 in
these proceedings, together with applicable interest.
In its answer to the appeal, plaintiff-appellee, Rosenblath's, asserts that
the trial court erred in reducing its damages by the amount paid to it by
its insurer. However, defendant-appellant, Wells Fargo, asserts that this
deduction was correct.
Both Rosenblath's and Wells Fargo rely upon the following language in the
alarm protection agreement:
17. SUBROGATION. Subscriber [Rosenblath's] does hereby for himself and any
parties claiming under him, release and discharge Contractor [Wells Fargo]
from and against all hazards covered by Subscriber's insurance, it being
expressly understood and agreed that no insurance company or insurer will
have any right of subrogation against Contractor.
Rosenblath's contends that this clause in the contract disclaims the
validity of any subrogation in favor of an insurer. Rosenblath's also argues
that, notwithstanding the subrogation, the collateral source rule applies.
By contrast, Wells Fargo contends that, in this clause of the contract,
Rosenblath's waived its right to collect any amounts paid by its insurer.
Wells Fargo also argues that the collateral source rule is not applied by
Louisiana courts to breach of contract cases.
The narrow issue before this court is whether the trial court erred in
reducing the damage award by the amounts Rosenblath's received pursuant to
the above subrogation agreement between Rosenblath's and its insurer, The
USF & G Companies. If clause 17 is a valid waiver of subrogation, then the
trial court correctly deducted Rosenblath's insurance proceeds from the
total damages. If not, then we must determine whether the subrogation
agreement between Rosenblath's and its insurer affects its ability to
recover the total damage amount from Wells Fargo.
The language of clause 17 is unambiguous with regard to Rosenblath's release
of Wells Fargo from liability for hazards covered by Rosenblath's insurer.
By contrast, the language of the waiver of subrogation in Peacock's, Inc. v.
Shreveport Alarm Co., 510 So.2d 387, 403 (La.App. 2d Cir.1987), writs
denied, 513 So.2d 826, 827, 828 (La.1987) rendered the waiver null and void
to the extent that it invalidated the insurance or increased insurance
premiums.
[3] [4] A party may legally contract with another party to exclude
liability for his negligence if the exculpatory agreement clearly expresses
that intent. Rhodes v. Congregation of St. Francis, 476 So.2d 461, 463
(La.App. 1st Cir.1985); Banner Chevrolet, supra, 508 So.2d at 967. All
exculpatory contracts are not ipso facto null and void; parties are free to
make their own contracts except in instances and under conditions inhibited
by law, morals, or public policy. Alan Abis, Inc. v. Burns Electronic
Security Services, Inc., 283 So.2d 822, 826 (La.App. 2d Cir.1973).
Unless void as against public policy, the parties are free to include this
release in the alarm protection agreement. Rosenblath's has cited, and we
have found, no statutory or jurisprudential prohibition which applies to
these circumstances. For these reasons, we do not reach the issue of the
effect of the subrogation agreement and we agree that the trial court's
calculation is correct.
CONCLUSION
The contractual limitation of liability does not apply to limit Wells
Fargo's liability for the damages which were caused by its grossly negligent
conduct. Wells Fargo is bound by the contract for damages arising from this
grossly negligent conduct. Thus, the assignments of error raised by
defendant-appellant, Wells Fargo, are without merit.
The amount requested by Rosenblath's in its answer to the appeal is an
amount which was covered by the insurer, and thus an amount from which Wells
Fargo is released under the contract. The trial court correctly awarded
damages which did not include the amount covered by Rosenblath's insurer.
For these reasons, the judgment of the trial court is affirmed at
appellant's costs.
AFFIRMED.
La.App. 2 Cir.,1994.
Rosenblath's, Inc. v. Baker Industries, Inc.
634 So.2d 969, 25,685 (La.App. 2 Cir. 3/30/94)
END OF DOCUMENT