The New Light Company, Inc., doing business as The Great Wall Restaurant,
Appellant, v. Wells Fargo Alarm Services, a division of Baker Protective
Services, Inc., and General Electric Company, jointly and severally,
Appellees.
SUPREME COURT OF NEBRASKA
December 23, 1994, Filed

PRIOR HISTORY: Petition for further review from the Nebraska Court of
Appeals, Sievers Chief Judge, and Connolly and Irwin, Judges, on appeal
thereto from the District Court for Douglas County, James M. Murphy, Judge.

DISPOSITION: REVERSED AND REMANDED FOR FURTHER PROCEEDINGS.

CASE SUMMARY
PROCEDURAL POSTURE: Plaintiff owner filed an action against defendant
corporation for damages sustained from a fire in the owner's restaurant and
alleged that the corporation's acts constituted gross negligence. The
Nebraska Court of Appeals affirmed an order granting summary judgment in
favor of the corporation.

OVERVIEW: The owner and the corporation renewed an agreement stating that
the corporation would install a fire alarm system in the owner's restaurant.
The renewal contained an exculpatory clause, which relieved the corporation
from liability for negligence. The corporation did not install a
fire-sensing device, and a fire occurred. The court reversed and remanded
the grant of summary judgment for the corporation. It held that the
limitation-of-damages clause did not create an enforceable limitation on the
corporation's liability for an action based upon gross negligence. Public
policy prevented the corporation from limiting its damages for gross
negligence. It did not attempt to exculpate acts of gross negligence from
the contract, and therefore the exculpatory clause did not affect the
owner's right to assert an action based upon gross negligence or willful and
wanton misconduct.

OUTCOME: The order upholding the grant of summary judgment in favor of the
corporation was reversed and remanded for further proceedings because a
material question of fact was presented as to whether the corporation's
actions constituted gross negligence or willful and wanton misconduct.

COUNSEL: Jeffrey R. Learned, of Morrison, Mahoney & Miller; Kile W. Johnson,
of Barlow, Johnson, Flodman, Sutter, Guenzel & Eske; and, on brief, Marvin
J. Monroe, of Denenberg, Tuffley & Jamieson, P.C., for appellant.

Michael G. Connery and Diana J. Vogt, of Kutak Rock, for appellee Wells
Fargo.

JUDGES: Hastings, C.J., White, Caporale, Fahrnbruch, Lanphier, and Wright,
JJ., and Boslaugh, J., Retired.

OPINION:

[*58] [**27] WRIGHT, J.

The New Light Company, Inc. (New Light), sued Wells Fargo Alarm Services
(Wells Fargo) and General Electric Company as jointly and severally liable
defendants for damages sustained as the result of a fire in a restaurant
owned by New Light. Wells [***3] Fargo had installed a fire alarm system
in the restaurant. Wells Fargo moved for summary judgment, and the district
court for Douglas County granted Wells Fargo's motion. The Nebraska Court of
Appeals affirmed, holding that public policy did not justify the voiding of
exculpatory language in the contract between Wells Fargo and New Light. We
reverse the judgment and remand the cause for further proceedings.

SCOPE OF REVIEW

In appellate review of a summary judgment, the court views the evidence in
the light most favorable to the party against whom the judgment is granted
and gives such party the benefit of all reasonable inferences deducible from
the evidence. Maloley v. Shearson Lehman Hutton, Inc., 246 Neb. 701, 523
N.W.2d 27 (1994); Steenblock v. Elkhorn Township Bd., 245 Neb. 722, 515
N.W.2d 128 (1994).

Summary judgment is to be granted only when the pleadings, depositions,
admissions, stipulations, and affidavits in the record disclose that there
is no genuine issue as to any material fact or as to the ultimate inferences
that may be drawn from those facts and that the moving party is entitled
[***4] to judgment as a matter of law. First Nat. Bank in Morrill v. Union
Ins. Co., 246 Neb. 636, 522 N.W.2d 168 (1994); Double K, Inc. v. Scottsdale
Ins. Co., 245 Neb. 712, 515 N.W.2d 416 (1994).

Regarding a question of law, an appellate court has an obligation to reach a
conclusion independent of that of the trial court in a judgment under
review. Rains v. Becton, Dickinson & Co., 246 Neb. 746, 523 N.W.2d 506
(1994); Murphy v. City of Lincoln, 245 Neb. 707, 515 N.W.2d 413 (1994).

FACTS

New Light owned and operated The Great Wall Restaurant at [*59] 1013
Farnam Street in Omaha, Nebraska. On July 1, 1983, New Light and Wells Fargo
executed an agreement which stated that Wells Fargo was to install and
maintain a fire alarm system on the restaurant premises. Wells Fargo
installed the system and maintained it through 1988. In October 1988, the
parties signed a renewal of the agreement, which renewal contained an
exculpatory clause stating that New Light agreed that Wells Fargo would not
be liable for any loss or damage, irrespective [***5] of origin, to persons
or property whether directly or indirectly caused by performance or
nonperformance of any obligation imposed by the agreement or "by negligent
acts or omissions of Wells Fargo Alarm, its agents or employees."

[**28] Wells Fargo failed to install a fire-sensing device in the
basement-level clothes dryer room or the adjoining electrical room, which
contained the main fire alarm control panel and its connection to the
telephone junction box. On January 7, 1989, a fire began in the clothes
dryer room. The fire alarm system failed to activate the outside alarm and
communications system. The fire caused extensive damage to the building and
its contents.

New Light's petition alleged, inter alia, that Wells Fargo was grossly
negligent by failing to design, install, and maintain adequate fire-sensing
devices in the electrical room or in the clothes dryer room of New Light's
property; by failing to adequately test the fire detection system so as to
ensure that a fire erupting in the electrical room or in the clothes dryer
room would not incapacitate the system; by failing to take reasonable care
in the design, installation, and maintenance of the system; and by failing
to properly, [***6] diligently, and reasonably select, train, and
supervise its employees and agents with regard to the design, installation,
and maintenance of the system. New Light alleged that such acts were
willful, wanton, and intentional and that they constituted gross negligence.

Wells Fargo generally denied the allegations and claimed that the petition
failed to state facts sufficient to constitute a cause of action. As two of
its affirmative defenses, Wells Fargo claimed that paragraph D of the
renewal agreement exculpated Wells Fargo from liability and claimed that, in
the alternative, such liability was limited to the lesser of the annual
charges due [*60] Wells Fargo from New Light pursuant to the agreement or
$ 10,000.

Wells Fargo moved for summary judgment, alleging that the contract for
protective alarm services between New Light and Wells Fargo relieved Wells
Fargo of all liability for any losses suffered by New Light and, in the
alternative, that Wells Fargo was entitled to partial summary judgment in
that its liability was limited to the amount specified by the renewal
agreement.

New Light's affidavits in opposition to the motion stated the following: The
fire originated in a fluorescent [***7] light fixture mounted on the
ceiling of the clothes dryer room, which was located in the basement at the
rear of the premises. The fire smoldered for a long period of time before it
was discovered. The fire alarm system failed to detect the fire, to activate
its on-premises exterior alarm, and to send a signal to Wells Fargo's
monitoring communications center because the system did not include a
fire-sensing device in the clothes dryer room, where the fire originated,
and because the system did not include a fire-sensing device in the
adjoining electrical room, which resulted in the destruction of the fire
alarm communication system before it could have been activated by
fire-sensing devices located in other areas of the premises. One affidavit
stated that the system, as designed and installed, was in violation of the
National Fire protection Association codes and that
to design, install and maintain such a system as was installed in the Great
Wall Restaurant is to be grossly negligent in that the system, as designed,
installed and maintained:

a) was in violation of codes and regulations governing such systems

b) was in violation of industry standards;

c) failed to place a heat [***8] sensing device in the basement
laundry/dryer room and adjoining electrical room where fires are very likely
to occur; and

d) failed to protect the very room where the fire alarm communication system
was installed and thus prevented the system from operating should a fire
occur in that room or the adjoining laundry/dryer room.


[*61] The district court granted Wells Fargo's motion for summary judgment
and dismissed the action as it related to Wells Fargo. On appeal, New Light
alleged that the district court erred in granting summary judgment in favor
of Wells Fargo. The Court of Appeals affirmed, holding that the exculpatory
clause was not contrary to public policy.

ASSIGNMENT OF ERROR

In its petition for further review, New Light claims the Court of Appeals
erred in holding that it is not contrary to public policy [**29] for a
party to contractually exculpate itself from liability for its own gross
negligence or willful and wanton misconduct.

ANALYSIS

The issue for our determination is whether, as a matter of law, the
exculpatory clause set out in paragraph D of the original agreement and the
renewal agreement released Wells Fargo from liability for gross negligence
or willful and wanton misconduct. [***9] The Court of Appeals held that
public policy did not void the exculpatory provision in the renewal
agreement which precluded the imposition of liability upon Wells Fargo for
gross negligence or willful and wanton misconduct. In rendering its
decision, the Court of Appeals relied upon our decision in Bedrosky v.
Hiner, 230 Neb. 200, 430 N.W.2d 535 (1988). The Court of Appeals'
application of Bedrosky would have been correct if this case had involved
exculpation from ordinary negligence.

In Bedrosky, a fire of uncertain origin began on the fifth and sixth floors
of a building and spread to the elevator shaft, where it spread to the
basement and the first floor, which was space leased to the plaintiffs. The
plaintiffs claimed the defendant landlord, in violation of certain
regulations of the State Fire Marshal's office failed to enclose the
elevator shaft; failed to install fire doors; and, in contravention of his
representation, failed to keep the sprinkler system in proper working order.
The plaintiffs made no allegations of gross negligence or willful and wanton
misconduct.

The issue in Bedrosky was whether the exculpatory [***10] clause of the
lease was effective to relieve the defendant from all liability. Paragraph
10 of the lease provided: "'The Lessor shall not be or become liable for any
damage . . . to said premises or to [*62] said Lessee or to any other
persons or property caused by . . . the act or neglect of any other person
or caused in any other manner whatsoever.'" Id. at 202-03, 430 N.W.2d at
538. The plaintiffs argued that the phrase "caused by the act or neglect of
any other person or caused in any other manner whatsoever" did not include
negligence or intentional misrepresentation of the lessor.

In Bedrosky we did not specifically address the issue of gross negligence or
willful and wanton misconduct, and we do not now interpret Bedrosky to be a
blanket approval of exculpatory clauses in all factual situations. We held
that paragraph 5 of the lease plainly disposed of the misrepresentation
claim. Paragraph 5 provided: "'Lessee agrees and admits that no
representation as to the condition or repair hereof has been made by the
Lessor or his agent which is not herein expressed or indorsed hereon . . .
.'" Id. at 202, 430 N.W.2d at 538. [***11] We found that the plain language
of paragraph 10 did "not permit us to read into its meaning a provision
limiting the exclusion to any of the specific causes previously enumerated
in the lease." Id. at 208-09, 430 N.W.2d at 541. We did not find the
language of the exculpatory clause to be a clear contravention of public
policy.

Contrary to Wells Fargo's contention, we have not specifically addressed the
public policy consideration regarding exculpatory clauses relating to gross
negligence or willful and wanton misconduct. In Mayer v. Howard, 220 Neb.
328, 331, 370 N.W.2d 93, 96 (1985), the language released the defendant
"'from all liability . . . caused by the negligence of the releasees . . .
.'" We held that Mayer had expressly assumed the risk of racing his
motorcycle on the defendant's track after being fully informed of the
dangers involved. The "Release of Liability" did not mention gross
negligence or willful and wanton misconduct, and our holding was expressly
based on the language at issue.

In Oddo v. Speedway Scaffold Co., 233 Neb. 1, 4, 443 N.W.2d 596, 599 (1989),
[***12] the lease provided for indemnification for injury caused by conduct
and stated the following in uppercase bold print: "'The parties agree that
Lessor shall only be liable or responsible for actions of wilful
misconduct.'" [*63] We held that although the clause did not contain the
word "negligence," the intended consequence of indemnity was clearly and
unequivocally expressed. The contractor was obligated to indemnify for
conduct including negligence, but excluding claims based on Speedway's
willful misconduct.

[**30] In determining whether the language of a particular exculpatory
clause in a contract is a clear contravention of public policy, we must
consider each agreement on the basis of the particular facts surrounding the
agreement. We have defined public policy as
"'that principle of the law which holds that no subject can lawfully do that
which has a tendency to be injurious to the public or against the public
good. * * * The principles under which the freedom of contract or private
dealings is restricted by law for the good of the community.' . . ."


OB-GYN v. Blue Cross, 219 Neb. 199, 203, 361 N.W.2d 550, 553 (1985). Accord
United Seeds, Inc. v. Hoyt, 168 Neb. 527, 96 N.W.2d 404 (1959). [***13]

We have stated that "'"'gross negligence means great and excessive
negligence; that is, negligence in a very high degree. It indicates the
absence of slight care in the performance of a duty.'"'" Wicker v. City of
Ord, 233 Neb. 705, 714, 447 N.W.2d 628, 634 (1989). Accord Jones v. Foutch,
203 Neb. 246, 278 N.W.2d 572 (1979). Willful and wanton misconduct exists
where a defendant had actual knowledge that because of its actions, a danger
existed to the plaintiff and the defendant intentionally failed to act to
prevent a harm that was reasonably likely to result. Dotzler v. Tuttle, 234
Neb. 176, 449 N.W.2d 774 (1990).

Whether a particular exculpatory clause in a contractual agreement violates
public policy depends upon the facts and circumstances of the agreement and
the parties involved. The right of contract may be restricted for the public
good. The greater the threat to the general safety of the community, the
greater the restriction on the party's freedom to contractually limit the
party's liability For example, a contractual agreement to dig [***14] a
ditch does not have the same public policy considerations as would the
installation of a fire alarm system [*64] in a school, hospital, nursing
home, restaurant, or other heavily occupied building. Common sense tells us
that the greater the risk to human life and property, the stronger the
argument in favor of voiding attempts by a party to insulate itself from
damages caused by that party's gross negligence or willful and wanton
misconduct.

In the factual setting in this case, when we balance the parties' right to
contract against the protection of the public, we find a sufficiently
compelling reason to prevent Wells Fargo from insulating itself by
contractual agreement from damages caused by its own gross negligence or
willful and wanton misconduct. Such an agreement would have a tendency to be
injurious to the public. This limitation on the freedom to contract is
imposed by law because of the potential risks to human life and property and
is, therefore, independent of the agreement of the parties.

A similar exculpatory clause was determined to be contrary to public policy
in Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 593 N.E.2d 1365, 583
N.Y.S.2d 957 (1992). [***15] The New York Court of Appeals stated that it
was the public policy of the state that a party could not insulate itself
from damages caused by grossly negligent conduct. Gross negligence was
defined as "conduct that evinces a reckless indifference to the rights of
others." Id. at 554, 593 N.E.2d at 1371, 583 N.Y.S.2d at 963. The court
found that this policy would apply equally to contract clauses purporting to
exonerate a party from liability and to clauses limiting damages to a
nominal sum. We agree with the New York court that public policy with regard
to gross negligence and willful and wanton misconduct applies both to
clauses attempting to exculpate liability and clauses attempting to limit
damages to a nominal sum.

We now apply the public policy considerations just outlined to the
limitation-of-damages provision of the agreement in the case at bar. We note
that Wells Fargo, in paragraph D of the renewal agreement, attempted to
limit the amount of loss or damages attributable to the failure of the fire
alarm system to the annual charge under the contract or $ 10,000, whichever
was less. As written, this limitation on [***16] damages is unqualified,
limiting all damages of whatever cause, including those that [*65] accrue
due to Wells Fargo's gross negligence or willful and wanton [**31]
misconduct. We therefore hold that this limitation-of-damages clause does
not create an enforceable limitation on Wells Fargo's liability for an
action based upon gross negligence or willful and wanton misconduct. As was
done in Sommer v. Federal Signal Corp., supra, we hold that in this
instance, public policy prevents Wells Fargo from limiting its damages for
gross negligence or willful and wanton misconduct.

Paragraph D attempted to completely release Wells Fargo from liability for
only its negligent acts or omissions. Based upon New Light's allegations of
gross negligence and willful and wanton misconduct, the court should not
have granted summary judgment. The parties are bound by the words of the
contract. Jones v. Burr, 223 Neb. 291, 389 N.W.2d 289 (1986). A contract
which is written in clear and unambiguous language is not subject to
interpretation or construction; rather, the intent of the parties must be
determined from [***17] the contents of the contract, and the contract must
be enforced according to its terms. Rains v. Becton, Dickinson & Co., 246
Neb. 746, 523 N.W.2d 506 (1994). Wells Fargo did not attempt to exculpate
acts of gross negligence or willful and wanton misconduct from the contract.
The pertinent part of paragraph D provided:
Subscriber agrees that Wells Fargo Alarm shall not be liable for any of
Subscriber's losses or damages, irrespective of origin, to person or to
property, whether directly or indirectly caused by performance or
nonperformance of any obligation imposed by this agreement or by negligent
acts or omissions of Wells Fargo Alarm, its agents or employees.


The exculpatory clause makes no mention of gross negligence or willful and
wanton misconduct on the part of Wells Fargo. Therefore, gross negligence
and willful and wanton misconduct were not contemplated by the parties. Even
if the exculpatory clause could be construed to include gross negligence and
willful and wanton misconduct public policy prohibits such an exclusion.

A similar result was reached in Douglas W. Randall, Inc. v. AFA Protective
Systems, 516 F. Supp. 1122 (E.D. Pa. 1981). [***18] The district court, in
discussing Pennsylvania law, noted that [*66] exculpatory clauses in
contracts relieving a party from liability for negligence are valid. The
exculpatory clause in that case provided: "'The subscriber . . . agrees that
the contractor shall be exempt from liability for loss or damage due
directly or indirectly to occurrences . . . from negligence, active or
otherwise, of the contractor . . . ." Id. at 1127. The court held that the
exculpatory clause limited the defendant's liability only with respect to
acts of negligence, and not for acts of gross negligence.

We do not find any language within the agreement which clearly and
unequivocally expresses an intention to limit Wells Fargo's liability for
acts involving gross negligence or willful and wanton misconduct. We
therefore hold that the exculpatory clause does not affect New Light's right
to assert a cause of action based upon gross negligence or willful and
wanton misconduct.

Since a material question of fact is presented as to whether Wells Fargo's
actions constituted gross negligence or willful and wanton misconduct, we
reverse the judgment and remand the cause for further proceedings. [***19]

REVERSED AND REMANDED FOR

FURTHER PROCEEDINGS.

White, J., concurs in the result.