164 A.D.2d 112, *; 560 N.Y.S.2d 293, **;
1990 N.Y. App. Div. LEXIS 11614, ***


Hanover Insurance Company, as Subrogee and/or Assignee of NBK Company
Manufacturing Jewelers, et al., Respondents, v. D & W Central Station Alarm
Co., Inc., Appellant, et al., Defendants

No. 40732

Supreme Court of New York, Appellate Division, First Department

164 A.D.2d 112; 560 N.Y.S.2d 293; 1990 N.Y. App. Div. LEXIS 11614

October 4, 1990

PRIOR HISTORY: [***1]

Appeal from an order of the Supreme Court (Harold Baer, Jr., J.), entered
October 27, 1989, which granted a motion by defendant D & W Central Station
Alarm Co., Inc., for reargument, and, upon reargument, adhered to a prior
determination denying a motion by said defendant for summary judgment.

DISPOSITION: Order, Supreme Court, New York County, entered on October 22,
1989, unanimously affirmed, without costs and without disbursements.


CASE SUMMARY

PROCEDURAL POSTURE: Defendant security company appealed an order of the
Supreme Court (New York) that denied defendant's motion for summary judgment
in a negligence action directed against defendant.


OVERVIEW: Plaintiff filed suit against defendant security company for a loss
plaintiff suffered after a premises being monitored by defendant was robbed.
Defendant's motion for summary judgment was denied. Defendant was then
permitted to reargue its motion on the ground that the law had changed.
Defendant's motion for summary judgment was again denied. The court
affirmed. The court held that the exculpatory clause in the security alarm
contract attempted to relieve defendant from liability for defendant's
wilful or grossly negligent acts. The court held that such an exculpatory
clause was wholly void as against public policy.


OUTCOME: The court affirmed the denial of defendant security company's
motion for summary judgment because an exculpatory clause attempting to
relieve defendant from liability for their grossly negligent acts was wholly
void as against public policy.

COUNSEL: Kenneth Kirschenbaum of counsel (Ira Levine with him on the brief;
Kirschenbaum & Kirschenbaum, attorneys), for appellant.

Arthur N. Lambert of counsel (Marc R. Lepelstat with him on the brief;
Lambert & Weiss, attorneys), for respondents.

JUDGES: Kassal, J. Ross, J. P., Ellerin and Wallach, JJ., concur.

OPINIONBY: KASSAL

OPINION: [*113] OPINION OF THE COURT

[**294] [1] This appeal calls upon the court to clarify the law with
respect to limitation of liability clauses in contracts for the provision of
burglary alarm services and related protection. For the reasons that follow,
defendant-appellant may not rely upon such a contractual provision to limit
its liability for acts of alleged gross negligence, and [***2] the IAS Part
properly denied its motion for summary judgment.

Plaintiff, Hanover Insurance Company (Hanover), brings this action as
subrogee and/or assignee of NBK Company Manufacturing Jewelers (NBK) which,
on February 18, 1986, entered into a written agreement with
defendant-appellant D & W Central Station Alarm Co., Inc. (D & W), pursuant
to which D & W agreed to install, service, and monitor a burglary alarm
system at NBK's premises. Included in the services to be provided under the
contract was "guard response".

Subsequent to D & W's installation of the burglary alarm equipment in NBK's
premises, and at some point between the evening of December 26 and the
morning of December 27, 1986, NBK's premises was burglarized. The record
establishes that D & W received an alarm signal from the subject premises on
December 26, 1986 at 10:47 P.M., and that a second alarm signal was received
at 12:38 A.M. on December 27. The record further establishes that a guard
dispatched from D & W's central office in response to the alarm signals
arrived at NBK's premises at 1:54 A.M. and departed therefrom at 2:15 A.M.
on December 27. In a handwritten and signed report, that guard stated that
[***3] the reason he left without investigating the alarm condition or
otherwise acting upon it [*114] was that he could not gain entry into the
building and, when he called D & W to so inform them, he was told to "forget
that assignment and go on another guard run".

The earliest report of police notification was recorded by Sergeant Jeffrey
Miller who received a call at 5:02 A.M. on December 27, 1986. Also contained
in the record is a report prepared by North Atlantic Security Alarm, Inc.
(NASA), which monitored NBK's premises on television equipment, stating that
the burglars were viewed on camera at approximately 4:44 A.M., on the
morning of the 27th, and that NASA notified the police. By the time that
Sergeant Miller arrived at the premises at approximately 5:03 A.M., the
burglars had escaped, and they have not been apprehended to date. NBK,
plaintiff Hanover's subrogor, sustained losses totaling $ 243,000.

The contract governing D & W's provision of burglary alarm services to
[**295] NBK contained a limitation of liability clause stating as follows:
"THE PARTIES AGREE THAT THE ALARM SYSTEM IS NOT DESIGNED OR GUARANTEED TO
PREVENT LOSS BY BURGLARY, THEFT, AND OTHER ILLEGAL [***4] ACTS OF THIRD
PARTIES, OR LOSS BY FIRE. IF, NOTWITHSTANDING THE TERMS OF THIS AGREEMENT,
THERE SHOULD ARISE ANY LIABILITY ON THE PART OF THE LESSOR, AS A RESULT OF
BURGLARY, THEFT, HOLD-UP, EQUIPMENT FAILURE, FIRE, SMOKE, OR ANY CAUSE
WHATSOEVER, REGARDLESS OF WHETHER OR NOT SUCH LOSS, DAMAGE OR PERSONAL
INJURY WAS CAUSED BY OR CONTRIBUTED TO BY LESSOR'S NEGLIGENT PERFORMANCE OR
FAILURE TO PERFORM ANY OBLIGATION UNDER THIS AGREEMENT, SUCH LIABILITY SHALL
BE LIMITED TO AN AMOUNT EQUAL TO SIX (6) TIMES THE MONTHLY PAYMENT BY LESSEE
AT THE TIME SUCH LIABILITY IS FIXED, OR TO THE SUM OF $ 250.00 WHICHEVER IS
GREATER."

Pursuant to this provision, D & W moved, on January 22, 1988, for summary
judgment. The denial of its motion, filed in the IAS Part on April 15, 1988,
was affirmed without opinion by order of this court entered October 20, 1988
( Hanover Ins. Co. v Full Range Sec. Protection, 143 AD2d 1074).

[2] Following this court's memorandum decision in Koos Van Den Akker Atelier
v Honeywell Protection Servs. (148 AD2d 359), D & W moved before the IAS
Part to reargue its motion for summary judgment on the ground that the law
had been changed. The motion to reargue [***5] having been granted, and the
IAS Part having adhered to its prior ruling, D & W now appeals from that
most recent denial of summary judgment [*115] relief. In light of the
appearance of a change or conflict in the law, occasioned by Koos Van Den
Akker Atelier v Honeywell Protection Servs. (supra), the IAS Part's grant of
reargument was proper. (See, Foley v Roche, 86 AD2d 887.) Also proper was
that court's adherence, upon reargument, to the denial of summary judgment.

[1] It is well settled that exculpatory clauses in security alarm contracts
"have been repeatedly enforced by the courts of this State, and claims for
breach of these contracts have been dismissed, where the plaintiff has
sought to recover damages for losses sustained, as a result of crimes such
as burglaries". ( Nuri Farhardi, Inc. v Albany Ins. Co., 137 AD2d 429, 431.)
However, to the extent that such agreements "'purport to grant exemption for
liability for willful or grossly negligent acts[,] they have been viewed as
wholly void'". (Supra, at 431, quoting from Gross v Sweet, 49 NY2d 102, 106;
see also, Idone v Pioneer Sav. & Loan Assn., 159 AD2d 560; Alter v Advance
[***6] Alarm Co., 131 AD2d 406; Arell's Fine Jewelers v Honeywell, Inc.,
147 AD2d 922, 923.)

In Koos Van Den Akker Atelier v Honeywell Protection Servs. (supra) this
court, relying upon dictum in Feldman Furs v Jewelers Protection Servs. (134
AD2d 171), held that gross negligence could properly be the subject of a
limitation of liability clause. Further reflection compels us to abandon
this course in favor of sound public policy grounds which preclude exemption
from liability for grossly negligent acts. (See, Kalisch-Jarcho, Inc. v City
of New York, 58 NY2d 377, 384-385; Gentile v Garden City Alarm Co., 147 AD2d
124, 131.)

In contrast to Feldman Furs v Jewelers Protection Servs. (supra), the record
before us establishes that triable issues of fact exist regarding whether D
& W was grossly negligent in its response or failure to respond to alarm
signals transmitted from NBK's premises. Among the matters to be considered
in this regard are D & W's failure to notify the police upon receipt of
three alarm signals in the span of four hours, and the decision by a member
of the D & W staff to direct the guard who responded to "forget the [**296]
assignment" [***7] because he encountered difficulty in entering the
building.

Accordingly, the order, Supreme Court, New York County (Harold Baer, Jr.,
J.), entered October 22, 1989, which granted defendant's motion to reargue
and, upon reargument, adhered to its prior determination denying defendant's
motion for summary judgment, should be affirmed, without costs.