A new appellate case has just been published in New York. The fulltext will be on my web site by Monday under Alarm Law Issues, Cases sortedstate by state, New York cases. Case is Adler v Columbia Savings & Loanand Wells Fargo Alarm Services, Second Department, Appellate Division, NewYork.
Here are the basic facts: Renters of safe deposit boxes at financialinstitution brought action for breach of contract and negligenceagainst bank and burglar alarm company that installed, tested, andmonitored bank's alarm system. The safe deposit box renters claimed thatthe bank's security was inadequate. The safe deposit boxes were emptied.The case does not offer details of how the alarm system or security wasdeficient or what went wrong with the system. The case does address legalissues and public policy issues important to the alarm industry. Theseissues obviously extend beyond the borders of New York, so if you're inanother state, you should still understand these issues.
Wells Fargo apparently had a contract that contained an exculpatoryclause. The contract also made clear that the bank's customers were notparties to the alarm contract, and not intended beneficiaries of the alarmcontract.
In New York an exculpatory clause will be enforced for negligence, butnot gross negligence. Some states will enforce the clause even if there isgross negligence. You can check your state's leading cases on my web siteunder the state by state cases under the Alarm Law Issues page.
So in this case Wells Fargo moves to dismiss the complaint as againstit, claiming that the bank's customers could not sue Wells Fargo. TheJudge grants that part of the motion and dismisses the complaint againstWells Fargo. But that does not end Wells Fargo's involvement in the case.
The bank made claim against Wells Fargo by way of a Cross Claim,claiming that Wells Fargo should be responsible for its share of theliability. Of course Wells Fargo did have a contract with the bank. WellsFargo's motion to have the Cross Claim by the bank dismissed was grantedonly in part, to the extent that Wells Fargo was only negligent, but not tothe extent that Wells Fargo was grossly negligent. So for the time beingWells Fargo stays in the case and continues to have defense expense.
Here are some of the more interesting holdings by the Appellate Court:
1. A burglar alarm agreement which contains an exculpatory clause shieldsthe burglar alarm company from liability only for ordinary negligence, notfor gross negligence.
2. In this context, gross negligence is conduct which "smacks" ofintentional wrongdoing or evinces a reckless indifference to the rights ofothers.
3. With respect to the cross claims for both contribution andindemnification, triable issues of fact exist as to whether the Wells Fargoand the bank were grossly negligent. The bank may recover from the WellsFargo under a contribution theory to the extent that Wells Fargo is foundto be grossly negligent [the court did not mention the facts].
4. With respect to the cross claim for indemnification, an issue of factexists as to whether Columbia was independently negligent. In indemnity,the party legally liable shifts the entire loss to another, Even if WellsFargo is found to be grossly negligent, Columbia is not entitled toindemnification for its own negligence.
5. Public policy considerations protect alarm companies for injuries tonon-contracting plaintiffs, particularly where, as here, the contractexplicitly states that the sums payable were calculated with theunderstanding that the risk of loss, at least for ordinary negligence,remains with the subscriber. No duty stems from the plaintiffs' claimedstatus as intended third-party beneficiaries.