Claim Falls to 'We Are Not an Insurer' Contract Provision
ALM Media
Updated
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A New York trial court has dismissed gross negligence, negligence, breach of contract, and res ipsa loquitur claims brought by a jewelry store against its alarm company based on the waiver and limitation of liability provisions in the contract the store signed with the alarm company.
The Case
Ivan and Krystyna Homola, the owners of EJ Jewelers, Inc., entered into contracts with Protection One Alarm Monitoring Inc., d/b/a Protection 1 Security Solutions, pursuant to which Protection One would install a burglar alarm monitoring system and closed circuit television at their store.
On May 7, 2014, the parties entered into a third agreement for burglar monitoring services, the terms of which superseded all prior agreements (the 2014 Agreement ).
At approximately 6:00 a.m. on March 20, 2016, the Homolas received a phone call from Protection One informing them that the jewelry store was experiencing a communication error whereupon Ms. Homola directed Protection One to call the police.
Approximately one hour later, Ms. Homola said that she called Protection One to follow up and asked if everything was ok and if the store was protected. Ms. Homola said that she was told that everything was fine, the police came to the store, and the store was fully secured by the alarm.
At 1:00 a.m. on March 21, 2016, the Homolas received a second call from Protection One at which time, they said, they were informed that the store was again experiencing a communication error in a few zones but that there was no burglary, just a communication problem.
On Monday morning, March 21, 2016, Ms. Homola again contacted Protection One; she said that she was told that everything [was] fine.
The Homolas said that, on Tuesday morning, March 22, 2016, they went to the store and discovered that it had been burglarized. Apparently, perpetrators had accessed the alarm system s power supply, which was housed in the basement of a business adjacent to the jewelry store. After disrupting the power, the perpetrators allegedly waited for the back-up batteries in the store s alarm system to dissipate and thereafter cut a hole through the roof and descended into the store, stealing in excess of $500,000 in jewelry.
That same day, the Homolas said, they also learned that the cameras supplied by Defendant Protection One had not filmed at all and the camera s backup storage provided by Defendant Protection One was completely empty.
The Homolas filed a claim with their insurance carrier, Jewelers Mutual Insurance Company, which had issued a policy covering losses up to $80,000. However, as a consequence of the stolen merchandise having been out of safe or vault while closed to business, the insurance carrier paid only $5,000 on the claim.
The Homolas then sued Protection One for, among other things, breach of contract, gross negligence, negligence, and res ipsa loquitur.
Protection One moved to dismiss.
The 2014 Agreement
The 2014 agreement provided:
(A)WE ARE NOT AN INSURER * * * OF YOUR PREMISES OR ITS CONTENTS; (B) IT IS YOUR RESPONSIBILITY TO OBTAIN ADEQUATE INSURANCE COVERING YOU, YOUR PREMISES AND ITS CONTENTS * * *; (D) THE EQUIPMENT AND SERVICES MAY NOT ALWAYS OPERATE AS INTENDED FOR VARIOUS REASONS, INCLUDING OUR NEGLIGENCE OR OTHER FAULT. WE CANNOT PREDICT THE POTENTIAL AMOUNT, EXTENT OR SEVERITY OF ANY DAMAGES * * * THAT MAY BE INCURRED * * * DUE TO THE FAILURE OF THE EQUIPMENT OR SERVICES TO WORK AS INTENDED. AS SUCH: (I) YOU AGREE THAT THE LIMITS ON OUR LIABILITY AND THE WAIVERS AND INDEMNITIES SET FORTH IN THIS AGREEMENT ARE A FAIR ALLOCATION OF RISKS AND LIABILITIES BETWEEN YOU, US AND ANY AFFECTED THIRD PARTIES; (II) YOU WILL LOOK EXCLUSIVELY TO YOUR INSURER FOR FINANCIAL PROTECTION FROM SUCH RISKS AND LIABILITIES, AND (III) * * YOU WAIVE ALL RIGHTS AND REMEDIES AGAINST US, INCLUDING ALL RIGHTS OF SUBROGATION, THAT YOU, ANY INSURER, OR ANY OTHER THIRD PARTY MAY HAVE DUE TO ANY LOSSES YOU OR OTHERS MAY INCUR.
In addition, the 2014 Agreement provided:
Limitation of Liability for Alarm Failure Events. NEITHER WE NOR ANY PERSON OR ENTITY AFFILIATED WITH US SHALL BE LIABLE FOR ANY LOSSES ARISING DIRECTLY OR INDIRECTLY FROM ANY ALARM FAILURE EVENT.
WE ARE NOT LIABLE UNDER ANY CIRCUMSTANCES FOR THE ADEQUACY OF THE EQUIPMENT DESIGN OR DESIGN CRITERIA ESTABLISHED BY YOU, YOUR DESIGN PROFESSIONAL, OR LOCAL CODE REQUIREMENTS, IF, NOTWITHSTANDING THE PROVISIONS OF THIS PARAGRAPH 10(B), WE OR ANY PERSON OR ENTITY AFFILIATED WITH US ARE DETERMINED TO BE RESPONSIBLE FOR ANY LOSSES ARISING FROM ANY ALARM FAILURE EVENT, YOUR CLAIMS AGAINST US AND/OR ANY PERSON OR ENTITY AFFILIATED WITH US SHALL BE LIMITED TO $2,000.00. THIS AMOUNT IS YOUR SOLE AND EXCLUSIVE REMEDY FOR ANY ALARM FAILURE EVENT, EVEN IF CAUSED BY PROTECTION ONE S NEGLIGENCE OR THAT OF OUR AFFILIATES OR OUR RESPECTIVE EMPLOYEES OR AGENTS, BREACH OF CONTRACT, BREACH OF WARRANTY, STRICT LIABILITY, OR OTHER FAULT.
In addition, the 2014 agreement defined "Alarm failure events" as the:
condition, nonfunctioning, malfunction, faulty design, faulty installation, or failure in any respect of the equipment or services to operate or perform as intended
The Trial Court s Decision
The trial court granted Protection One s motion.
In its decision, the trial court explained that the Homolas allegations sufficiently alleged conduct on the part of Protection One that, if true, might constitute gross negligence. The trial court reasoned that the Homolas alleged that, on two consecutive days, Protection One failed to alert the police and appropriate authorities after having been notified that the alarm system at the jewelry store was experiencing a communication error ; in response to Ms. Homola s call to follow-up, Protection One responded that the jewelry store was fully alarmed and secured; and again, in a second conversation, Protection One informed Ms. Homola that there was no burglary, just a communication problem.
The trial court then ruled that, notwithstanding any alleged gross negligence, the risk allocation/waiver of subrogation provision set forth in the 2014 agreement, which required the Homolas to obtain insurance for all losses occurring at the jewelry store and pursuant to which they waived any remedies against Protection One, functioned as a complete defense to the breach of contract, gross negligence, negligence, and res ipsa loquitur claims asserted by the Homolas against Protection One.
The case is Homola v. Jewelers Mutual Ins. Co., No. 608489/2016 (N.Y. Sup.Ct. Nassau Co. July 11, 2017).
