Western Alliance v. Wells Fargo Alarm Services, 3:93CV1907 (JBA).

• Decision Date: 26 March 1997
• Docket Number: No. 3:93CV1907 (JBA).,3:93CV1907 (JBA).
• Citation: 965 F.Supp. 271
• Court: U.S. District Court — District of Connecticut
• Parties: WESTERN ALLIANCE INSURANCE CO. v. WELLS FARGO ALARM SERVICES, INC., and Udolf Properties.

965 F.Supp. 271

WESTERN ALLIANCE INSURANCE CO. v.WELLS FARGO ALARM SERVICES, INC., and Udolf Properties.

No. 3:93CV1907 (JBA).

United States District Court, D. Connecticut.

March 26, 1997.

Michael Thomas Wade, Reid & Riege, P.C., Hartford, CT, Jeffrey L. Ment, Rome, McGuigan, Sabanosh & Klebanoff, Hartford, CT, David A. Curry, F. Timothy McNamara, Hartford, CT, for plaintiff.

Matthew G. Conway, Danaher, Tedford, Lagnese & Neal, Hartford, CT, for Wells Fargo Alarm.

Matthew G. Conway, Danaher, Tedford, Lagnese & Neal, Hartford, CT, Miles David Newman Esty, Frankel & Thornberry, Bridgeport, CT, for Udolf Properties.

RULING ON DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT[DOC. # 7, # 15] AND DEFENDANTWELLS FARGO'S OBJECTION TO MAGISTRATE JUDGE'S RECOMMENDED RULING [DOC. # 32]

ARTERTON, District Judge.

This is a breach of contract case brought by Western Alliance as subrogee of furrier Lloyds & Robarts, from whom numerous furs were stolen during a robbery of its premises.Defendant Wells Fargo Alarm Services installed and maintained a security/alarm system in the fur store.During the burglary, the security/alarm system installed by Wells Fargo, including the system's Passive Infrared Intrusion Detectors, failed to activate or detect the intruders.Plaintiff's complaint against Wells Fargo alleges breach of contract and negligent misrepresentation.Wells Fargo moves for summary judgment on the ground that it is not liable to plaintiff for either breach of contract or negligent misrepresentation by virtue of the exculpatory clause in the contract between it and Lloyds.

Defendant Udolf Properties leased the retail premises to Lloyds.Prior to the burglary, Lloyd's advised Udolf that the premises adjacent to the fur store were kept unsecured and that this could pose a security risk to Lloyds, to which information Udolf failed to respond.Udolf moves for summary judgment on the grounds that a clause in its lease with Lloyds releases it from liability for both negligence and nuisance.

On September 30, 1996, Magistrate Judge Martinez filed a Recommended Ruling denying both motions for summary judgment, concluding that issues of material fact remained for trial with respect to the operation of the exculpatory provisions in both the Wells Fargo contract and the Udolf lease.Wells Fargo filed a timely objection to the Magistrate Judge's recommended ruling.Udolf did not file an objection to that ruling.

DEFENDANT UDOLF PROPERTIES

Upon review and pursuant to 28 U.S.C. § 636(b)(1)(A)andRule 2 of the Local Rules for United States Magistrates (D.Conn.1995), Magistrate Judge Martinez's recommended ruling denying defendant Udolf's Motion for Summary Judgement [doc. 15], is APPROVED and ADOPTED as the ruling of this Court absent objection.

DEFENDANT WELLS FARGO ALARM SERVICES

In Count One of its complaint against Wells Fargo, plaintiff alleges that the alarm system Wells Fargo installed failed to detect any motion while the burglary occurred, that Wells Fargo failed to properly install Passive Infrared Intrusion Detectors which would detect motion inside the storage bins, and that the alarm system failed to activate when the intruders were removing the furs.In denying Wells Fargo's summary judgment motion, Magistrate Judge Martinez concluded that the exculpatory clause in the Wells Fargo/Lloyds contract did not excuse Wells Fargo from liability because installation of a properly installed and functioning alarm system may be a condition precedent to Wells Fargo's enforcement of the exoneration clause, (Rec. Rul.at 5), and thus whether the parties intended proper installation to be a condition precedent in the contract was a genuine issue of fact for trial.With respect to plaintiff's negligent misrepresentation count against Wells Fargo, the Magistrate Judge concluded that because a material misrepresentation may void an otherwise enforceable contract, whether there was such a misrepresentation in this case was a question of fact warranting denial of Wells Fargo's summary judgment motion.

Wells Fargo objects to the Recommended Ruling on three grounds.First, Wells Fargo contends that the recommended ruling is at variance with the overwhelming case law supporting the enforcement of exculpatory clauses under analogous fact scenarios.Second, defendant argues that the recommended ruling does not address the limitation of liability provision included in the exculpatory clause, and is thus incomplete.Finally, Wells Fargo maintains that the recommended ruling fails to consider the public policy reasons which support the enforcement of such clauses in alarm system contracts.

The exculpatory and limitation of damages provision in the Wells Fargo/Lloyd's alarm system contract provides:

IT IS UNDERSTOOD AND AGREED BY SUBSCRIBER THAT WELLS FARGO ALARM IS NOT AN INSURER; THAT THE SUMS PAYABLE HEREUNDER TO WELLS FARGO ALARM BY SUBSCRIBER ARE BASED UPON THE VALUE OF SERVICES OFFERED AND THE SCOPE OF LIABILITY UNDERTAKEN AND SUCH SUMS ARE NOT RELATED TO THE VALUE OF PROPERTY BELONGING TO THE SUBSCRIBER OR TO OTHERS LOCATED ON SUBSCRIBER'S PREMISES.SUBSCRIBER FURTHER AGREES AND PROMISES THAT, IF IT DESIRES INSURANCE, SUBSCRIBER'S INSURANCE WILL BE OBTAINED FROM AN INSURANCE COMPANY IN SUCH AMOUNT AS SUBSCRIBER SHALL DEEM NECESSARY TO PROTECT ITS INTERESTS.SUBSCRIBER DOES NOT AND WILL NOT SEEK INDEMNITY FROM WELLS FARGO ALARM AGAINST ANY DAMAGES OR LOSSES CAUSED BY HAZARDS TO SUBSCRIBER'S PROPERTY.WELLS FARGO ALARM MAKES NO WARRANTY.EXPRESSED OR IMPLIED, THAT THE SYSTEMS IT INSTALLS OR THE SERVICES IT FURNISHES WILL AVERT OR PREVENT OCCURRENCES, OR THE CONSEQUENCES THEREFROM WHICH THE SYSTEMS AND SERVICES ARE DESIGNED TO DETECT.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 OF NONPERFORMANCE OF ANY OBLIGATION IMPOSED BY THIS AGREEMENT OR BY NEGLIGENT ACTS OR OMISSIONS OF WELLS FARGO ALARM.ITS AGENTS OR EMPLOYEES.IT IS AGREED THAT IF WELLS FARGO ALARM SHOULD BE FOUND LIABLE FOR ANY LOSSES OR DAMAGES ATTRIBUTABLE TO A FAILURE OF SYSTEMS OR SERVICES IN ANY RESPECT, ITS LIABILITY SHALL BE LIMITED TO THE ANNUAL CHARGE HEREUNDER, OR $10,000.00, WHICHEVER IS LESS.THE SUBSCRIBER MAY OBTAIN A GREATER LIMITATION OF LIABILITY, IF DESIRED, BY PAYMENT OF AN INCREASED ANNUAL RATE, WHICH SHALL BE NEGOTIATED BETWEEN THE SUBSCRIBER AND WELLS FARGO

ALARM UPON THE REQUEST OF THE SUBSCRIBER IN WRITING.

(Emphasis added).

Where the Connecticut Supreme Court has not addressed the enforceability of a contract disclaimer of tort liability in the sale or installation of an alarm system, the Court must determine what it believes the state's highest court would find if the same issue were before it.Continental Casualty Co. v. Pullman, Comley, Bradley & Reeves,929 F.2d 103, 105(2d Cir.1991)."In making such a determination, a federal court is free to consider all of the resources to which the highest court of the state could look, including decisions in other jurisdictions on the same or analogous issues."Leon's Bakery, Inc. v. Grinnell Corp.,990 F.2d 44, 48(2d Cir.1993).

In Leon's Bakery, a bakery whose property was damaged by fire sought to recover for that damage and for lost profits from the company who manufactured and installed the fire alarm and sprinkler system which allegedly malfunctioned.The district court granted summary judgment in favor of the alarm company on the ground that plaintiff's claims were foreclosed by a limitation of liability provision in the alarm system contract.The alarm system contract provided that:

"[i]n no event shall Seller be liable for special or consequential damages and Seller's liability on any claim whether or not based in contract or in tort or occasioned by Seller's active or passive negligence for loss or liability arising out of or connected with this contract, or any obligation resulting therefrom, or from the manufacture, fabrication, sale, delivery, installation, or use of any materials covered by this contract, shall be limited to that set forth in the paragraph entitled `warranty.'"

990 F.2d at 47.Plaintiff contended that the district court erred in granting summary judgment on the clause because it argued that the limitation clause was unenforceable under Connecticut law.Recognizing the Connecticut Supreme Court's silence on this issue, the Second Circuit reviewed the decisions of other jurisdictions, as well as the Connecticut Superior Court, and found that several courts have upheld the enforceability of clauses limiting liability for the failure of alarm systems in contracts for the installation and servicing of burglar alarms.Id. at 48(citingE.H. Ashley & Co. v. Wells Fargo Alarm Services,907 F.2d 1274, 1278(1st Cir.1990))(collecting cases from six states holding that contract clauses limiting liability of burglar alarm services were enforceable);Schrier v. Beltway Alarm Co.,73 Md.App. 281, 533 A.2d 1316, 1319(1987)(collecting cases from fourteen jurisdictions so holding);Hanover Insurance Co. v. American District Telegraph Co.,5 Conn.L.Rptr. 324, 1991 WL 269106(Conn.Super.1991)(Stengel, J.)(rejecting contention that contract clause limiting the liability of an allegedly negligent seller and monitor of burglar alarm system was unconscionable).

In Sue & Sam Manufacturing Co. v. United Protective Alarm Systems,119 A.D.2d 664, 501 N.Y.S.2d 102(1986), the court held that an exculpatory clause in a contract for the installation, leasing or servicing of an alarm system negated the alarm installer's breach of contract liability for allegedly failing to install two motion detectors as required by contract, noting that New York courts have "repeatedly and consistently enforced exculpatory clauses in contracts for the installation, leasing, and servicing of alarm systems, and have dismissed claims for breach of...