Great Northern Ins. Co. v. Adt Sec. Services, Inc.

Page 723

517 F.Supp.2d 723

GREAT NORTHERN INSURANCE CO., as Subrogee of Croatian Fraternal Union of America, Plaintiff, v. ADT SECURITY SERVICES, INC., Defendant.

Civil Action No. 06-90.

United States District Court, W.D. Pennsylvania.

September 17, 2007.

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Elaine M. Rinaldi, C. Leon Sherman & Associates, Pittsburgh, PA, for Plaintiff.

David R. LeFevre, Jones, Gregg, Creehan & Gerace, John F. Doherty, City of Pittsburgh Department of Law, Pittsburgh, PA, for Defendant.

OPINION

McVERRY, District Judge.

Currently before the Court for disposition is Defendant's Motion for Summary Judgment. In this subrogation action, Plaintiff, Great Northern Insurance Company ("Great Northern"), seeks to recover monies it paid its insured, the Croatian Fraternal Union of America ("CFU"), under a property insurance policy for damages sustained to CFU's building containing its office and museum, when a broken pipe in its sprinkler system went undetected for a period of time. Great Northern has brought claims of negligence and breach of implied warranty against Defendant, ADT Security Services, Inc. ("ADT"), with regard to its conduct in servicing and/or arranging for the repair of a component part of the panel box that monitors CFU's fire protection and alarm system.

Plaintiff has alleged that this Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332(a), but Defendant disputes this allegation, contending that the amount in controversy is less than the statutory minimum. Venue in this District is proper under 28 U.S.C. § 1391, as the events giving rise to this lawsuit occurred in this district.

The issues presented here are: (1) whether CFU and ADT intended, either by their words or conduct, to include in their agreement for service and repair of CFU's alarm system, the terms and conditions, including a limitation of liability provision, contained on the reverse side of a service ticket, issued by ADT for proposed repair to a component part of CFU's alarm system and signed by an employee of CFU; and, if so, (2) whether a limitation of liability provision, limiting damages to $1,000.00 contained on the reverse side of the service ticket, is valid and enforceable. ADT contends that CFU assented to the inclusion of the terms and conditions either through its employee's signature on the Service Ticket and/or through its prior course of dealings. ADT further contends that the limitation of liability provision is valid and enforceable, and the language is broad enough to apply to losses resulting from gross negligence. Therefore, ADT contends the amount of damages at issue here is limited to $1,000.00 per claim; consequently, subject matter jurisdiction is lacking as the amount in controversy does not exceed $75,000.00, as required under 28 U.S.C. § 1332(a). On the other hand, Great Northern denies that CFU officers or employees agreed to or had actual knowledge of the limitation of liability provision contained on the reverse side of the Service Ticket, and therefore, there was no meeting of the minds as to including the limitation of liability provision in CFU's implied contract with ADT. Great Northern submits that at the very least, material issues of fact exist thereby precluding summary judgment. Alternatively, Great Northern contends that if the Court finds that CFU assented to the inclusion of the limitation of liability provision, that provision should not be enforced because it violates public policy, is unconscionable, and constitutes a contract of adhesion.

For the reasons set forth below, the Court will deny Defendant's Motion for Summary Judgment on the issue of whether the "Limitation of Liability" provision is part of the parties' bargain, and will grant Defendant's Motion for Summary Judgment in all other respects.

I. FACTS AND PROCEDURAL HISTORY

The following facts, stated in the light most favorable to Great Northern, are not disputed. CFU is a fraternal benefit association which maintains its home office and museum at 100 Delaney Drive, Pittsburgh, Pennsylvania ("CFU's premises"). In January of 1989, CFU contracted with Rollins Protective Service ("Rollins") for the purchase and installation of a security detection system for the purposes of monitoring the fire detection and security protection at CFU's premises. (Rollins Security Agreement dated January 18, 1989 (Ex. A to Def.'s Ans. to Am. Compl.).) In addition to the sale and installation of the security detection system, Rollins also provided monitoring and maintenance services to CFU for. a three-year period. (Id.) Included in the Rollins Security Agreement dated January 18, 1989, are certain terms and conditions, most notably: (1) a Limited Warranty, disclaiming all other express or implied warranties with regard to the detection system; (2) an Insurance provision, acknowledging CFU's knowledge and agreement that Rollins is not an insurer of CFU's property and CFU has the sole responsibility to maintain adequate insurance coverage; and (3) a Limitation of Liability provision, which provides in relevant part:

LIMITATION OF LIABILITY: All charges and fees hereon are based solely on the cost of the Detection System and the services herein set forth, and are unrelated to the value of CUSTOMER'S property or the property of others which may be located on CUSTOMER'S premises.

CUSTOMER ACKNOWLEDGES AND AGREES THAT IF ANY LOSS OR DAMAGE SHOULD RESULT FROM THE FAILURE OF THE DETECTION SYSTEM, OR THE MONITORING SERVICE, OR FROM IMPROPER DESIGN, INSTALLATION, MAINTENANCE, OR REPAIR OF THE DETECTION SYSTEM, WHETHER WITHIN THE LIMITED WARRANTY PERIOD OR OTHERWISE, [ROLLIN]'S LIABILITY, IF ANY, FOR SUCH LOSS OR DAMAGE SHALL BE LIMITED TO A SUM NOT GREATER THAN FIVE HUNDRED DOLLARS ($500.00). IN THE EVENT PARTIES DESIRE TO IMPOSE GREATER LIABILITY UPON THE OBLIGATIONS HEREUNDER, CUSTOMER MAY REQUEST AN INCREASED LIMITED LIABILITY BY OFFERING TO PAY AN ADDITIONAL AMOUNT OF TEN (10%) PERCENT OF THE INCREASED LIMIT (MINIMUM OF $100.00 INCREMENTS) AND, IF ACCEPTED BY [ROLLINS], AN ADDITIONAL RIDER SIGNED BY THE PRESIDENT OF ROLLINS, INC. SHALL BE ATTACHED TO THIS AGREEMENT SETTING FORTH THE ADDITIONAL LIABILITY OF [ROLLINS]. I HAVE READ THIS CLAUSE AND CHOOSE _________ DO NOT CHOOSE _________

       (Cust. Initial)      (Cust. Initial)

AN INCREASED LIABILITY.

Under no circumstances shall [Rollins] be liable to CUSTOMER or any other person for incidental or consequential damages of any nature in excess of such amount, including without limitation damages to property, loss of property or revenue, or cost of replacement goods, however, occasioned, and whether alleged to result from [Rollin]'s breach of warranty, negligence, through strict liability in tort, or otherwise.

(Rollins Service Agreement dated 1/18/89, Parts I.B. & L.; Part VIII (Ex. A to Def.'s Answer to Am. Compl.).) CFU initialed the line for "do not choose an increased liability." This agreement was signed by the Secretary/Treasurer of CFU at the time.¹

Subsequently, in April of 1992, Rollins and CFU executed a new purchase and service agreement, extending the maintenance and monitoring service for five years. (Ex. C to Def.'s Ans. to Am. Compl.) After the initial five year period, the contract would be renewed on a year-to-year basis unless otherwise terminated. The April 1992 agreement included similar, if not identical, provisions as to the limited warranty, insurance notice, and limitation of liability, and was signed by the Secretary/Treasurer of CFU at the time.² (Id.)

The record also shows a service order ticket issued by Rollins on June 23, 1995 for repairs performed, and handwritten on the customer signature line is the name "Robert D. Keber." (Ex. D to Def.'s Ans. to Am. Compl.) The following notice appears on the bottom of the service order ticket in capital letters: "CUSTOMER NOTICE! SEE REVERSE FOR IMPORTANT CUSTOMER INFORMATION." (Id.) On the reverse side of the Rollins service order ticket is a limitation of liability provision, which includes a notice regarding insurance, almost identical to the one contained in the previous Rollins contracts.

Sometime prior to September of 1999, the contract between Rollins and CFU was terminated. By September of 1999, CFU was utilizing SecurityLink for its service and maintenance needs. (Ex. E to Def.'s Ans. to Am. Compl.) On one documented occasion, CFU made a service call to SecurityLink, which responded on September 1, 1999 and completed a service call report indicating the repair done and the cost of labor and materials. This service call report also appears to be signed by Robert D. Keber as CFU's representative, and immediately above his signature, in the same font type and size, the following sentence appears: "See terms and conditions on reverse side." (Id.) The second numbered paragraph on the reverse side of the SecurityLink service call report is entitled "LIMITATION OF LIABILITY" and contains a notice regarding insurance coverage and a limitation of liability provision substantially similar to the one previously set forth in the Rollins contracts.

On or about August 10, 2001,³ ADT notified CFU that it had acquired SecurityLink and that it would now be providing monitoring services. (Ex. A in Def.'s App.) ADT acquired the CFU account solely as a result of its acquisition of SecurityLink, and the subsequent servicing of SecurityLink's existing customers. Thus, ADT took over the monthly monitoring service of CFU's alarm system by virtue of its acquisition of SecurityLink, and issued monthly invoices for such service. (Ex. A and C in Def.'s App.)

After ADT acquired the CFU monitoring account, if and when its alarm system needed to be maintained or serviced, CFU contacted ADT and a service call was requested. CFU and ADT never discussed, negotiated, or entered into any written contract or agreement for the maintenance or...