ADT win in wrongful death case great for alarm industry January 28, 2020
KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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ADT win in wrongful death case great for alarm industry
January 28, 2020
ADT win great for alarm industry
ADT won dismissal of a wrongful death claim where the subscriber died in a home fire. ADT got signals, tried to reach the subscriber and “cleared” the alarm. In 2018 the Federal District Court dismissed the action based on the contract provision that required that a lawsuit be brought within a year of the loss. The Plaintiff appealed and the United States Court of Appeals, Tenth Circuit, has just affirmed the decision. You can read the entire appellate decision on our website at Alarm Law Issues / Leading Cases / Kansas, Frost v ADT January 17, 2020.
A number of important issues are addressed by the Court and more importantly the Court pronounced several policy issues essential to alarm company contract rights.
The Court recites several promotional claims contained on the ADT website regarding the prowess of its alarm services, and then plainly notes that:
“The Contract between ADT and Frost does not contain these representations. Instead, on the first page, under the heading “IMPORTANT PROVISIONS — YOUR RESPONSIBILITY TO READ TERMS OF THIS AGREEMENT” the Contract states: “SECTION 6, 7, and 8: WE ARE NOT AN INSURER, Limitation of Liability, Hold Harmless which, among other things, significantly limits [ADT’s] liability to you under this Contract.”
The central issue on appeal was the enforcement of the “suit-limitation provision” which shortened the 2 year statute of limitation for wrongful death to one year. One year shortened suit-limitation period is fairly common in alarm contracts and rarely challenged.
The first challenge Plaintiff presented is that the contract was unconscionable.
“First, Claimants argue the Contract as a whole is unenforceable as an unconscionable adhesion contract. Under Kansas law, courts look to numerous factors in assessing unconscionability, including,
(1) the use of printed form or boilerplate contracts drawn skillfully by the party in the strongest economic position, which establish industry wide standards offered on a take it or leave it basis to the party in a weaker economic position; (2) a significant cost-price disparity or excessive price; (3) a denial of basic rights and remedies to a buyer of consumer goods; (4) the inclusion of penalty clauses; (5) the circumstances surrounding the execution of the contract, including its commercial setting, its purpose and actual effect; (6) the hiding of clauses which are disadvantageous to one party in a mass of fine print trivia or in places which are inconspicuous to the party signing the contract; (7) phrasing clauses in language that is incomprehensible to a layman or that divert his attention from the problems raised by them or the rights given up through them; (8) an overall imbalance in the obligations and rights imposed by the bargain; (9) exploitation of the underprivileged, unsophisticated, uneducated and the illiterate; and (10) inequality of bargaining or economic power.”
The Court addressed this issue:
“Claimants engage with only a subset of these factors, arguing principally that the Contract is unconscionable because the parties lacked equal bargaining power and the Contract was presented on a “take it or leave it” basis….. Under Kansas law, more is required—for example, substantive unfairness or some form of deception in the contracting process—to render a contract unconscionable….As the Kansas Supreme Court clarified, the principle of unconscionability is aimed at preventing oppression and unfair surprise, not disturbing the allocation of risks resulting from an imbalance of bargaining power”
And here the Court addresses reasoning for enforcement:
“Here, the Contract’s significant limitation of liability must be viewed in context. Where monitoring services are concerned, liability-limiting provisions reflect appropriate risk allocations, especially where monthly premiums are low….(“[T]he price [of a fire or burglary alarm system] does not generally include a sum designed to anticipate the possible need to pay the purchaser the value of the property that the system is to protect.”). It is thus no surprise that many courts uphold monitoring services contracts with similar liability-limiting provisions…. Claimants also fail to show any “cost-price disparity” or that ADT charged an “excessive price.”…. To the contrary, Frost’s $37.99 monthly fee is reasonable in light of the services. Where consumers pay small monthly premiums, it is hardly unconscionable for liability to be appropriately limited….(“The relatively low yearly service fee that the Greenspans paid reflects the fact that ADT was not the Greenspans’ insurer, it was not in the business of assessing risk, and its annual service fee could not have been reasonably based on the value of the real property protected by ADT’s alarm system.”… The Contract here does just that. Moreover, it does so conspicuously, with large, bolded and capitalized language on the first page stating that ADT is “NOT AN INSURER,” notifying the purchaser that the Contract contains a “Limitation of Liability,” and directing him to the appropriate subsections to find additional details.”
The next issue was, predictably, gross negligence.
“Claimants also argue that ADT’s “wanton” behavior and “gross negligence” invalidate certain provisions of the Contract…. To show wanton conduct, Claimants must establish (1) the alleged acts were performed with a realization of imminent danger and (2) that the alleged acts were performed with a reckless disregard or complete indifference to the probable consequences”
The Court rejected this argument as well, noting:
“Claimants’ conclusory allegations fail this test. Despite receiving the alerts, ADT had little actual knowledge of the danger Frost faced at the time of the fire….(“Wantonness refers to the mental attitude of the wrongdoer rather than to a particular act of negligence.”). Moreover, nothing about ADT’s response indicates reckless disregard or complete indifference. ADT attempted to contact Frost and the next number listed on her account multiples times immediately after receiving the alerts in question. Regardless of whether ADT’s failure to then contact emergency services was negligent, this conduct does not rise to the higher bar of wanton or grossly negligent behavior. Accordingly, we refuse to invalidate the terms of the Contract on this basis.”
The Court next favored freedom of contract and rejected that the suit-limitation violated Kansas public policy, holding:
“Finally, Claimants suggest that Section 9’s suit-limitation provision violates Kansas public policy because their claims stem from statutory authority. While statutory rights reflect the Kansas “legislature’s determination that such a right is in the public interest,” and thereby provide some evidence of a public policy interest, we decline to read Pfeifer so broadly as to invalidate suit-limitation provisions with respect to all statutory rights. Such a broad reading would contradict Pfeifer’s statement that its holding “is limited to the circumstances in which there is a strongly held public policy interest at issue.” Id. at 1234. Indeed, Pfeifer itself affirmed the general proposition that parties are free to shorten applicable statutes of limitations through contracts. Accordingly, we hold that the contractual limitations period at issue is neither void or unenforceable as contrary to Kansas public policy.”
The next legal issue dealt with was tort v contract law. This is an important issue for the alarm industry and the Court’s finding worth noting:
“Nor have Claimants put forward any case holding a security services company or similar entity liable in tort for failures to adequately perform monitoring services….. (noting “plaintiffs have not pointed to, nor has this Court found, a single case in which a court held ... that an alarm company’s failure to notify the relevant parties of a received burglar alarm signal created a duty outside of the contract.”).
In sum, Claimants cannot rely on independent tort theories of liability to avoid the terms of the Contract.”
This decision by the US Court of Appeals is the end of the line for Plaintiff unless the US Supreme Court hears the case, and that is highly unlikely.
Congrats to ADT’s legal team; the entire alarm industry benefits. And in case the contract message is not readily apparent, ADT relied entirely on its contract language; can you? Update your contracts today at www.alarmcontracts.com so you can have the contractual protection you absolutely need.
To order up to date Standard Form Alarm / Security / Fire and related Agreements, click here: www.alarmcontracts.com
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