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QUESTION : STRICT LIABILITY AND EXCULPATORY CLAUSE
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Ken
One of our commercial subscribers in Illinois is suing us after a fire in their kitchen burned down half their office. I know we weren’t negligent so I am not too concerned about that, but what I am concerned about it the strict liability claim. We are not the manufacturer of the alarm system and I’m not sure whether there was a defect in the system. Now I’m paranoid because we get all our alarms from the same company and if there was truly something wrong with this alarm panel, how do I know there isn't something wrong with all of them? Since its “strict liability” will I be responsible even if it’s not my fault? We use your Commercial All in One contracts for all of our commercial subscribers.
Thanks
ANON
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RESPONSE BY JESSE KIRSCHENBAUM, ESQ.
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Generally if you sell a product that is defective, regardless of whether or not you’re at fault, you will be strictly liable for any damages caused by the defective product meaning you will be liable regardless of whether you’re actually responsible. Now here’s the good news: because you use our Commercial All in One Agreement, you have a valid affirmative defense and should be able to have the strict liability claim dismissed.
Courts in most states, including Illinois, will enforce an exculpatory claim as a defense to a strict liability claim. In an Illinois case, the court ruled for ADT by enforcing the exculpatory clause in its contract against a commercial subscriber. In that case, there was a fire in the office of one of ADT’s commercial subscribers. The subscriber sued ADT claiming ADT was strictly liable because the alarm panel was defective and did not detect the fire in time. ADT was able to assert the exculpatory clause as an affirmative defense and was successful in having the strict liability claim dismissed. A Pennsylvania court, in upholding an exculpatory clause in a commercial contract stated that Pennsylvania law allows “clearly expressed and freely negotiated waiver of strict liability between business entities of relatively equal bargaining strength.” In New York, courts have consistently recognized exculpatory clauses in commercial contracts as a valid defense to strict liability claims. Same goes for Connecticut. A federal court applying Connecticut law stated that “a contractual limitation of liability with respect to a device alleged merely to have failed to detect or impede fire may be enforced against a claim of strict liability under Connecticut law.”
This is not to say that having an exculpatory clause in your contract will protect you against a claim for strict liability in every state. For instance, Oklahoma courts have held that Oklahoma law prohibits disclaimers of strict tort liability, even in commercial cases. That doesn’t necessarily mean you’re helpless if you’re sued in a state that does not recognize an exculpatory clause as a valid defense to a claim for strict liability. Our Residential All in One Agreement and Commercial All in One Agreement have other provisions that will protect you. Regardless of what state you’re in, you can always protect yourself by making sure you’re using properly drafted contracts.
Not sure whether you’re using proper contracts? Contact Jesse Kirschenbaum, Esq. at (516) 747-6700 ext. 317 or at jesse@Kirschenbaumesq.com; or our Contract Administrator Eileen Wagda at (516) 747-6700 ext. 312 or at ewagda@kirschenbaumesq.com.
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MORE ON DMP
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Something else you might want to consider when you get sued for equipment failure. Are you going to have to indemnify the manufacturer for the privilege of using its defective product? Maybe if it's DMP.