Shaer Shoe Corporation d/b/a Myrna Shoe Company v. Granite State Alarm, Inc.
SUPREME COURT OF NEW HAMPSHIRE; 110 N.H. 132; 262 A.2d 285; February 27,
PRIOR HISTORY:Appeal from Hillsborough County.
PROCEDURAL POSTURE: All questions of law raised by defendant company's
motion to dismiss were transferred without ruling to the court in plaintiff
businesses' action in assumpsit. The company's motion alleged that the
business's action was barred by a subrogation clause in the parties'
OVERVIEW: The company installed and maintained a sprinkler system at the
business. The parties' contract provided a subrogation clause that made any
claim by the company unassignable and unavailable to any other person by way
of subrogation. The system allowed the company to notify the fire department
when water was flowing. The company received an alarm indicating water flow
at the business. The company mistakenly sent the fire department to another
location. The business's insurer paid an insurance claim. The business then
initiated an action in assumpsit against the company. The company filed a
motion to dismiss alleging that the action was in subrogation and was
therefore barred by the subrogation clause. All questions of law raised by
the company's motion were transferred to the court without ruling. The court
remanded the action. The court found that although the insurer had a right
to subrogation, the right could be waived. The court examined the insurance
contract and the contract between the business and the company. The court
concluded that the contracts were entered into in contemplation of the

OUTCOME: The court remanded the business's assumpsit action, finding that
the subrogation clause did not bar the action.
COUNSEL: Sheehan, Phinney, Bass & Green and Joseph F. Devan (Mr. Devan
orally), for the plaintiff.

Wadleigh, Starr, Peters, Dunn & Kohls and William H. Kelley (Mr. Kelley
orally), for the defendant.

JUDGES: Grimes, J. All concurred.

OPINION: [*132] [**286] Action in assumpsit and a count in negligence
[*133] arising out of a contract between the parties relating to a water
flowage alarm system on the premises of the plaintiff. All questions of law
raised by defendant's motion to dismiss were transferred without ruling by
Leahy, C. J. on an agreed statement of facts.

The defendant is in the business of installing and maintaining a "Central
Station Signal System" by which it provides supervision of automatic
sprinkler systems. Part of its service is to notify the fire department when
its device installed in the sprinkler system of the customer signals that
water is flowing. The plaintiff subscribed to the service on April 21, 1961
at an annual charge of $ 540.50. It is claimed by plaintiff that on July 13,
1963 defendant received an alarm indicating water flow at the plaintiff's
[***2] premises but directed the fire department to another location, and
that the firemen, upon arrival at the wrong location and discovering nothing
wrong, made inquiry of the defendant and were directed to the plaintiff's
premises. It is for damage done due to this period of alleged delay that
plaintiff seeks damages. The plaintiff was paid for its loss under a fire

The contract between the parties contains the following Clause 13: "The
Contractor does not represent that its alarm system may not be circumvented
or will in all cases provide the protection for which it is installed. It is
agreed that the Contractor is not an insurer and that the amounts payable to
the Contractor as hereinabove provided are not sufficient to warrant its
assuming the risk of consequential or other damage to the Subscriber as a
result of a failure of the Contractor to perform any of its obligations
hereunder. Accordingly, the Contractor shall be under no liability to the
Subscriber for any such failure, except in the case of wilful default or
negligence on the Contractor's part, and in such case its liability shall be
limited to refunding the amounts theretofore paid by the Subscriber under
this [***3] agreement. No claim by the Subscriber against the Contractor
shall be assignable by operation of law or otherwise, nor be available to
any other person by way of subrogation."

The defendant bases its motion to dismiss on the grounds (1) that the
action, being a subrogation action is barred by Clause 13, and (2) that
Clause 13 limits damages to the amounts paid in annual charges.

Clause 13 does not purport to exempt the defendant entirely [*134] from
liability for the consequences of negligence, but rather to limit the amount
of recovery to the amount paid by Shaer for the service. However, the
limitation on damages is not phrased in the usual terms of liquidated
damages which set a specific amount. Instead, an upper limit is set, but
damages within that limit must be proved. Also under this particular
provision, there is no question of a foreiture because damages must be
proved before there can be recovery within the limit.

No case involving this precise language has been cited by counsel and we
have found none. In the cases found involving contracts for fire protection
systems, the contract provisions all provided not only for limitation on
damages but fixed the damage [***4] at an amount certain or as a percentage
of the service charge. In all these cases, the validity of the provision was
upheld on the basis of liquidated damages. Atkinson v. Pacific Fire
Extinguisher Co., 40 Cal. 2d 192, [**287] 253 P. 2d 18; American Dist.
Tel. Co. v. Roberts & Son, 219 Ala. 595, 122 So. 837; Schepps v. American
Dist. Tel. Co., 286 S. W. 2d 684 (Tex. Civ. App. 1955); Better Food Markets
v. American Dist. Tel. Co., 40 Cal. 2d 179, 253 P. 2d 10. See Annot. 42 A.
L. R. 2d 591.

If the defendant in this case could have entirely exempted itself from
liability, then it would necessarily follow that it can limit the amount of

It has been stated that this state follows a minority rule which holds
invalid contracts exempting a person from liability for the consequence of
his own negligence. Ahern v. Roux, 96 N. H. 71, 73, 69 A. 2d 701. Cases
applying this rule have generally involved landlord-tenant relationships or
common carriers. See Conn v. Manchester Amusement Co., 79 N. H. 450, 111 A.
339; Papakalos v. Shaka, 91 N. H. 265, 18 A. 2d 377; Wessman v. Boston &
Maine R.R., 84 N. H. 475, 152 [***5] A. 476 and cases cited; Nashua Gummed
& Coated Paper Co. v. Noyes Buick Co., 93 N. H. 348, 41 A. 2d 920. In both
Nashua Gummed & Coated Paper Co. v. Noyes Buick Co. and Ahern v. Roux, both
supra, the question whether our rule has been "too broadly phrased" was
raised but not decided. In Bernardi Greater Shows Inc. v. Boston & Maine
R.R., 89 N. H. 490, 1 A. 2d 360, an exculpatory clause in a contract was
upheld because the railroad was contracting as a private and not as a common
carrier and the parties were said to be free to make their own contract.
This case [*135] indicates that our rule does not prohibit all exculpatory

We do not need to decide whether our rule should continue to apply in cases
involving the special relationships such as are involved in landlord and
tenant and common carrier cases because no such special relationship exists
here. Each party was free to make his own bargain. Under these
circumstances, a contract which fully exculpated the defendant for property
damage due to its negligence in the performance of the contract would be
valid and enforceable. It follows that Clause 13 which limited the damages
[***6] recoverable for such negligence is also valid.

Defendant contends that the real party in interest is the insurance company
which paid Shaer Shoe Corporation for the damage done and that such an
action is barred by Clause 13 which makes any claim of the subscriber
unassignable and unavailable "to any other person by way of subrogation." We
disagree with this contention.

The Uniform New Hampshire Fire Insurance Policy form has been referred to in
both briefs without objection. A provision dictated by RSA 407:22 appears on
the policy which permits but does not compel the company to subrogate itself
to the rights of the insured by assignment. The standard policy in use at
the time also contained a provision entitled "Subrogation Clause" which
reads as follows: "This insurance shall not be invalidated should the
Insured waive in writing prior to a loss any or all right of recovery
against any party, for loss occurring to the property described herein." It
also contains clauses providing for reduced premiums if automatic sprinkler
systems and automatic fire alarm systems are installed. The contract between
Shaer and the defendant contained a provision that if the name of an
underwriter [***7] which allowed credits in its rates was filed with the
defendant, it would comply with any requirements of that underwriter as to
installation and service.

Considering the contracts together, it appears that each was entered into in
contemplation of the other. Although the insurer had a right to subrogation,
this right could be waived. See cases collected in Annot. 16 A. L. R. 2d
1269, 1272, and later case service; 44 Am. Jur. 2d Insurance, s. 1825.

We hold that the clause in the policy entitled "Subrogation Clause" quoted
above permitted the insurer's subrogation rights to be defeated to the
extent, but only to the extent, that Shaer, [*136] prior to the [**288]
loss, had released the defendant from liability. It follows that the insurer
may be subrogated to the claim of the insured for damages limited by Clause
13 to the amount paid for the alarm service.