Elsken v. Network Multi-Family Security Corp.
1992 OK 136, 63 O.B.A.J. 2925, 838 P.2d 1007 (1992)
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Rule of Law:
A contractual clause in a security alarm agreement that limits the company's liability for its own ordinary negligence is not void as against public policy and is enforceable, even for personal injury claims, provided the parties dealt at arm's length with equal bargaining power.
Facts:
- Patricia Ann Elsken leased an apartment and signed a 'Residential Alarm Security Agreement' with Network Multi-Family Security Corp. for alarm monitoring services.
- The agreement contained a clause limiting Network's liability for any failure of the system or service to $250, and stated that Network was not an insurer.
- On April 11, 1988, at 10:33 a.m., an alarm signal from Elsken's apartment was received by Network.
- After receiving no answer to a telephone call to Elsken's apartment, Network contacted the apartment complex manager.
- At 10:38 a.m., the apartment manager told Network to disregard the alarm.
- Later that day, Patricia Ann Elsken was found dead in her apartment, the victim of a homicide.
- There were no signs of forced entry into the apartment, and the alarm mechanism itself was not defective.
Procedural Posture:
- The estate of Patricia Ann Elsken sued Network Multi-Family Security Corp. in the United States District Court for the Northern District of Oklahoma.
- The defendant, Network, moved for summary judgment, asserting the contract's limitation of liability clause as a defense.
- The federal district court determined that the only remaining issue was whether Network's failure to respond properly to the alarm signal was a contributory cause of Elsken's death.
- The federal district court then certified three questions of state law to the Oklahoma Supreme Court regarding the validity and enforceability of the contract's limitation of liability and indemnification clauses.
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Issue:
Does a limitation of liability clause in a residential alarm security contract, which caps damages for personal injury resulting from the company's ordinary negligence, violate Oklahoma public policy and is it therefore unenforceable?
Opinions:
Majority - Hargrave, J.
No. A contractual limitation of liability for personal injury resulting from ordinary negligence in a burglar alarm service contract is valid and enforceable, provided the parties dealt at arm's length and had equal bargaining power. The court distinguished between clauses that completely exempt a party from liability for its own negligence, which are void under Oklahoma statute, and clauses that merely limit liability to a certain amount. Citing its own precedent in Fretwell v. Protection Alarm Co., the court reasoned that because the contract itself establishes the duty of the alarm company, any lawful limitations within that contract may also limit the liability of the tortfeasor. The court found that such clauses are not unconscionable or against public policy because alarm companies are not insurers, it is difficult to determine the extent of loss attributable to a system failure, and customers are often given the option to pay a higher fee for increased liability coverage.
Analysis:
This decision reinforces the legal distinction between unenforceable exculpatory clauses and enforceable limitation of liability clauses in Oklahoma. It significantly extends the principle from cases involving only property damage to those involving personal injury and death, demonstrating the court's strong deference to freedom of contract. The ruling clarifies that unless a party's conduct amounts to gross negligence or the contract is unconscionable, service providers like alarm companies can contractually cap their liability for ordinary negligence. This places the burden on consumers to secure adequate insurance for potential losses rather than relying on the service provider as a de facto insurer.
