Court Allows Subrogation Action Against Sprinkler Installer and Inspector

Normally, a lawsuit which claims workers breached a contract must be brought within six (6) years of the date of the breach.  Thus, unfortunately, where a fire is caused by a worker’s wrongful act which occurred many years ago, often times a subrogation breach of contract action is barred by the statute of limitations.  A negligence action, however, can be brought within three (3) years of the date of loss.

In 1990, defendant “B” installed a fire sprinkler system in a restaurant.  A fire occurred in the restaurant in 2000 which caused serious damage.  In February 2003, the restaurant’s carrier brought a subrogation against “B,” alleging the sprinkler system was defective and failed to operate and prevent the damage to the restaurant.  “B” moved to dismiss the complaint based on statute of limitations, since the lawsuit was not filed within six (6) years of the 1990 installation.

The court rejected defendant’s argument.  Although the relationship between the parties had its “genesis” in contract, the services contracted for (i.e., fire sprinkler alarm installation) “had a significant impact on the public interest,” and therefore, the plaintiff carrier was not limited to a contract claim.  The court allowed plaintiff to proceed on a negligence theory, which had been timely filed (i.e., the lawsuit had been commenced within three (3) years of the 2000 fire [1].   Additionally, the court rejected defendant’s spoliation argument, since the alarm company had been given a full and fair opportunity to attend a joint invasive inspection of the evidence (but declined to do so).

The court relied on a 1992 Court of Appeals case in which an alarm company allegedly failed to transmit a fire alarm to the fire department [2].   In that case, the alarm company argued their liability was limited to only $250, as per their written contract with the building owner [3].   The high court rejected this argument, finding that an alarm company cannot use a contract to shield itself from liability for gross negligence, which the court defined as “conduct evincing a reckless disregard for its customers' rights.”   An alarm contract can shield liability for mere “mistakes” by the alarm company, a contract cannot shield liability for gross negligence.

Bottom Line:  Don’t lose heart because your insured signed a contract which appears to limit a wrongdoer’s liability.  New York law forbids one from shielding itself from liability due to “gross negligence.”  Further, where an alarm system is involved, public policy considerations may permit you to subrogate and proceed on a negligence theory.

[1] General Security a/s/o Global 33 v. Buckmiller, 2008 App. Div. LEXIS 3444 *=(4/22/08)
[2] Sommer v. Federal Signal Corp., 79 NY2d 540 (1992)
[3] Allegedly due to the failure to transmit the alarm, the building (a 42-story Manhattan skyscraper) suffered $7 million in damages.

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