Case No. 67 EXCULPATORY CLAUSE Public Service Mutual Insurance Company v. Royal Burglar and Fire Alarm Inc. New York City Civil Court 394 N.Y.S.2d 524 (1977) FACTS: Defendant Royal Burglar and Fire Alarm Inc. (Royal) was in the business of renting burglar alarm systems. A customer signed a contract to rent a system from Royal. Royal agreed in a written contract to maintain the system and to repair and replace parts as needed. The contract contained a clause that relieved Royal from liability for damages arising from its own negligence. This limitation was printed in large, bold print and was clearly stated. During the term of the lease the alarm malfunctioned. The customer called Royal who negligently replaced the malfunctioning alarm with another malfunctioning alarm, The following day the property on which the alarm was located was burglarized. The alarm failed to operate and the burglars stole $712.75 worth of property. The customer was compensated for the loss by its insurance company, Plaintiff Public Service Mutual Insurance Company (Insurance Company). In this action Insurance Company sought to collect from Royal the money paid to the customer on the grounds that Royal acted negligently by not verifying that the second system it installed worked properly. Royal claimed the exculpatory clause freed it from liability for negligence. ISSUE: Is the comract provision seeking to free Royal from liability for its own negligence enforceable? DECISION: Yes. REASONING: Generally, parties to a contract can exempt or limit their liability for losses resulting from their own negligence, absent a statute to the contrary, The exculpatory clause in the contract between the customer and Royal was conspicuously presented in large, bold print and the language was clear. Linder these circumstances a clause limiting a party's liability for negligence is enforceable. * *QUESTIONS * * * (See back of text for answers) The reasoning in this case suggests statutes may exist which preclude parties from inserting exculpatory classes into certain types of contracts. What are some examples of comracis that are prohibited by New York statutes from including exculpatory clauses? 2) If an exculpatory clause is inserted into a contract in violation of a statute, is the clause enforceable