Insurance (Adhesion Contracts): UNITED SERVICES AUTOMOBILE ASS’N V. ADT SECURITY SERVICES, INC. [COA 9/8/2006]

UNITED SERVICES AUTOMOBILE ASS’N  V. ADT SECURITY SERVICES, INC.
INSURANCE:  Exclusions and contracts of adhesion
2005-CA-001418
PUBLISHED
AFFIRMING;  MILLER
DATE RENDERED:  9/8/2006

CA affirms SJ to home fire alarm company, upholding limitation of liability clause in the service contract.

Homeowners and their insurance company sued ADT when the fire alarm system failed to function and alert the monitoring service or the fire department of a fire. The fire damaged the home extensively; $885,000 was paid on the homeowners’ policy. ADT retained title to the physical equipment and homeowners paid an installation fee and monthly maintenance/monitoring fee under a service contract. The contract contained a clause limiting ADT’s liability to 10% of the annual monthly fees or $250 in the event of a failure.

CA held the contract was not one of adhesion because homeowners could negotiate for, and pay for, additional liability on ADT’s part. The clause was not unconscionable. The $250 limitation was properly characterized as liquidated damages. The clause was not against public policy. Affirmed.