Legal Alert: Georgia Supreme Court Declines to Review Decision Regarding Limitation-of-Liability Clauses in Customer Contracts

by Eversheds Sutherland (US) LLP

This week, the Georgia Supreme Court denied a request to review a divided Georgia Court of Appeals decision with potentially far-reaching consequences for companies that do business in Georgia and rely on limitation-of-liability clauses in their customer contracts. Monitronics International v. Veasley, 746 S.E.2d 793, A13A0090 (Ga. Ct. App, July 16, 2013), cert. denied, Nov. 4, 2013 (S13C1727).

The Georgia Supreme Court’s denial of certiorari is somewhat surprising given the divided Court of Appeals decision and the importance of the issue. Nonetheless, a take-away from the various opinions of Court of Appeals seems to be that, to increase the chances of a limitation-of-liability clause being enforced, companies may want to consider having clauses that (1) have an explicit typeface and prominent location in the contract; and (2) have explicit language setting forth the specific claims (property damage versus personal injury; contract versus tort/negligence) they seek to limit. Companies with customer contracts containing limitation-of-liability clauses may want to review their contracts in light of these recent developments.

In Monitronics, the Georgia Court of Appeals upheld a $9 million jury verdict against an alarm company that had failed to properly warn a customer about repeated alarms at her home.

The customer, who was brutally assaulted by an intruder, filed suit against the company alleging, among other claims, breach of contract and negligence. The alarm company argued that a limitation-of-liability clause in its customer contract limited liability to $250 for any loss resulting from the company’s service. The trial court, however, ruled that the clause was void as a matter of public policy, and allowed the case to be heard by a jury.

The Court of Appeals upheld that decision, although on different grounds. Notably, there was no majority opinion on the limitation-of-liability issue. In the plurality opinion, which is physical precedent only (i.e., not binding precedent for other cases), Judge Stephen Dillard explained that it is “well settled that exculpatory clauses in which a business seeks to relieve itself from its own negligence are valid and binding in this State” and “are not void as against public policy unless they purport to relieve liability for acts of gross negligence or willful or wanton conduct.” Nonetheless, the clause in the contract at issue was “written in the same small, single-spaced typeface as the majority of the contract.” Because the exculpatory clause was neither “explicit” nor “prominent,” Judge Dillard concluded that the clause was unenforceable.

The Court of Appeals decision included three separate concurrences, each analyzing the clause in different ways. One concluded that the clause could be interpreted to apply only to property damage, rather than personal injury. Another concluded that the clause was sufficient to preclude a contract-based claim, but that the clause was not sufficiently explicit to preclude a negligence-based claim. And yet another opinion concluded that the clause was irrelevant because the alarm company had a duty, independent of the contract, to exercise reasonable care to avoid increasing the risk of harm to the plaintiff. There was also a dissenting opinion, which took the position that the exculpatory clause was valid, and that the judgment should be reduced to $250.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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