The Georgia Court of Appeals Analyzes Limitation of Liability Clauses

In Monitronics Int’l, Inc. v. Veasley, Case No. A13A0090 (decided July 16, 2013), a divided Georgia Court of Appeals addressed a number of issues relating to contractual limitation of liability clauses. The decision should cause businesses to re-examine the clauses they use.

The plaintiff had been assaulted by an intruder who broke into her house. She sued the company with which she had a contract to monitor her home’s security system. The jury returned a large verdict for the plaintiff. One of the key issues on appeal was the effect of a limitation of liability clause in the contract between the plaintiff and the monitoring company.

Although the Court voted six to one to affirm the verdict in favor of the plaintiff, the Court could not agree on how to analyze the limitation of liability clause. The limitation of liability clause was printed on the reverse side of a one-page document. It was in a section of the contract headed “Damages.” Its typeface was the same size as the typeface as the other portions of the contract. The provision stated that if the provider “should be found liable for loss or damages caused by a failure of [provider] to perform any of its obligations under this agreement …, [the provider’s] total liability shall be limited to $250.” Three judges on the panel held that the limitation was not sufficiently explicit or prominent. Another other judge held that the limitation applied only to property damage claims, not to personal injury claims. Another judge specifically stated that the limitation was sufficiently prominent but concluded that the limitation only applied to claims brought as a result of a failure to perform obligations under the contract, and that the plaintiff’s claims arose from acts performed by the defendant outside the scope of the contract. Another judge concurred on the outcome, but wrote nothing explicitly about the limitation of liability clause. One judge dissented, finding that the clause was sufficiently explicit and prominent and applied to the claim at issue.

The multiplicity of opinions makes it difficult to determine exactly what a majority of the judges concluded about the limitation of liability clause. The six judges in the majority stated different reasons for affirming the verdict. However, this case should cause businesses that rely upon limitation of liability clauses to reexamine those clauses. They should examine whether or not their clauses are “prominent.” Such clauses might be sent out with a unique typeface or in a distinct part of the agreement. Businesses also should examine whether or not the clause is broad enough to cover the full range of potential claims about which the contracting party is concerned. For example, a clause limited to negligence claims might not cover breach of contract claims or claims for statutory violations. This case suggests that Georgia courts will be taking a hard look at such causes in future cases.

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