A complaint recently filed against an alarm company in the state of Kentucky had an old, familiar claim – the alarm contract was a contract of adhesion.

The plaintiff insurance company and its insured homeowner brought subrogation action against the defendant fire alarm company seeking to recover losses arising from a home fire, alleging that the fire alarm failed.  The complaint stated, among other charges, that the contract was a contract of adhesion.  

Summary judgment was granted in favor of the alarm company by the trial court in Kentucky, and then the insurance company and its insured homeowner appealed the judgment. Once again, the insurance company and its insured homeowner argued that the contract was one of adhesion, but the appellate court disagreed and upheld the trial court’s decision. The insurance company and its insured were not presented with a “take-it-or-leave-it” proposal, because the contract actually provided that they could pay an additional amount and have the fire alarm company assume greater liability. 

The court pointed out that a contract of adhesion is a standardized contract, which, imposed and written by the party of superior bargaining strength, leaves the subscribing party only two choices, to accept the contract or reject it.  In the case at hand, the insured homeowner was not presented with a “take-it-or-leave-it” proposal. The insured homeowner could have bargained for more favorable terms, but chose not to do so. 

The limitation of liability language was located on the back of the contract document.  The insured homeowner signed the contract on the bottom front of the document.  Directly to the left and above his signature, the contract stated in all capital letters and bold print: “Attention is directed to the limited liability, limit of liability and other conditions on reverse side.”  The insurance company and the insured homeowner tried to argue about the font size and placement of the limitation of liability clause, but again, the court disagreed with them.  The court pointed  out that the language stands separate and apart from the rest of the paragraphs and is easily readable. The limitation of liability clause was approximately 350 words, so it was not unduly lengthy. The insured homeowner testified that he was given the opportunity to read the document before signing it, and he did read it. He then chose not to impose additional liability upon the fire alarm company for failure of its service or equipment. Therefore the contract was not one of adhesion.

The court pointed out that previously there appeared to be no case under Kentucky law specifically deciding the issue of whether limitation of liability clauses in alarm service agreements are enforceable. However, other jurisdictions had faced the issue and the majority determined that such clauses are valid and enforceable. Therefore, the summary judgment in favor of the fire alarm company was sustained.