Many years ago I reported on a case decided in California. Fireman’s Fund had paid various claims for burglary or fire losses and filed a lawsuit against alarm companies that had contracts with the plaintiff`s insureds, claiming subrogation to losses arising from property damage incidents sustained by insureds.

The defendant alarm companies filed a demurrer and motion to dismiss. The court granted the defendant’s motion and the plaintiff insurance company appealed.

The plaintiff’s complaint alleged 30 causes of action based on breach of contract and negligence. The first cause of action sought declaratory relief to invalidate liquidated damage clauses in contracts between the alarm companies and Fireman’s insureds. The second cause alleged violations under the Cartwright Act for conspiracy to fix prices by inclusion of liquidated provisions in the companies’ service contracts.

The Appellate Court pointed out that the plaintiff’s insureds operate various commercial establishments, where each of them have contracted with one of the alarm companies to have systems maintained. The companies’ contracts with each of the insureds provide “liquidated damages” for breaches.

The court said the primary cause of the loss is the creator of the fire or the burglar. The alarm companies’ alleged negligence would be secondary to creation of the perils. Moreover, the insureds are in the best position to place a value on the contents of their premises. Thus the court did not find that Fireman’s is equitably subrogated to any of the insureds’ causes of action. This is sufficient to affirm the judgment of the dismissal, apart from the enforceability of the liquidated damage provision.

The court upheld the validity of the provision limiting the alarm companies’ liability, citing a previous California case.

The plaintiff alleged that the anti-competitive inclusion of liquidated damage provisions in alarm contracts amount to a conspired price-fixing scheme. The plaintiff said that because it had paid the lawsuits of its insured, it was subrogated to the cause of action for the restraint of trade. The court said Fireman’s is not subrogated to that claim.

Fireman's did not pay its insureds for the losses under the antitrust claim, and none of the money paid was related to the price of the alarm systems, affirming the judgment of the dismissal.