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Travelers Indemnity Company v. S.C.S. Realty Corporation

2005 WL 2646917 (3rd. Cir. Ct. App. 2005) (Unpublished)

LEASES; NEGLIGENCE; EXCULPATION—Exculpatory clauses that bar suits for negligence also bar suits for very negligent or grossly negligent performance but not for wanton or willful misconduct which means consciously and intentionally doing a wrongful act or omitting to discharge a duty while knowing that injury will probably or likely result from such conduct or acting with reckless indifference to the consequences of such act or omission.

A landlord’s insurance company sought to enforce a subrogation claim it believed that its insured had against its insured’s shopping center landlord. Factually, it believed that the landlord was responsible for installation of a fire suppression system based upon a leasehold provision that required another tenant of the landlord to comply with all laws and regulations and “specifically to follow all required directives to prevent a fire.” The insurance company’s argument was that the landlord had a duty to enforce that provision against its other tenant and that the landlord’s failure to do so contributed to the fire damage loss experienced by the insurance company’s customer and, consequently, by the insurance company. The lease between the insurance company’s customer and the landlord contained an exculpatory clause stating that the landlord could not be held liable “for any tenant’s negligence or its own negligence.” The insurance company attempted to argue that the applicable provision of that lease only applied to negligence and therefore did not shield the landlord “from liability for its own gross negligence or wanton and/or willful misconduct.” The Court disagreed. It pointed to a 1985 New Jersey Superior Court Appellate Division decision which held “that any exculpatory clause that bars suits for negligence also bars suits for ‘very negligent or grossly negligent performance.’” The same case, however, “specifically stated that claims for wanton and/or willful misconduct [were] not barred by an exculpatory clause that only addresses negligent performance.” Nonetheless, the New Jersey Supreme Court “had defined wanton and/or willful misconduct ... as follows: It must appear that the defendant with knowledge of existing conditions and conscious from such knowledge that injury will probably or likely result from his conduct, and with reckless indifference to the consequences, consciously and intentionally does some wrongful act or omits to discharge some duty which produces the injurious result.” Because the Court believed that the landlord had no duty to cause its other tenant to comply with the other tenant’s lease, the Court held that there was no wanton and/or willful misconduct in this particular case.

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