The Colorado Court of Appeals issued its opinion in Core-Mark Midcontinent, Inc. v. Sonitrol Corporation on July 19, 2012.
Breach of Contract—Limitation of Liability—Willful and Wanton—Expert Witness—Non-Party at Fault.
Defendant Sonitrol Corporation appealed the judgment entered against it after a jury trial on the breach of contract claims of plaintiffs, Core-Mark International, Inc. and its wholly owned subsidiary, Core-Mark Midcontinent, Inc. (collectively, Core-Mark); and Core-Mark’s casualty insurers, U.S. Fire Insurance Company and Commonwealth Insurance Company (collectively, Insurers). It also appealed the district court’s award of costs based on that judgment. The judgment as to liability was affirmed, the judgment as to damages was reversed, the costs award was vacated, and the case was remanded for a new trial on damages.
Sonitrol and Core-Mark contracted to have Sonitrol install and monitor a burglar alarm system at one of Core-Mark’s warehouses. Sonitrol failed to detect or to respond to a burglary at the warehouse. One of the burglars, David Ottersberg, started a fire in the warehouse that effectively destroyed the building and its contents. Sonitrol contended that a division of the Court of Appeals erred in Sonitrol Iby ruling that a limitation of liability provision like that here is not enforceable where a party has committed a willful and wanton breach of contract [United States Fire Ins. Co. v. Sonitrol Mgmt. Corp., 192 P.3d 543 (Colo.App. 2008)]. A limitation of liability provision generally is enforceable because it represents the parties’ bargained-for agreement regarding allocation of risks and costs in the event of a breach or other failure of the contemplated transaction. Because of the egregiously wrongful nature of a willful and wanton breach of contract, however, enforcing a limitation of liability provision to shield a party from the consequences of such conduct is deemed to be contrary to public policy. Therefore, the division in Sonitrol I correctly ruled on this issue.
Sonitrol further contended that the district court erred on remand by refusing to allow Sonitrol’s expert witnesses to testify. Sonitrol could have foreseen that if it failed to detect a break-in at the warehouse, a burglar could start a fire. However, the jury should have been able to consider Sonitrol’s proffered expert testimony relating to whether Sonitrol could have foreseen that the fire set by Ottersberg would prove so calamitous due to the alleged code violations. Further, the proffered testimony supported Sonitrol’s theory that its conduct was not the cause of all the damages Core-Mark claimed. Becausethe experts’ testimony was relevant and admissible on the issue of damages and the error was not harmless, the district court abused its discretion by excluding Sonitrol’s experts’ testimony.
Sonitrol finally contended that the district court erred by ruling that it could not designate Ottersberg as a nonparty at fault. CRS § 13-21-111.5(3) permits apportionment of liability only to a nonparty at fault in a tort action. Therefore, the district court did not err in ruling that Sonitrol could not designate Ottersberg as a nonparty at fault under CRS § 13-21-111.5 in this breach of contract action.
Summary and full case available here.