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The validity of exculpatory clauses in commercial leases suffered another setback recently in Burnett v. Chimney Sweep (2004) 20 Cal.App.4th 562. In Burnett, the California Courts of Appeal for the Second District reversed the trial court by reaffirming previous legal authority that prohibited a lessor from raising an exculpatory provision in a lease as a defense for claims of negligence, particularly from a lessor's affirmative negligence. The appellate court in Burnett also held that the scope of the exculpatory clause is not affected by the provision of the lease requiring appellants to maintain insurance coverage on their personal property. Specifically, the court held that nothing in the lease suggested that, if Defendant Chimney Sweep's active negligence caused damage to the plaintiffs' personal property, then plaintiffs sole recourse would be to file a claim with their insurance company.
Defendant Chimney Sweep ("Defendant") leased plaintiffs a commercial space in 1998, which included an exculpatory clause that provided that:
"Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise, or other property of Lessee, ... whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said injury or damage results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, from other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same is accessible or not.... Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of income or profit therefrom."
Following the alleged discovery of "toxic mold" within the commercial space, Plaintiffs filed an action against Defendant that set forth seven causes of action, including: (1) premises liability; (2) general negligence; (3) breach of contract; (4) negligent maintenance of premises; (5) negligent maintenance of nuisance; (6) intentional infliction of emotional distress; and (7) conversion. Plaintiffs claimed that Defendant refused to repair their property despite being notified of the "dangerous condition" that required immediate repair. Plaintiffs also alleged that they suffered personal injuries as a result of inhaling toxic mold spores and mold contamination of their trade goods.
Defendant moved for a judgment on the pleadings, contending that the lease shielded it from liability based on two specific provisions in the lease. The lease required plaintiff lessees to maintain "full replacement cost" insurance coverage on their personal property. The lease also included an exculpatory clause providing that "notwithstanding Lessor's negligence or breach of this lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of income or profit therefrom." Relying on the foregoing provisions of the lease, the trial court granted Defendant's motions for judgment on the pleadings, and also awarded Defendant its attorneys' fees.
On appeal, however, the appellate court ruled that an issue of fact, precluding a judgment on the pleadings, existed whether an exculpatory clause in a commercial lease precluded the lessor's liability for toxic mold on premises. Although no public issue was involved, the clause was silent as to negligence, which thereby shielded the lessor only for passive negligence - the complaint alleged that the lessor was actively negligent in refusing to remediate problems caused by excessive moisture and mold infestation.
The appellate court relied on Butt v. Bertola (1952) 110 Cal.App.2d 128, 138, which held that, as a matter of law, a landlord was actively negligent "in knowingly maintaining defective sewerage facilities and in taking patently inadequate measures for the repair of those facilities, with knowledge of the injuries to [tenant's] property which would ensue." [Leaking sewerage water had damaged the tenant's property and had forced him to close his business.] The court in Butt v. Bertola concluded that an exculpatory clause in the lease did not shield the landlords from liability from an active negligence cause of action. The court also held that it "cannot, without more explicit and specific words in this clause, conclude that the minds of the parties met and agreed to exempt [landlords] from the consequences of their own wrongful acts when of the kind and nature of those here involved." (Id.) The court noted "that the trend of decisions is to exclude from such general clauses the exemption of a landlord from the consequences of his own affirmative negligence…." (Id. at 140.)
Therefore, the Burnett court recognized that the law does not look with favor upon attempts to avoid liability or secure exemption for one's own negligence, and such provisions are strictly construed against the person relying upon them. (Basin Oil Co. of Cal. v. Baash-Ross Tool Co. (1954) 125 Cal.App.2d 578, 594.) The general rule provides that: For an agreement to be construed as precluding liability for "active" or "affirmative" negligence there must be express and unequivocal language in the agreement which precludes such liability. An agreement, which seeks to limit generally without mentioning negligence, is construed to shield a party only for shield a party only for passive negligence, not for active negligence. (Salton Bay Marina, Inc. v. Imperial Irrigation Dist. (1985) 172 Cal. App. 3d 914, 933.)
In addition to representing a variety of defendants in litigation, Gordon & Rees lawyers also counsel and educate a diverse range of clients from large national clients to small local companies on important legal aspects related to "toxic mold" and asbestos-related issues including prevention, abatement, insurance, contracts and the selection of appropriate remediation contractors and consultants. This summary of California law should not be construed as legal advice. If you would like additional information or assistance in complying with the requirements imposed by the above-cited laws, please feel free to contact your Gordon & Rees attorney.
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