Case ID: ny-2d_46/html/0653-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Per Curiam.\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Board of Education, Union Free School District No. 3, Town of Brookhaven, Appellant, v Valden Associates, Inc., et al., Respondents, et al., Defendants. Board of Education, Union Free School District No. 3, Town of Brookhaven, Appellant, v Aldoro Electric Corp., Respondent, et al., Defendants.
    Argued February 5, 1979;
    decided March 22, 1979
    
      POINTS OF COUNSEL
    
      Milton B. Pfeifer for appellant.
    I. Section 5-323 of the General Obligations Law is applicable to construction contracts. II. The legislative history of section 5-323 of the General Obligations Law shows a strong legislative concern with safety. III. Defendants’ contention that plaintiff waived its right to proceed against defendants is invalid, in light of section 5-323 of the General Obligations Law, which renders void and unenforceable any agreement whereby a contractor attempts to exculpate himself from liability to others arising from his negligence in the construction of real property. (Cullen v Naples, 31 NY2d 818.) IV. Even if section 5-323 of the General Obligations Law did not exist, the exculpatory clause would be void because it does not explicitly include negligent conduct. (Ciofalo v Vic Tanney Gyms, 10 NY2d 294; Van Dyke Prods. v Eastman Kodak Co., 12 NY2d 301.)
    
      John F. Mulholland for Valden Associates, Inc., respondent.
    I. Contractual waiver clauses entered into by parties of equal bargaining strength dealing with one another at arm’s length must be given effect according to its terms. (Cenven, Inc. v Bethlehem Steel Corp., 51 AD2d 955, 41 NY2d 842; Hogeland v Sibley, Lindsay & Curr Co., 51 AD2d 866, 42 NY2d 153; Ciofalo v Vic Tanney Gyms, 10 NY2d 294; Rinaldi & Sons v Wells Fargo Alarm Serv., 39 NY2d 191; Levine v Shell Oil Co., 28 NY2d 205; Phibbs v Ray’s Chevrolet Corp., 45 AD2d 897; St. Vincent’s Med. Center of Richmond v Vincent E. lorio, Inc., 78 Misc 2d 968; Russell v New York Tel. Co., 57 Misc 2d 227; Bayview Gen. Hosp. v Associated Hosp. Serv. of N. Y., 45 Misc 2d 218.) II. Section 5-323 of the General Obligations Law does not bar the waiver provision contained in the contract between the parties. (Kirshembaum v General Outdoor Adv. Co., 258 NY 489.)
    
      Francis P. McGowan for Aldoro Electric Corp., respondent.
    I. Section 5-323 of the General Obligations Law is not applicable to construction contracts entered into by parties of equal bargaining power at arm’s length where the public interest is not affected. (St. Vincent’s Med. Center of Richmond v Vincent E. Iorio, Inc., 78 Misc 2d 968; Rogers v Dorchester Assoc., 32 NY2d 553; Rankin v Shanker, 23 NY2d 111; People ex rel. Carollo v Brophy, 263 App Div 238, 294 NY 540; Broderick v Weinsier, 253 App Div 213, 278 NY 419; Matter of Cherkis v Impellitteri, 307 NY 132; Matter of New York Post Corp. v Leibowitz, 2 NY2d 677.) II. The subject waiver clause was entered into by the parties at arm’s length, did not contract away liability and did not violate public policy. (Ciofalo v Vic Tanney Gyms, 10 NY2d 294; B.V.D. Co. v Marine Midland Bank — N. Y., 46 AD2d 51; Levine v Shell Oil Co., 28 NY2d 205; Brentano’s, Inc. v Charter Mgt. Corp., 46 AD2d 861; 614 Third Ave. Corp. v Grand Iron Works, 44 AD2d 531.)
   OPINION OF THE COURT

Per Curiam.

This appeal concerns the validity of certain provisions contained in a construction contract which required the owner to provide "fire, extended coverage, vandalism and malicious mischief insurance upon the entire structure on which the work of the Contract is to be done and upon the materials, in or adjacent thereto and intended for use thereon, to One Hundred Percent of the insurable value thereof.” It also provided that "[t]he Owner, Contractor, and all subcontractors waive all rights, each against the others, for damages caused by fire or other perils covered by insurance provided for under the terms of the Contract Documents, except such rights as they may have to the proceeds of insurance.” The owner did make provision for the required insurance, and during the course of the project a fire broke out, allegedly due to the negligence of the contractor or the subcontractors, causing damage to the building. The insurer paid the owner its damages pursuant to the policy, and then this action was commenced against the contractor and subcontractors, in which the owner is the named plaintiff but the actual plaintiff in interest is the insurer as a subrogee.

Defendants argue that the contractual provisions quoted above constitute a defense to this action. Plaintiff contends, however, that so viewed, those contractual provisions are unenforceable pursuant to section 5-323 of the General Obligations Law, which provides as follows: "Every covenant, agreement or understanding in or in connection with or collateral to any contract or agreement affecting real property made or entered into, whereby or whereunder a contractor exempts himself from liability for injuries to person or property caused by or resulting from the negligence of such contractor, his agent, servants or employees, as a result of work performed or services rendered in connection with the construction, maintenance and repair of real property or its appurtenances, shall be deemed to be void as against public policy and wholly unenforceable.” In response, defendants contend first that this section is applicable only to building maintenance contracts, and alternatively, that even if it is applicable to contracts such as this, the General Obligations Law section does not speak to the provisions involved in this dispute. As to defendant’s first argument, although it may not be without some support in the legislative history of the section, such arguments are inappropriate in the face of the clear, explicit, and unambiguous language of the statute, speaking as it does of "any contract or agreement affecting real property”. However, we agree that the section does not prohibit contractual provisions of the type involved in this litigation.

Insofar as damages for injuries are in fact compensable under an insurance policy mandated by contract, a provision waiving all rights to recover for those same injuries other than from the proceeds of the insurance policy does not constitute a violation of the statute. A distinction must be drawn between contractual provisions which seek to exempt a party from liability to persons who have been injured or whose property has been damaged and contractual provisions, such as those involved in this suit, which in effect simply require one of the parties to the contract to provide insurance for all of the parties. Absent any indication of overreaching or unconscionability, such provisions violate neither section 5-323 of the General Obligations Law nor any other public policy (see Hogeland v Sibley, Lindsay & Curr Co., 42 NY2d 153).

Accordingly, the order of the Appellate Division should be affirmed, with costs.

Chief Judge Cooke and Judges Jasen, Gabrielli, Jones, Wachtler and Fuchsberg concur in Per Curiam opinion.

Order affirmed.