Case Title: Maryland Cas. Co. v. NSTAR Elec. Co.

Citation: 

Docket Number: SJC-11741

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2015-05-14T00:00:00Z

Document:
NOTICE:  All slip opinions and orders are subject to formal 
revision and are superseded by the advance sheets and bound 
volumes of the Official Reports.  If you find a typographical 
error or other formal error, please notify the Reporter of 
Decisions, Supreme Judicial Court, John Adams Courthouse, 1 
Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-
1030; SJCReporter@sjc.state.ma.us 
 
SJC-11741 
 
MARYLAND CASUALTY COMPANY1 & another2  vs.  NSTAR ELECTRIC 
COMPANY & another.3 
 
 
 
Middlesex.     January 5, 2015. - May 14, 2015. 
 
Present:  Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, & 
Hines, JJ. 
 
 
Department of Public Utilities.  Public Utilities, Electric 
company, Rate structure, Negligence.  Negligence, Public 
utilities, Limitation of liability. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
March 27, 2008. 
 
 
The case was heard by Dennis J. Curran, J., on motions for 
summary judgment, and entry of a stipulated final judgment was 
ordered by him. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
                                                 
 
1 As subrogee of Cambridge Incubator, Inc., doing business 
as Cambridge Innovation Center, and Sedo.com, LLC. 
 
 
2 Assurance Company of America, as subrogee of Allodia 
Corporation. 
 
 
3 NSTAR Electric and Gas Corporation. 
2 
 
 
 
Matthew M. O'Leary (Andrew J. Fay with him) for the 
plaintiffs. 
 
Andrea Peraner-Sweet (Barbara L. Drury with her) for the 
defendants. 
 
 
LENK, J.  This case raises the question whether a tariff 
filed with and approved by the Department of Public Utilities 
(DPU) may limit a public utility from liability to 
nonresidential customers for special, indirect, or consequential 
damages resulting from the utility's gross negligence.  We hold 
that a properly approved tariff may so limit a public utility's 
liability. 
1.  Background.  On December 8, 2006, two employees of 
NSTAR Electric and Gas were performing a switching procedure to 
restore electrical equipment that had been taken out of service.  
During the procedure, an explosion occurred, igniting a fire in 
the basement of a building at One Broadway in Cambridge.  Smoke 
filled the basement and flowed into the stairwells leading up to 
the other floors of the building.  The fire and smoke resulted 
in extensive damage to the building, requiring its closure for 
approximately six weeks.  Construction and repairs continued for 
a lengthy period of time thereafter. 
At the time of the fire, the building was owned by the 
Massachusetts Institute of Technology (MIT).  MIT leased space 
3 
 
 
in the building to Cambridge Incubator, Inc. (Cambridge 
Incubator),4 Sedo.com, LLC (Sedo), and Allodia Corporation 
(Allodia).  Cambridge Incubator and Sedo purchased insurance 
coverage from Maryland Casualty Corporation (Maryland Casualty); 
Allodia purchased insurance coverage from Assurance Company of 
America (Assurance).  In the wake of the fire, Maryland Casualty 
paid claims by Cambridge Incubator and Sedo, and Assurance paid 
claims by Allodia. 
Maryland Casualty and Assurance then brought this complaint 
against NSTAR Electric Company and NSTAR Electric & Gas Company 
(collectively, NSTAR), seeking to recover for the claims paid to 
Cambridge Incubator, Sedo, and Allodia.  The plaintiffs asserted 
causes of action in negligence, gross negligence or reckless, 
wilful and wanton misconduct, breach of contract, and breach of 
express and implied warranties.  They alleged that the explosion 
resulted from NSTAR's inadequate maintenance of its equipment at 
the building and training of the crew performing the switching 
procedure. 
NSTAR moved for partial summary judgment.  It contended 
that, to the extent to which the insurers sought recovery for 
business interruption losses, their claims were barred as a 
                                                 
 
4 Doing business as Cambridge Innovation Center. 
4 
 
 
matter of law by Massachusetts Department of Telecommunications 
and Energy Tariff No. 200A (tariff), filed with and approved by 
the DPU on January 31, 2006, and in effect when the explosion 
occurred in December, 2006.  The tariff contained a "Limitation 
of Liability" clause providing that, "for non-residential 
Customers served under general service rates, the Company shall 
not be liable in contract, in tort (including negligence and 
[G. L. c.] 93A), strict liability or otherwise for any special, 
indirect, or consequential damages . . . ." 
 
A judge of the Superior Court allowed, in part, NSTAR's 
motion for summary judgment.  The judge determined that, while 
private parties may not contractually limit their liability for 
gross negligence, a tariff filed with and approved by a 
regulatory agency may so limit a public utility's liability.  
Because the claims paid to Allodia and Sedo that the plaintiffs 
sought to recover were exclusively for business interruption, 
the judge determined that they were fully precluded by the 
"Limitation of Liability" clause.  By contrast, the judge 
concluded that, to the extent Maryland Casualty sought to 
recover for claims paid to Cambridge Incubator for property 
damage, its claims were not for "special, indirect or 
consequential damages," and thus were not barred by the tariff. 
5 
 
 
In the wake of the judge's decision, the parties filed a 
stipulated judgment awarding Maryland Casualty the amount of 
$17,062 plus interest for claims paid to Cambridge Incubator for 
property damage.  The plaintiffs then appealed from the decision 
granting partial summary judgment, and we transferred the case 
to this court on our own motion. 
2.  Discussion.  On appeal, the plaintiffs assert that the 
judge improperly granted partial summary judgment because:  
(1) there is a genuine dispute regarding the authenticity of the 
tariff; (2) the language at issue in the tariff does not clearly 
and unambiguously preclude liability for claims based on gross 
negligence or wilful and wanton misconduct; and (3) NSTAR cannot 
limit its liability for losses caused by its own gross 
negligence or wilful and wanton misconduct.5  We conclude that 
the tariff is authentic, that the clause at issue does encompass 
claims based on gross negligence or wilful and wanton 
                                                 
 
5 The plaintiffs also assert that there is a genuine dispute 
regarding whether the losses sought by plaintiffs were caused by 
NSTAR's gross negligence or wilful and wanton misconduct.  We 
agree with NSTAR that this argument is not properly before the 
court.  The judge never addressed whether there is a genuine 
dispute of material fact regarding NSTAR's alleged gross 
negligence or wilful and wanton misconduct.  Instead, the judge 
determined that, even if the plaintiffs could show gross 
negligence, their claims would be barred as a matter of law by 
the "Limitation of Liability" clause. 
6 
 
 
misconduct, and that the clause is enforceable.6 
a.  Authenticity of the tariff.  General Laws c. 25, § 1, 
provides that the DPU "shall have an official seal, which shall 
be judicially noticed."  The judge based his decision granting 
summary judgment on the copy of the tariff submitted to the 
Superior Court by NSTAR and accompanied by a cover letter that 
contained the DPU's official seal.  The cover letter attests 
that "the attached are true and certified copies of NSTAR 
Electric Company/Cambridge Electric Company Terms and Conditions 
for Distribution Services Tariffs . . . on file with the Rates 
and Revenue Requirements Division of this Agency and also a copy 
of the Stamp Approval dated January 31, 2006 of the compliance 
filing . . . ." 
The plaintiffs contend that the judge erred in granting 
summary judgment to NSTAR because there is a genuine and 
material factual dispute as to the authenticity of the tariff at 
issue.  The plaintiffs' challenge to the tariff's authenticity 
focuses on discrepancies between the copy of the tariff that 
accompanied NSTAR's motion for summary judgment and the copy of 
                                                 
 
6 Because we conclude that the "Limitations of Liability" 
clause precludes all of plaintiffs' claims, we do not address 
NSTAR's alternative argument that, regardless of the clause, the 
claims of Sedo and Allodia are barred by the economic loss 
doctrine. 
7 
 
 
the tariff later submitted to the court with the cover letter 
from the DPU.  We conclude that these alleged discrepancies, 
which involve minor differences in the pagination of the 
documents, do not give rise to a "genuine issue" regarding the 
authenticity of the tariff accompanied by the DPU's official 
seal.  See DIRECTV, LLC v. Department of Revenue, 470 Mass. 647, 
657-658 (2015), citing HipSaver, Inc. v. Kiel, 464 Mass. 517, 
522 (2013) (no genuine issue of material fact where party has 
"no reasonable expectation" of prevailing on factual dispute).  
See also Mass. R. Civ. P. 56(c), as amended, 436 Mass. 1404 
(2002). 
b.  Interpretation of the "Limitation of Liability" clause. 
The tariff's "Limitation of Liability" clause provides, in full: 
 
"Unless there is negligence on the part of the 
Company, the Company shall not be liable for damage to the 
person or property of the Customer or any other persons 
resulting from the use of electricity or the presence of 
the Company's appliances and equipment on the Customer's 
premises.  In any event, for non-residential Customers 
served under general service rates, the Company shall not 
be liable in contract, in tort (including negligence and 
[G. L. c.] 93A), strict liability or otherwise for any 
special, indirect, or consequential damages whatsoever 
including, but not limited to, loss of profits or revenue, 
loss of use of equipment, cost of capital, cost of 
temporary equipment, overtime, business interruption, 
spoilage of goods, claims of Customers of the Customer or 
other economic harm." 
 
This court has observed that, "where words in a tariff are 
8 
 
 
used in a peculiar or technical sense, and where extrinsic 
evidence is necessary to determine their meaning or proper 
application, so that 'the enquiry is essentially one of fact and 
of discretion in technical matters,' then the issue of tariff 
application must first go to the [regulatory] [c]ommission."  
Spence v. Boston Edison Co., 390 Mass. 604, 613 (1983), quoting 
United States v. Western Pac. R.R., 352 U.S. 59, 66 (1956).  The 
interpretive question at issue in this case, however, does not 
turn on any technical term.  Instead, it concerns the meaning 
and scope of a tariff provision specifying the types of damages 
for which NSTAR may be held liable.  Because the interpretation 
of such a provision poses a pure question of law, it is proper 
for judicial resolution.  See Patterson v. Christ Church in the 
City of Boston, 85 Mass. App. Ct. 157, 159 (2014). 
We have little difficulty concluding that the portion of 
the "Limitation of Liability" clause at issue here encompasses a 
claim of gross negligence or wilful and wanton misconduct.  The 
clause refers to liability "in tort."  A cause of action for 
gross negligence or wilful and wanton misconduct is a form of 
liability "in tort."  MacFadyen v. Maki, 70 Mass. App. Ct. 618, 
621-623 (2007); 1 D.B. Dobbs, P.T. Hayden, & E. M. Bublick, 
Torts § 140 (2d ed. 2011); Restatement (Second) of Torts § 500 
9 
 
 
(1965). 
The plaintiffs assert that the clause's parenthetical 
phrase -- "(including negligence and [G. L. c.] 93A)" -- 
indicates that "[t]he only 'tort' liability [the clause] 
purports to limit is that for 'negligence and [G. L. c.] 93A.'"  
"It is," however, "hornbook law that the use of the word 
'including' indicates that the specified list . . . that follows 
is illustrative, not exclusive."  Puerto Rico Maritime Shipping 
Auth. v. Interstate Commerce Comm'n, 645 F.2d 1102, 1112 n.26 
(D.C. Cir. 1981).  The tariff's "use of the word 'including' 
indicates that the [parenthetical] list is representative, not 
all-inclusive, and that any . . . tort is covered" by the 
clause.  See Barrows v. Wareham Fire Dist., 82 Mass. App. Ct. 
623, 626 (2012). 
In context, the specific reference to "negligence" in the 
parenthetical serves to clarify the relation between the 
"Limitation of Liability" clause's first and second sentences.  
The first sentence indicates that the public utility shall not 
be held liable to any customers "[u]nless there is negligence on 
the part of the Company."  The second sentence indicates that, 
"[i]n any event," the utility shall not be liable "in tort 
(including negligence . . .)" to "non-residential Customers 
10 
 
 
served under general service rates . . . for any special, 
indirect, or consequential damages whatsoever."  The clause's 
specific reference to liability for "negligence," then, 
elucidates the relation between the "no liability to any 
customers without negligence" rule established in the first 
sentence and the "no liability to nonresidential customers 
served under general service rates for special, indirect or 
consequential damages" rule articulated in the second sentence.  
It does not render the latter rule ambiguous. 
Indeed, the intention to exempt the company from all 
liability to nonresidential customers served under general 
service rates for special, indirect, or consequential damages is 
abundantly clear from the tariff.  The tariff's list of the 
potential bases for liability is followed by the phrase "or 
otherwise," thereby sweeping up any other potential bases of 
liability not encompassed in the already broad categories of 
liability specifically listed.  Further, the tariff's reference 
to "special, indirect, or consequential damages" is sandwiched 
between the words "any" and "whatsoever."  Finally, the tariff's 
illustrative list of potential forms of "special, indirect, or 
consequential damages" is preceded by the phrase "including, but 
not limited to." 
11 
 
 
Short of a specific reference to gross negligence or wilful 
and wanton misconduct, it is difficult to imagine how the tariff 
more plainly could have exempted the plaintiffs from liability 
for "special, indirect, or consequential damages."  Because such 
a specific reference is not required, and the plaintiffs do not 
contest that they are nonresidential customers served under 
general service rates or that they are seeking to recover 
special, indirect, or consequential damages, the rule 
articulated in the second sentence encompasses the plaintiffs' 
claims. 
c.  Enforceability of the limitation of liability clause.    
In Massachusetts, a public utility's "liability for damages may 
be limited by properly filed and approved tariffs."  Disk 'N' 
Data, Inc. v. AT&T Communications, 415 Mass. 886, 888 (1993).  
Such tariffs "have the 'force and effect of law,'" id., so long 
as they satisfy the basic "requirement of reasonableness," 
Wilkinson v. New England Tel. & Tel. Co., 327 Mass. 132, 135 
(1951) (Wilkinson). 
The core of the plaintiffs' argument is that, while a 
public utility may, through its tariff, limit its liability for 
ordinary negligence, it may not limit its liability for gross 
negligence or wilful and wanton misconduct.  In making that 
12 
 
 
argument, the plaintiffs invoke the well-established principle 
of contract law indicating that, "while a party may contract 
against liability for harm caused by its negligence, it may not 
do so with respect to its gross negligence."  Zavras v. Capeway 
Rovers Motorcycle Club, Inc., 44 Mass. App. Ct. 17, 19 (1997).  
See CSX Transp., Inc. v. Massachusetts Bay Transp. Auth., 697 F. 
Supp. 2d 213, 226 (D. Mass. 2010) ("the [Supreme Judicial Court] 
would not enforce agreements purporting to require 
indemnification against gross negligence").  We conclude that 
the plaintiffs' invocation of that principle of contract law is 
inapposite in light of the distinction between a contractual 
release of liability and a properly filed and approved public 
utility tariff. 
The plaintiffs' argument relies primarily on one, nearly 
one and one-half century old precedent, Ellis v. American Tel. 
Co., 13 Allen 226 (1866) (Ellis).  In that case, a plaintiff 
sued a telegraph company for damages resulting from a missent 
telegraph.  Id. at 227. This court determined that the statutory 
scheme governing telegraph companies "takes the business of 
conducting and managing a line of electric telegraph within this 
[C]ommonwealth out of the class of ordinary private occupations, 
and makes it a quasi public employment, to be carried on with a 
13 
 
 
view to the general benefit and for the accommodation of the 
community."  Id. at 231.  The court nevertheless deemed 
enforceable a contractual clause providing that the telegraph 
company would not be liable for errors and delays in the 
transmission of messages unless the plaintiff paid extra to have 
the message in question sent back to the station from which it 
originated.  Id. at 236.  The court observed that the general 
rule that a defendant is liable for damages caused by its 
negligence: 
 
"does not operate so as to prevent parties from 
prescribing reasonable rules and regulations for the 
management of the business, or establishing special 
stipulations for the performance of service which, if made 
known to those with whom they deal, and directly or by 
implication assented to by them, will operate to abridge 
their general liability at common law, and to protect them 
from being held responsible for unusual or peculiar hazards 
which are incident to particular kinds of business.  Of 
course, a party cannot in such way protect himself against 
the consequences of his own fraud or gross negligence, or 
the fraud or gross negligence of his servants or agents." 
 
Id. at 234. 
In Wilkinson, 327 Mass. at 135, the court cited Ellis, 
supra, in the context of claims against a telephone company for 
financial loss caused by the defendant's failure of service.  
The court affirmed a directed verdict in favor of the defendant 
telephone company, based on a limitation of liability clause in 
the rate schedule and accompanying regulations.  Wilkinson, 
14 
 
 
supra at 134.   The court observed, in dicta, that "[o]ne of the 
counts in the plaintiff's declaration alleges wilful and wanton 
acts of the defendant and, if sustained by evidence, might 
require submission of this action to the jury."  Id. at 135.  
The court concluded, however, that the plaintiff could not 
recover on that count because "[n]owhere in the opening 
statement . . . [was] there a sufficient allegation of facts 
from which the jury could infer or find any wilful or wanton 
misconduct on the part of the defendant."  Id. 
In our view, both the Wilkinson court's citation to Ellis 
and the plaintiffs' reliance on Ellis elide the significant 
historical transformation in the regulation of public utilities 
that occurred after 1866, when Ellis was decided.  The Ellis 
court determined that the statutory scheme governing the 
telegraph industry transformed it into "a quasi public 
employment," even though the statutory scheme did not confer on 
telegraph companies all the duties and obligations that apply to 
common carriers.  Ellis, 13 Allen at 231.  The court 
nevertheless concluded that the statutory scheme "recognized and 
affirmed" a telegraph company's right, under "familiar and well 
settled principles of common law," to "make rules and 
regulations by which to define and limit their duties and 
15 
 
 
obligations in the transaction of the business which they assume 
to carry on."  Id. at 235. 
The limitation of liability clause at issue in Ellis, then, 
was contractual.  Its contractual character, moreover, was 
crucial to the court's decision.  The court observed that the 
plaintiff "had notice" of the term limiting the telegraph 
company's liability.  Id. at 237.  Although the plaintiff, as 
the intended recipient rather than the sender of the missent 
message, "entered into no express contract with the defendants," 
the court concluded the plaintiff's power to recover was limited 
by the terms of the contract entered into between the sender and 
the telegraph company.  Id.  As the court explained, "it is 
difficult to see how the plaintiff, who claims through the 
contract entered into by the sender of the message with the 
defendants, which created the duty and obligation resting on the 
defendants, can claim any higher or different degree of 
diligence than that which was stipulated for the parties to the 
contract."  Id. at 238. 
In the late Nineteenth Century, this contract-based 
approach gave way to the now dominant tariff-based model for 
public utilities regulation.  See Kearney & Merrill, The Great 
Transformation of Regulated Industries Law, 98 Colum. L. Rev. 
16 
 
 
1323, 1331-1332 (1998) (Kearney & Merrill).  Under that model, 
the "progenitor" of which was the 1887 Interstate Commerce Act 
(ICA), a public utility is required to file a tariff, which 
contains all rates and all regulations, practices, or 
classifications affecting those rates.  See Kearney & Merrill, 
supra at 1331.  Once the tariff is approved by the relevant 
regulatory agency, any deviation from it is strictly prohibited.  
Id.  With respect to telegraphs (the industry at issue in 
Ellis), the United States Supreme Court observed in Western 
Union Tel. Co. v. Priester, 276 U.S. 252, 259 (1928), that, as a 
result of amendments to the ICA bringing the telegraph industry 
into the tariff-based model of public utility regulation, 
"[w]hat had previously been a matter of common law liability, 
with such contractual restrictions as the [S]tates might permit, 
then became the subject of [F]ederal legislation to secure 
reasonable and just rates for all without undue preference or 
advantage to any." 
Wilkinson, decided eighty-five years after Ellis, manifests 
the transformation in public utility regulation.  Whereas in 
Ellis telegraph companies operating in the Commonwealth were 
"only required to transmit despatches 'according to the 
regulations' which they may establish," Ellis, 13 Allen at 235, 
17 
 
 
in Wilkinson the defendant telephone company's "rates, 
regulations, and practices [were] subject to the control and 
supervision of the [DPU]."  Wilkinson, supra at 133.  The DPU's 
ultimate control over the rates, regulations, and practices 
governing the provision of telephone service, moreover, was 
crucial to the court's analysis of the case.  In affirming the 
grant of a directed verdict, the court observed that "rates and 
regulations are indissolubly bound together" such that, "[w]hen 
the [DPU] approved [the] regulation [at issue], it must have had 
in mind its effect on rates and no modification of the 
regulation may be countenanced."  Id. at 136. 
We likewise have observed that "the extensive legislative 
regulation of [an electric company's] rates and practices takes 
the furnishing of electricity out of the realm of contract law."  
FMR Corp. v. Boston Edison Co., 415 Mass. 393, 396 (1993).  
Instead, "[t]he process of utility rate making by a public 
regulatory body is the exercise of a legislative function, . . . 
which has been delegated to the [DPU] through the enactment of 
G. L. c. 164" (citation omitted).  Boston Edison Co. v. Boston, 
390 Mass. 772, 774 (1984).  The result of that process is a 
"quasi statutory enactment."  Id. at 777, quoting Haverhill Gas 
Co. v. Findlen, 357 Mass. 417, 420 (1970). 
18 
 
 
In light of this distinction, we are persuaded that the 
contract rule against releases for gross negligence or wilful 
and wanton misconduct should not be applied in the tariff 
context.  Several considerations lead us to that conclusion. 
First, tariffs differ from contracts in that the regulatory 
process by which the rates are set provides recourse for the 
public to challenge rates or tariff terms as onerous or unfair.  
Courts in the Commonwealth have been particularly "cautious in 
enforcing releases against liability," and have "decline[d] to 
do so" in circumstances "where a public utility attempts to 
limit its liability."  Zavras v. Capeway Rovers Motorcycle Club, 
Inc., 44 Mass. App. Ct. 17, 19 (1997).  See Sharon v. Newton, 
437 Mass. 99, 106 (2002) ("We have not had occasion to rule on 
the validity of releases required in the context of a compelled 
activity or as a condition for the receipt of essential services 
[e.g., public education, medical attention, housing, public 
utilities], and the enforceability of mandatory releases in such 
circumstances might well offend public policy").  Such 
heightened scrutiny makes sense in the context of contractual 
releases, given that public utilities typically enjoy 
"legislatively sanctioned monopol[ies]" for the provision of 
essential services, Boston Edison Co. v. Boston, 390 Mass. at 
19 
 
 
777, obviating the possibility of true bargaining between a 
utility and its customers. 
In the context of a public utility tariff, however, the 
regulatory regime provides a framework for protecting against 
onerous or unfair limitations in liability.  Pursuant to G. L. 
c. 164, § 94, for instance, electric companies operating within 
the Commonwealth must file with the DPU "schedules . . . showing 
all rates, prices and charges to be charged or collected within 
the [C]ommonwealth for the sale and distribution of . . . 
electricity, together with all forms of contracts to be used in 
connection with such schedules."  Before an electric company may 
change its rates, the DPU must "hold a public hearing and make 
an investigation as to the propriety of such proposed changes."  
Id.  The DPU may initiate an investigation, either upon 
complaint or on its own motion, into a proposed rate change.  
Id.  Furthermore, "all contracts for the sale of . . . 
electricity by . . . electric companies . . . shall be filed 
with the [DPU]," and the "[DPU] may investigate the propriety of 
any such contract, both before and after such contract has 
become effective, and may, after notice and a public hearing, 
make such orders relative to the rates, prices, charges and 
practices covered by such contract as the public interest 
20 
 
 
requires."  Id. 
Second, because the tariff that results from this process 
is "not . . . a matter of contract by which a legal liability 
could be modified, but a matter of law by which a uniform 
liability was imposed," see Western Union Tel. Co. v. Esteve 
Bros. & Co., 256 U.S. 566, 572 (1921), it demands a degree of 
judicial deference not warranted in the contractual context.  
The statutory scheme indicates that "[t]he Legislature delegated 
the responsibility for regulating [electric] company practices 
to the DPU."  Lebowitz Jewelers Ltd. v. New England Tel. & Tel. 
Co., 24 Mass. App. Ct. 268, 273 (1987).  To evaluate and 
invalidate that "Limitation of Liability" clause based on 
traditional contract law principles would entail the court 
impermissibly "substitut[ing] its judgment for that of the 
Legislature."  Id., quoting Purity Supreme, Inc. v. Attorney 
Gen., 380 Mass. 762, 776 (1980). 
Finally, a judicial decision invalidating the "Limitation 
of Liability" clause would have effects beyond the clause 
itself.  "The limitation of liability was an inherent part of 
the rate" set by the DPU, and "[t]he company could no more 
depart from it than it could depart from the amount charged for 
the service rendered."  Western Union Tel. Co. v. Esteve Bros. & 
21 
 
 
Co., 256 U.S. at 571.  Because "the rates as fixed by the [DPU] 
are established with the rule of limitation in mind," 
invalidation of the limitation would undermine the broader 
structure by which both the public utility's "rights and 
privileges" as well as "its liabilities" are carefully defined 
and limited.  Waters v. Pacific Tel. Co., 12 Cal. 3d 1, 7 
(1974). 
The fact that the plaintiffs here allege gross negligence 
or wilful and wanton misconduct does not alter the analysis.  In 
a classic formulation, this court described the distinctions 
between ordinary negligence, gross negligence, and wilful and 
wanton misconduct as matters of degree.  "The element of 
culpability which characterizes all negligence is in gross 
negligence magnified to a high degree as compared with that 
present in ordinary negligence," but is nevertheless "something 
less than . . . willful, wanton and reckless conduct . . . ."  
Altman v. Aronson, 231 Mass. 588, 591-592 (1919).  Because the 
tariff provision at issue applies to all claims by 
nonresidential customers seeking to recover "special, indirect, 
or consequential damages," without regard to distinctions 
between the degrees of culpability, we decline to make such a 
distinction. 
22 
 
 
Courts in other jurisdictions have reached the same 
conclusion.  Most pertinently, the United States Supreme Court 
in Western Union Tel. Co. v. Priester, 276 U.S. 252, 259-260 
(1928), after concluding that the tariff system took the 
regulation of the telegraph industry out of the realm of 
contract law, determined that a plaintiff could not escape a 
limitation of liability clause in a tariff simply by affixing 
the "vituperative epithet" of "gross" to an allegation of 
negligence.  "[I]f it be assumed that we can weigh and measure 
degrees of negligence and that a public service company may not 
by contract alone limit its liability for gross negligence, so-
called," the court observed, "nevertheless we may not disregard 
a lawful exercise of the regulatory power which has made no 
distinction between degrees of negligence, nor may we, upon any 
theory of public policy, annex to the rate as made conditions 
affecting its uniformity and equality."  Id. at 260.  Tracking 
this analysis, courts in other jurisdictions similarly have 
rejected arguments that an allegation of gross negligence takes 
a plaintiff's claim out of the scope of a limitation of 
liability clause.  See Stern v. General Tel. Co., 50 Cal. App. 
3d 538, 541-542 (1975); Professional Answering Serv., Inc. v. 
Chesapeake & Potomac Tel. Co., 565 A.2d 55, 65 (D.C. 1989); In 
23 
 
 
re Illinois Bell Switching Station Litig., 234 Ill. App. 3d 457, 
463-465 (1992). 
We acknowledge that a number of courts in other States have 
reached a different conclusion, determining that a provision in 
a tariff exempting a public utility from liability for gross 
negligence is invalid.  Closer examination of the extra-
jurisdictional authorities identified by the plaintiffs, 
however, reveals that many are distinguishable from the instant 
case.  In Satellite Sys., Inc. v. Birch Telecom of Okla., Inc., 
51 P.3d 585, 589 (Okla. 2002), for instance, the Oklahoma 
Supreme Court observed that "[c]ourts overwhelmingly reject 
attempts to limit liability either by contract or by tariff for 
gross negligence, willful misconduct, and fraud."  There, 
however, the plaintiff alleged that the defendant engaged in 
fraud, not gross negligence, and the court held that, "[b]ecause 
[the] tariff attempted to limit its liability for fraud, it was 
unreasonable, does not have the force of law, and is not 
binding."  Id.  In other decisions cited by the plaintiffs, the 
tariff specifically provided that, while the utility would not 
be liable for negligence, it could be held liable for gross 
negligence.  See Pilot Indus. v. Southern Bell Tel. & Tel. Co., 
495 F. Supp. 356, 362 (D.S.C. 1979) ("This Court is likewise 
24 
 
 
convinced that the tariff on file with the South Carolina Public 
Service Commission and the Federal Communications Commission 
effectively limits defendant's liability for service 
interruptions in the absence of its gross negligence or 
wilful/wanton conduct"); Lee v. Consolidated Edison Co., 98 
Misc. 2d 304, 305 (N.Y. Sup. Ct. 1978) (tariff provision 
"essentially exempts [electric company] from liability for 
ordinary negligence and renders it liable for gross negligence 
only").  Because these tariffs did not seek to exempt the 
defendants from liability for gross negligence, the courts had 
no occasion to determine whether such an exemption would be 
valid. 
Finally, while we reject a categorical rule that a 
limitation of liability clause in a tariff must distinguish 
between ordinary negligence and gross negligence or wilful and 
wanton misconduct, a tariff provision limiting liability 
nevertheless must satisfy the basic requirement of 
reasonableness.  Wilkinson, 327 Mass. at 135; Lebowitz Jewelers 
Ltd. v. New England Tel. & Tel. Co., 24 Mass. App. Ct. at 270.  
The plaintiffs, however, only argue that the challenged 
provision is "unreasonable" insofar as they contend that any 
tariff provision limiting liability for gross negligence is 
25 
 
 
unreasonable.  We reject that contention, and see no other 
reason for thinking that the "Limitation of Liability" clause is 
unreasonable. 
The provision does not categorically exempt NSTAR from 
liability for negligence, much less gross negligence.  On the 
contrary, the provision specifically contemplates liability for 
negligence, to both residential and nonresidential customers 
alike.  The portion of the "Limitation of Liability" clause that 
the plaintiffs challenge here merely exempts NSTAR from 
liability for a particular type of damages ("special, indirect, 
or consequential damages") asserted by a particular class of 
customers (nonresidential customers served under general service 
rates).  There are compelling reasons why the DPU could approve 
of such a limitation, even where it fails to make a distinction 
between ordinary negligence and gross negligence.  As scholars 
have noted, consequential damages, such as damages for lost 
profits or business interruption, are at once extremely 
difficult to predict and potentially immense in magnitude.  See, 
e.g., Tort Recovery for Negligently Inflicted Economic Loss:  A 
Reassessment, 37 Stan. L. Rev. 1513, 1536 (1985). 
Under these circumstances, we think that the "Limitation of 
Liability" clause is reasonable.  We have no occasion to address 
26 
 
 
whether a broader limitation of liability tariff provision -- 
one that, for instance, fully immunized a public utility from 
liability for damages resulting from its gross negligence or 
wilful and wanton misconduct, rather than merely immunizing it 
from claims for a particular type of damages, or one that 
encompassed claims for fraud -- would, if it were to survive DPU 
scrutiny, satisfy the basic requirement of reasonableness. 
3.  Conclusion.  For the reasons stated, we conclude that 
the limitation of liability clause in the tariff precludes the 
plaintiffs' claims to recover for business interruption and 
other consequential or economic damages. 
 
 
 
 
 
 
 
Judgment affirmed.