Maryland Casualty Co. v. NSTAR Electric Co. , 471 Mass. 416 ( 2015 )

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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
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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.