## Facts

- Abacus Federal Savings Bank operated a Manhattan branch with a vault and safe-deposit boxes.
- Over the weekend of March 20–21, 2004, burglars entered the branch, breached the vault wall, and stole about $589,749.55 in bank cash and about $926,512 in customers’ property from safe-deposit boxes.
- Abacus had separate contracts with ADT and Diebold for burglary-alarm and monitoring services.
- ADT agreed to install and maintain a 24-hour burglar alarm system and transmit alarm signals to a central station; its contract limited liability to $250 and required Abacus to look to its insurance, but did not include a waiver-of-subrogation clause.
- Diebold agreed to monitor ADT’s reporting system and provide redundant monitoring equipment; its contract limited liability to $250 and included a waiver-of-subrogation clause requiring Abacus (and its insurer) to waive subrogation claims for covered losses.
- Abacus alleged recurring “trouble signals” for months before the burglary, and that ADT and Diebold knew of malfunctions but failed to investigate, correct them, or notify Abacus, leaving the system ineffective during the break-in.
- Abacus sued for contract and tort damages, including negligence and gross negligence, and sought recovery for both its own losses and customers’ safe-deposit losses.

## Issues

1. Whether limitation-of-liability clauses in commercial security-service contracts are enforceable when the plaintiff alleges gross negligence.
2. Whether Diebold’s waiver-of-subrogation clause barred Abacus’s claims and/or limited claims to those brought by insurers.
3. Whether Abacus had standing to recover for losses suffered by safe-deposit customers.
4. Whether Abacus stated tort claims based on a duty independent of the security contracts.

## Decision

- The Court of Appeals largely affirmed dismissal of the complaint, with one exception.
- The court reinstated a narrow breach-of-contract claim against Diebold for Abacus’s own losses, subject to Diebold’s $250 contractual limitation of liability.
- The court dismissed all claims against ADT.
- The court dismissed claims seeking recovery for safe-deposit customers’ losses for lack of standing.
- The court rejected negligence and gross-negligence theories as insufficient to avoid the contractual limitations and as duplicative of contract claims absent an independent tort duty.

## Legal Principles

- Commercial alarm and security-service contracts commonly allocate risk by requiring the customer to obtain insurance and by limiting the provider’s liability; such provisions are generally enforceable.
- A contractual limitation on liability is not avoided unless the alleged conduct constitutes gross negligence—i.e., behavior approaching intentional wrongdoing or reckless indifference—rather than negligent nonperformance of contractual duties.
- A waiver-of-subrogation clause may bar insurer subrogation claims and does not necessarily eliminate all direct contract claims by the insured; interpretation turns on the clause’s text and context.
- A plaintiff generally lacks standing to recover for third parties’ property losses absent a clear third-party-beneficiary basis or assignment of rights.
- Tort claims arising from service contracts require a duty independent of the contract; repackaging a contract breach as negligence (including “gross negligence”) does not, without more, create tort liability.

## Conclusion

The court enforced the parties’ contractual risk allocation for security services, holding that the alleged failures did not rise to gross negligence and did not support independent tort liability, dismissing ADT and all customer-loss claims, but allowing Abacus to pursue a limited, $250-capped breach-of-contract claim against Diebold for the bank’s own losses.


Abacus Fed. Sav. Bank v. ADT Sec. Servs., Inc., 18 N.Y.3d 675, 967 N.E.2d 666 (N.Y. 2012)