Industry lawyer draws lessons from $60M verdict

Penn. court finds Grinnell partially liable for documents destroyed in '97 warehouse blaze
Tuesday, November 1, 2005

PHILADELPHIA--The long-term effects remain to be seen, but according to an industry attorney, a recent verdict on the Grinnell-Mobil/First Union fire sprinkler case highlights some red flags for contractors.
In late August, the Pennsylvania Superior Court upheld a verdict that found Grinnell Fire Protection, now known as SimplexGrinnell, partially liable for a 1997 warehouse fire that destroyed documents belonging to Mobil Oil Corp. and First Union.
SimplexGrinnell spokesman Chris Woodcock declined to comment as the litigation is ongoing.
Lawsuits filed by Mobil and First Union claimed that Grinnell did not design the sprinkler system for Diversified Records, a new multi-building facility in West Pitson, Penn., to the correct code and failed to turn on the system after the records were moved into one of the buildings.
Over eight years, damages have swollen to $60 million, and the case may not be over yet. On Sept. 23, SimplexGrinnell appealed the decision to the Supreme Court of Pennsylvania.
Eric Pritchard, an attorney with Kleinbard, Bell & Brecker in Philadelphia, who specializes in these kinds of cases, reviewed the 43-page Superior Court decision and said there are a few lessons to be learned with this case.
First, he said, "Grinnell does not appear to have had a limitation of liability clause." Very common in contracts, these clauses are enforceable, particularly in cases like this where there are sophisticated customers such as Mobil and First Union.
Without such a clause, the contractor can be liable for damages to an unknown third party--in this case the companies that had records in the warehouse.
In addition, without the protection of a limitation clause, a contractor who is found partially liable may still have to pay 100 percent of the damages under a legal rule called joint and several liability.
"If the landlord or the sprinkler company doesn't have a limitation clause in the contract, this may be a job that a contractor cannot afford to take. It may look profitable on the front end, but it may be unprofitable on the back end," said Pritchard.
Pritchard said jobs should always be done to code.
"Contractors should always do the job to code, whether the municipality requires it or not. If you don't do the job to code you risk a catastrophic loss. And in court, they'll find an expert witness who will say that you didn't comply with the code," he said.