Xl Specialty Insurance Co. v. Christie's Find Art Storage Services, Inc.

137 A.D.3d 563 (2016)

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Nature of the Case

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Facts

XL (P) is the insurer for Chowaiki & Co. Fine Art Ltd., a private fine art gallery. Chowaiki entered into a managed storage agreement with Christie's (D). D was to provide secure storage for some of Chowaiki's fine artworks at its facility in Brooklyn. Chowaiki had the option to either (a) have D 'accept liability for physical loss of, or damage to, the Goods,' or to (b) 'sign a loss/damage waiver,' under which Chowaiki accepted that D 'shall not be liable for any physical loss of, or damage to, the Goods.' Chowaiki opted to sign the waiver. where it was required to 'effect and maintain adequate insurance in respect of the Goods deposited.' There was an additional limitation of liability, stating that 'even if,' despite the aforementioned language, D was found 'liable for any loss of, or damage to, the Goods,' liability was not to exceed the lower of $100,000 or the market value of the goods. Chowaiki was responsible for obtaining an 'against All Risks of loss or physical damage' insurance policy covering the goods deposited. P provided this insurance. The waiver also absolved D of all responsibility for loss or damage to Chowaiki's goods and required Chowaiki to notify its insurer of the waiver and 'arrange for them to waive any rights of subrogation' against D with respect to any loss or damage to Chowaiki's goods while in D's custody. In October 2012, 'Superstorm Sandy' struck causing major damage. Prior to the storm, D notified Chowaiki that 'all property on the first floor' of the building where Chowaiki's artwork was stored would be 'checked to ensure all items are raised off the floor,' or, if necessary, the goods would be removed to empty rooms on the upper floors of D's storage facility. During Hurricane Irene, D's facility flooded but D took measures to protect Chowaiki's goods from damage. The facility flooded, and the goods were damaged because they were left on the first floor. P paid for the losses and sued D as Chowaiki's subrogee. The policy did not waive P's right to subrogation against D. P asserted causes of action for gross negligence, breach of bailment, negligence, breach of contract, negligent misrepresentation, and fraudulent misrepresentation. D moved to dismiss because of the waiver signed by Chowaiki contained both a waiver of subrogation clause and a limitation of liability, both of which barred P's claims; (b) the agreement limited P's damages to $100,000; (c) there was no bailment because the agreement created a lessor/lessee relationship, and (d) the storm was an Act of God, which, as a matter of law, excused D's liability. The court found that there was a bailor/bailee relationship under article 7 of the UCC and the limitation of liability was unenforceable because it purported to exempt D from all liability, in contravention of then UCC 7-204 (2) (now UCC 7-204 [b]) D appealed.