Abacus Federal Savings Bank v. ADT Security Services, Inc.

On March 20, 2004, burglars broke into Abacus Federal Savings Bank (plaintiff) in New York City. The burglars used blowtorches to break down a wall of the bank’s vault and then took $589,749.55 in cash from a safe inside the vault and $926,512 in property from bank customers’ safe-deposit boxes. The burglary lasted for several hours, but police were never notified of the burglary while it was occurring. Before the burglary, ADT Security Services, Inc. (defendant) and Diebold, Incorporated (defendant) had contracted with Abacus to provide security services for the bank. Abacus’s contract with ADT required ADT to install and maintain a 24-hour security system to protect the bank’s premises and vault. ADT was also required to use motion and smoke detectors inside the vault and transmit any alarm signals from the vault to ADT’s central security system. Abacus’s contract with Diebold required Diebold to maintain a backup-alarm system to ADT’s system. The contracts contained clauses exculpating ADT and Diebold from negligence liability and limiting ADT and Diebold’s liability in all circumstances to $250. Diebold’s contract also contained a waiver-of-subrogation clause that required Abacus to obtain insurance to cover losses due to theft and waive any claim against Diebold for covered theft losses. ADT’s contract did not contain a similar waiver-of-subrogation provision, but it stated that Abacus was responsible for obtaining insurance to cover property loss. After the burglary, Abacus sued ADT and Diebold in New York state court. Abacus asserted that ADT and Diebold breached their contracts by installing inadequate security systems. Abacus further alleged that ADT and Diebold knew that their alarm equipment had been malfunctioning for months, but they failed to investigate the malfunctions or notify anyone at Abacus about the issue. ADT and Diebold moved to dismiss Abacus’s complaint. The trial court denied the motion to dismiss Abacus’s breach-of-contract and gross-negligence claims but dismissed the rest of the complaint. The Appellate Division reversed and granted the motion to dismiss the entire complaint. Abacus appealed to the New York Court of Appeals.