Pennsylvania Court Holds Arbitration Clause Which Did Not Permit Arbitrators to Question Enforceability of Exculpatory Clause Was Not Enforceable

Carll v. Terminex Int’l. Co., L.P.
2002 PA Super 44; 793 A.2d 921; 2002 Pa. Super. LEXIS 183 (2002)

The Carlls (“Plaintiffs”) instituted an action against Terminex International Company (“Terminex”) and other entities (collectively the “Defendants”), claiming that they sustained severe and permanent injuries as a result of Terminix’s negligent application of pesticides in and around their home. The Defendants responded with a petition to compel arbitration of the matter in accordance with the arbitration provisions of the contract at issue.
The trial court refused to grant the petition, holding that the arbitration clause was contrary to the public policy of the state, and was therefore void. The Superior Court of Pennsylvania agreed.

Pursuant to the clause, the arbitrator was without the authority to award the Plaintiffs damages for physical injuries resulting from the Defendants’ own negligence. It is this absence of authority to afford relief for personal injury in a consumer contract that the Court deemed contrary to the public policy of the state. The arbitration clause was therefore deemed void.

The fact that courts have upheld limitation of damages provisions in the past did not persuade the Superior Court to alter its conclusion. Rather, it noted that such provisions have been upheld only where the contracting parties enjoyed equality in bargaining power and sophistication. Because it rarely deals with such equals in the consumer context, the Court deemed the decisions enforcing limitations clauses inapposite to the contract at issue.

The Superior Court also refused to sever the limitation of damages provision from the arbitration clause. It noted that the limiting language was not independent of the agreement to arbitrate. Rather, the same provision that directed arbitration required the to enforce the clause. Therefore, the Court held that the entire clause must fail.

 

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