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QUESTION OF FACT WHETHER GROSS NEGLIGENCE MIGHT OVERCOME A CONTRACTUAL LIMITATION ON LIABILITY (FIRST DEPT).

The First Department, reversing Supreme Court, determined there was a question of fact whether gross negligence might overcome a contractual limitation on liability. Here a bid on a highway project turned out to be more than $80 million short, which resulted in the withdrawal of the bid. The project was for a toll road, the toll to be paid to the builder of the road. The bid was low because the date of the beginning of construction, rather than the end of construction, was used to calculate the income from the toll. Gross negligence factors included, the firing of key personnel overseeing the creation of the bid, failure to follow company policy in reviewing the bid, and departure from industry standards:

It is well-settled that contractual limitations on liability are generally enforceable … . However, “public policy forbids a party from attempting to avoid liability for damages caused by grossly negligent conduct” … . Thus, a gross negligence claim will be sustained where a party’s conduct “evinces a reckless disregard for the rights of others or smacks’ of intentional wrongdoing” … . S.A. De Obras y Servicios, COPASA v Bank of Nova Scotia, 2019 NY Slip Op 01706, First Dept 5-12-19

 

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