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CHANGING LIMITATION OF LIABILITY PROVISION
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Ken
We currently use your Commercial All in One contract. Our customer, a YMCA, would like us to change Section 24. Limitation of Liability to the full cost of the work. I do not feel that is acceptable. I would be willing to increase from the 5% number to 10% of the total cost of each project. The sum of all 5 contracts is over $90,000.00. Any thoughts as to increasing the amount?
Sincerely,
Ed
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RESPONSE
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The limitation provision is one of the most important of the protective provisions and should be changed only with great care. The significance of the change should be obvious, increasing your exposure for damages. The limitation of liability provision can sometimes be misinterpreted as an amount that will be paid if the subscriber suffers a loss, which is not the intent of the provision. The limit of liability is an upper limit only if there is in fact liability imposed despite the other provisions in the contract and only if there is a finding of breach of the agreement, negligence or other legal duty. A subscriber's request to increase the limit only underscores the subscriber's lack or understanding, appreciation or acceptance of the relationship with the alarm company. Much of a properly drafted alarm contract is focused on exculpating or limiting the alarm company's liability and explaining to the subscriber that there will be no liability; that the subscriber has to look to its own insurance carrier, who in turn cannot then look to the alarm company.
You should also be mindful that your E&O carrier has agreed to provide insurance knowing that you routinely use proper approved alarm agreements. That means an agreement with a limitation of liability provision. While your insurance carrier may not object to you increasing that limit to several thousand dollars it is going to have serious problem with increasing the limit to the insurance coverage or some other significant amount. Even if you do stick your carrier with the increased limit you can expect a cancellation notice or non renewal notice soon thereafter. If you can't or don't replace the insurance and you have subscriber contracts out there with increased limits of liability you'll be the one holding the bag. The bag I speak of is the shopping bag you'll be shelping to bankruptcy court with your records. Hopefully not.
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DO YOU NEED UL
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Ken,
We are U.L. for fire but not commercial burglary yet we protect bank and jewelry stores. To get our U.L. certificate for U.L. Burglary mercantile is onetime $5,000 and $2,500 a year. What is your opinion?
Sincerely,
MS
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RESPONSE
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I know that when I first started representing alarm companies doing business in New York City many subscribers, particularly those in the jewelry business, required UL certificates because their insurance companies required that certificate. Supposedly UL had relationships with the insurance companies and encouraged them to require the certificates. In turn, alarm dealers were forced to obtain UL Listing. That applied to dealers and central stations, the only ones who could issue the UL Central Station Certificate. UL certification required the central station to respond to alarms with guards within a certain time depending on the level of certification. I assume that not much if anything has changed.
If you need a UL Listing because your subscribers require the certificates then there isn't much you can do except get the listing.
Your question caused me to check the All in One forms. The Commercial Fire All in One has a separate provision calling for RMR for a UL certificate. The Commercial All in One [for everything other than fire] doesn't presently have that UL provision. I am going to change that today, so you have our first update for 2015. Thanks for the heads up.