QUESTION:
Hi Ken,
I've subscribed for years and appreciate the information. I would be happy for any feedback
you might provide to me and other dealers on this issue that just came up.
We took over a monitored account from another company named, say, ABCalarm. ABCalarm is
closed and gone. ABCalarm used the same central station as we use. Customer knew this when
he signed up with us approx. six months ago. Customer informed me the other day, by phone,
that he is suing the central station for a burglary and loss that occurred while he was with
ABCalarm. He apparently had no contract with ABCalarm nor the central station.
So the question for me is, do I have any conflict of interest concerns subcontracting
monitoring services from the same place he is suing?
Thank you for any consideration you might provide.
Marjory Earle, President
Froula Alarm Systems, Inc.
861 Industry Drive
Tukwila, WA 98188
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ANSWER:
I don't see any ethical issue here. You can continue to use the central station for
this subscriber and others. If this subscriber lets you know that it is uncomfortable with
the central station in view of the lawsuit I think it would be good business judgment for you
to move that account to another central station.
You apparently had no involvement in the incident; you took over the account after the
loss. You don't indicate whether you intend to assist the subscriber in its lawsuit against
the central station, either behind the scenes, or as an expert witness. That would perhaps
create some difficulty between you and the central station, although I don't see it as an
ethical issue. Any alarm company providing testimony against another on liability issues
should remember that what goes around, comes around, and also that eroding the protective
shield created by the alarm contracts would not serve any good for the alarm industry.
What strikes me as an interesting issue is whether an alarm company can continue
providing service if the subscriber commences an action against the alarm company, or as in
your case, its subcontractor central station. It seems to me that if the subscriber has not
taken the position that it wants to cancel the contract then there should be no reason for
the alarm company to terminate. In fact, as long as the subscriber makes payment there would
be no legal basis for the alarm company to cancel the contract.
If a subscriber is suing an alarm company one of the causes of action is probably breach
of contract. The breach of a contract by one party generally permits the non breaching party
to terminate the contract. Therefore, a non breaching subscriber could seek to terminate a
contract if that contract is breached by the alarm company. We run into this when a
subscriber suffers a loss attributable in part by the alleged failure of the alarm system.
The subscriber stops making payments; the alarm company sues for breach of contract; the
subscriber defends raising as its principal defense that the alarm company breached the
contract. Does the failure of the alarm system followed by a loss by the subscriber
constitute a breach of contract? Not necessarily. There could be many reason the alarm
didn't function having nothing to do with a breach of contract.
I have been involved in cases where the subscriber is suing the alarm company and yet
remains a paying subscriber. Not often, but there have been cases. I have not had a client
terminate the contract just because the subscriber commenced an action.