October 6, 2011

 

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Question

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Ken,

I read your newsletter daily and appreciate your contribution to the many legal and related issues facing our industry. It is truly a valuable forum that you provide.

Have you any advice for a dealer customer of my company who has a large university customer who purchased a 5 year extended equipment warranty and yet wants to service, maintain and repair the equipment themselves while expecting the dealer to honor the remaining term of the warranty regardless of owner/university actions, intervention or involvement with the equipment still under extended warranty

coverage ?

Unfortunately this came up after the project was substantially completed, installed, commissioned, accepted and turned over to the owner. The University is unwilling to sign a waiver of liability or provide any indemnification for the dealer.

Would alarm insurance brokers like to weigh in ?

Would any sane business owner accept the potential liability of others actions ?

Could the alarm dealer be insured against potential tragedy caused by owner actions ?

Would the university even qualify as an additional insured ?

Would any legal term(s) adequately describe this situation ?

What advice would you offer the manufacturer who has been asked to train the

university personnel so they can side step the dealer's refusal to support this misguided yet well intentioned initiative to save money and improve response time and who has serious reservations regarding the potential liability of even inadvertently enabling breach of contract or worse, such as personal injury?

Best regards,

Steve S

CA

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Answer

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This inquiry comes from a fire alarm company so I am going to assume that we are talking about a fire alarm system. I am also going to guess that this company did not use the Standard Fire Alarm All in One contract with this subscriber. Why? Because that contract would have covered installation, monitoring, service and inspection. There would not have been any issue about warranty service.

Here the "warranty" includes "service, maintain and repair the equipment". In the alarm industry you do not ordinarily "maintain" equipment or systems, you "service" the system upon request from the subscriber or after a scheduled inspection, if you are under contractual obligation to provide inspection. Fire alarms normally require inspection.

This subscriber wants to service its own equipment, yet keep the alarm company on the hook for warranty work. I have no idea how this warranty reads; most warranties are void once anyone else works on the equipment.

Since this alarm company is in the relationship and isn't going to give that relationship up, the best recommendation at this point that I can offer is carefully document every service call and inspection, and ask the subscriber to do the same. You obviously don't want to have additional exposure for work done by the subscriber, both in terms of a fire loss or additional work you may have to do to correct or repair the subscriber's work on the equipment.

I really believe you would not be in this dilemma had you used the Fire All in One. When I first read your inquiry I thought of the Service Contract option for the per call relationship. The subscriber does not have to call the alarm company, but if it does the Service Contract terms apply. Thus, the alarm company could be called in after someone else worked on the system. One difference is that the service work is not pre paid; it is billed time and material, so if the subscriber called someone in who caused more work, the alarm company is going to get paid for repairing the system. Hard for me to comment when I don't see the "5 year extended warranty" [and I don't want to see it]