QUESTION:
Mr. Kirschenbaum:
I appreciate your comments regarding alarm service contracts and I would like to pose the following scenario for your opinion.
A strip mall developer leases a portion of his mall to a major tenant (in this case a Fitness Club). There are several other tenants in the strip mall. The mall developer and the major tenant agree that the major tenant will have the responsibility to maintain a sprinkler system that serves both the major tenant and all other remaining tenants in the strip mall. The sprinkler system waterflow alarm, pressure and gate supervisory contacts are connected to a Fire Alarm System that serves the major tenant and all other tenants in the mall. The major tenant also has the responsibility to maintain the fire alarm system and to arrange for and pay for the monitoring of the fire alarm system. (In Ontario a building with a fire alarm system and waterflow initiating devices is required to be monitored in accordance with a National Standard of Canada.) The fire alarm control unit is physically located in the area occupied by the major tenant. Pull stations and audible devices are located throughout the entire strip mall.
The major tenant contacts my company and arranges for the monitoring of the fire alarm system. We installed proper listed equipment and connected to the common alarm, common trouble, and common supervisory outputs of the fire alarm control unit. We have provided the required service for several years now.
At no time did our customer disclose to us that the Fire Alarm System served anyone other than his occupancy in the strip mall. Obviously we had no call list for any other tenant in this strip mall.
One night about two years ago a tenant in one of the units in the strip mall left a candle burning on a wooden cabinet that subsequently caught fire. Sprinkler head operated and the fire was extinguished. The sprinkler system waterflow switch tripped a zone on the fire panel and a signal was transmitted to our station. The fire service was promptly (less than one minute) notified. We were unable to reach any keyholders and the fire service was so advised.
The occupant of the unit where the candle was left burning is now suing the developer of the strip mall, the major tenant, the municipal fire service – and yup – us! “Shotgun approach.”
Allegation is that we failed to turn the water off to prevent damage to the premises. My contact contains an indemnify and hold harmless from any third party claims clause and further states that our sole obligations are to notify the fire service and the customer’s representative. The indemnify and hold harmless clause: "You agree to indemnify us and to hold us harmless from and against any claims or demands which may be asserted against us, and to pay on a solicitor and client basis, collection costs, legal fees, removal costs, bailiff fees, office administration fees and any other reasonable expense incurred because of you not meeting any obligations contained herein or because of any demands, claims or other charges made upon us by you or any other party."
Question: Is the indemnify and hold harmless clause sufficient to deal with our liability exposure to un-named and un-known third parties?
Is there some additional terminology that should be in a contract requiring disclosure of all known third parties that may benefit from the service we are providing?
Thank you!
Dave Currie
Damar Security Systems
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ANSWER:
My first thought is that an alarm company, especially one providing more than just monitoring, should know who you are servicing. It appears that you only provide the monitoring and that the system was installed by others. Nevertheless, you should have had zone information so that your notification to the fire department includes that information.
An alarm contract with all of the familiar protective provisions - i.e., exculpatory clause, limitation of liability clause, etc - is enforceable and provides protection against only those subscribers who have signed the agreement. The indemnity provision is designed to afford some protection to the alarm company when a third party [non party to the agreement] sues the alarm company because of a loss which the third party believes should have been prevented by the alarm system and alarm service.
The indemnity clause you refer to is not sufficiently broad in its terminology, and it is not what I include in my Standard Form Contracts - www.alarmcontracts.com. For example, your provision does cover "any claims ..." but I suggest being more specific and reference your alleged breach of contract and negligence. Your jurisdiction may also have restrictions on the enforcement of the indemnity provision which needs to be considered.
Relying upon an indemnity provision is risky. For one thing, the indemnity is only as good as the indemnitor, in your case the subscriber. The claim may well exceed your indemnitor's ability to defend or respond to the damages. Indemnity does not get you off the hook, it merely shifts the obligation to pay once your liability and damages is determined.
Your contract should have and probably does have other provisions that coordinate with the indemnity provision, such as an insurance procurement clause. If not, you know where to get a better alarm contract !!