QUESTION:
Ken,
After reading the recent article “New Jersey Town to Monitor Alarms” in the October 2009 “Security Systems News” in which you were quoted, it brings this question in seeking your opinion. What Liability does a Municipality take on when they enter the business of alarm monitoring? We have a situation developing in the Chicago Market where the Municipalities and Fire Protection Districts now are going into the Alarm Monitoring Business. They are purchasing their own monitoring equipment and they require, by ordinance, the Commercial Subscribers to connect their Fire Alarm Systems into their equipment utilizing radio transceivers that they are leasing to the Subscribers and charging a monthly monitoring and radio lease fee.
The way this has been done in the Chicago area in the past, was that an Alarm Company would install the monitoring equipment at the Alarm Dispatch Center for the Municipality or Fire Protection District. The Alarm Company would then be responsible to service this equipment, secure monitoring agreement from each Subscriber and their Alarm Company, if one was involved, lease Radio Transceivers to the Subscriber or their Alarm Company, and invoice the Subscriber or their Alarm Company for the leased radio and monitoring services. The Alarm Company providing the monitoring equipment would then pay a royalty back to the municipality for being allowed to provide this service to the community. The Municipalities and Fire Protection District feel that they are not exposing themselves to any further Liability. They feel that their municipal corporate shield prevents them from being liable and being sued is protection enough. What is your opinion? Thank you in advance for your counsel in this matter.
A thankful reader of you daily e-mails,
John Fischer
Fire & Security Systems Inc
*************
ANSWER:
Municipalities are generally protected by their police powers and governmental immunity. That protection is not absolute however. Where the municipality enters into a special relationship with someone, creating a justifiable reliance on personal protection, the police power immunity can be pierced. Additionally, even a municipality cannot hide behind police power immunity when it is engaging in business in competition with private enterprises.
Municipalities that engage in alarm monitoring expose themselves to the same liability as alarm monitoring companies. I am guessing there is going to be a big difference too. Alarm companies - especially those reading these articles - are smart enough to know they need properly written alarm contracts - found at www.alarmcontracts.com, I suspect that municipalities will not bother getting alarm contracts with their "customers".
I also suspect that municipalities have not correctly calculated their expense in operating a monitoring center. Even the retail cost of monitoring is going to be less than an actual cost. Keep in mind that the municipality will be competing with wholesale central stations who charge well below the retail cost, and it is not likely that a municipality is going to have the number of accounts typically monitored by a wholesale central station. I haven't run the numbers and perhaps a few central stations would like to comment.
A municipality is also not going to engage in alarm installation or service. Or will it? The alarm subscriber is still going to need the local alarm company who is going to be less inclined to service a subscriber being monitored by the municipality. Certainly not at the same price as its own subscriber for whom it is charging a monitoring fee.
Municipalities, unless they are in a low population area, is better advised to establish closer relations with the local alarm companies, and stick to what government does best - charge permit fees and taxes. Stay out of private business. That's my opinion.