Insurance certificates and additional liability exposure

Question:

    Ken,
I have been in the security industry in sales, management and ownership for
over 35 years and have not only enjoyed your legal input into our industry,
but also when your e. mails "spark" some additional questions in various
important areas from time to time.

My concern today deals with alarm companies which issue Alarm Installation
Certificates (not UL) to  their residential/commercial customers or
directly to their insurance carriers, either upon completion of
installation or send these certificates out on an annual or periodic basis
upon request.

Since "Certificate" means a document that certifies and "Certify" means to
declare formally to be competent, valid and true, my concerns are two fold
when we place the following verbiage on these signed documents: "This
system is complete as ordered and has been fully operational since the date
indicated below" or "We certify that this system is complete and has been
fully operational since the date indicated below."

  Concern #1: On new installations wouldn't it be better to leave this
verbiage out all together or not even use a Certificate Form, but just use
a standard notification of installation letter with the customer's
information and system specifications?

  Concern #2: We issue the Certificate with the above verbiage on the
initial installation and issue another Certificate on the same location
three years later (or when a new owner moves in), without inspecting the
system most of the time, and again "certify that this system is complete
and HAS BEEN FULLY OPERATIONAL since the date indicated below," which is
usually the original installation date.

Do you think my fears of additional liability and exposure are valid?

Signed,
Concerned
___________________________

Answer:

    Your relationship with your subscriber is defined by your written
contract.  Many alarm companies use my standard forms
[www.alarmcontracts.com], so I will use those as a frame of reference to
answer the question.
    None of my contracts provide for the issuance of a "certificate".  If I
understand the question, you refer to a certificate that a home owner or
commercial subscriber gives to his/its insurance company so that insurance
underwriting requirements are met and insurance coverage issued.
Homeowners can receive a discount in home owners insurance; commercial
subscribers may not be able to  obtain fire or liability insurance without
the certificates.
    My standard form contracts do not mention "certificates".  The
"certification" is nothing more than a confirmation that the alarm system
is installed and functioning.  It is likely to impose liability only when
you know that the system is not functioning, or you provide a certification
without making some inquiry or inspection.  In other words, you may have
exposure if you negligently represent, or willfully represent that the
alarm is in working order when that is not the case.
    The certification would constitute a separate undertaking on your part
and you could be held liable for your misrepresentation or willful or
negligent misrepresentation.  In other words, for knowing you are not
telling the truth or knowing that you didn't make sufficient inquiry before
expressing a statement of fact.
    A provision in the contract exonerating you for the certification will
not protect you since the party relying on the certification is not a party
to the contract.
    If you issue a certificate you should be able to document that you
inspected the system and it is working, or at least get a representation
from the subscriber regarding the system's operation.