KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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3-day cooling off on service call / water damage loss March 10, 2017
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Next webinar March 28, 2017
TitleAll You Need To Know About Alarm dealer program contracts - getting in and getting out
Register here: https://attendee.gotowebinar.com/register/7359323076355955715
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3 day cooling off on service call
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Ken,
    Our company has always provided the writ of cancellation to our residential clients for the past 30 years anytime that we sign a contract in their home.  However, the question at hand is how the 3-day cool off period affects service calls where we are replacing or upgrading motion detectors, keypads, etc.  I don’t believe the labor for the call requires a cancellation form, however, does the equipment sold.  Would the same rule apply that any in home sale of $25.00 or more would need a writ of cancellation provided?
Thanks,
Steve B
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Response
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    Good question and a hard one to answer without research.  But here is my take on it.  
    You're called in on a routine service call. Alarm won't work.  Service tech deternines that a component needs repair, or wiring, a contact.  Tells subscriber it's going to cost $xxx for the repair.  
    First of all the 3 day cooling off period applies only for residential sales.  Commercial subscribers don't get a cooling off period.  If you were to require the 3 day cooling off period the home owner would not have the alarm repaired on the service call.  
    Here is how California's Department of Consumer Affairs deals with home repairs and the 3 day cooling off period:
    "Contracts with a licensed contractor for repair services are not covered if all of the following are true: 
(a) the contract price is $ 750 or less; 
(b) the buyer initiated the contract with the contractor to request the work; 
(c) the contractor does not sell the buyer goods or services beyond those reasonably necessary to take care of the particular problem that caused the buyer to contact the contractor and no payment is due or accepted by the contractor until the work is completed; and (d) the contract contains a written and dated statement, signed by the buyer, that he or she initiated the negotiations."  [CC § 1689.5(a). See this section for additional exceptions. See also B&P § 7159.10] http://www.dca.ca.gov/publications/legal_guides/k-10.shtml

    Now let me tell you why this issue should not be coming up in the alarm industry.  YOU SHOULD NOT BE DOING A SERVICE CALL UNLESS YOU ALREADY HAVE A SERVICE CONTRACT IN PLACE.  THAT SERVICE CONTRACT IS PART OF THE STANDARD RESIDENTIAL ALL IN ONE
    If you decide to make service calls for a subscriber not under contract then you should require a contract to be signed.  If you are not able to comply with the above criteria because the repair will be for more than $750.00 then you should treat it as a new sale, requiring the subscriber to sign a new Residential All in One, and you will have to give the 3 day notice of cancellation.  There are further exceptions for disaster repairs which I am not addressing here.
    You can check how the issue is treated in your state or follow the above criteria, more or less.
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water damage loss
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Ken
    We had an incident of a late (after hours) sprinkler head activation (no evidence of a fire) and its activation was not judged to be of anyone’s fault. Just one of those unfortunate accidents that couldn’t be explained. Our monitoring panel activated and it called the Central Station. The central station transposed some numbers on the call to the Fire Department and they were dispatched to an address across a busy highway from the actual property. Long story short, the FD responded to the wrong address, found nothing, did not request a better address, and returned to the station house while the water kept flowing. This was finally discovered the next morning by an employee coming in to work and hence, damages in excess of $280,000 were incurred.
    We were contacted by the legal representative for the insurance company for the customer. Their insurance covered it initially and now we are obviously being approached by their insurance provider through their legal counsel to compensate them for these damages.
    We sent all the information that we had on this to our insurance claims specialist.  The CS insurance claim representative has responded to our claims specialist and CS is pointing to a “limitation of liability clause” in the CS agreement that limits their exposure to $250 or 6 months monitoring (whichever is less).
    Obviously we would expect CS to step up and take ownership of this since it was definitely their screw up that caused the information to be miscommunicated. On the other hand, the damage to their facility (a kitchen equipment supply business) with concrete floors and stainless steel kitchen equipment would likely have done the majority of the damage in the first 5 to 10 minutes of water flow even if the FD had arrived and shut off the water flow.
    So that said, and without knowing your take on how best to handle this since the damage is done, going forward, what monitoring contracts would you recommend?  We need one to best protect us as the Alarm Company that monitors the client and also protects us as the “middle man” reseller of the monitoring service from a CS that monitors our accounts for us?  
    We also do not have a contract that we typically present to a customer since most of our work is through either a General Contractor or Electrical contractor and they usually have their own contracts for us to sign. We take exception to the “waivers of subrogation clauses” and “limitations of liability” most generally as you suggest.
    This obviously has given you the abbreviated version of the entire problem, but we obviously have some concerns moving forward with the same contract with them doesn’t protect us from this rare event. I guess we have been lucky so far with this never having become an issue until now. 
Thank you.
JC
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Response
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    Undetected water flow damage is not uncommon; we have plenty of these types of claims in the alarm industry.  [Fire suppression companies also have these claims and should be using the Fire Protection All in One Agreement].  You did the right thing notifying your insurance company as soon as you found out about the loss.  However, you've been very remiss in not properly contracting your services, a serious problem that you seem ready to rectify now.  One thing should be very clear to you.  You've been lucky if this is your first experience with a claim; you should expect more.  In fact you'd be silly not to conduct your business assuming that you will have these and other claims.
    Your sprinkler alarm monitoring requires the Commercial Fire All in One.  More than likely the sprinkler system was required by code, the alarm system is required by code and that alarm system requires inspection and monitoring.  All covered by the Fire All in One.
    Alarm companies should not be performing any sales or services without using the Standard Form Agreements.
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TitleAll You Need To Know About Alarm dealer program contracts - getting in and getting out
When: March 28,  2017 noon EST
Where: Your computer for power point, live video and call in on computer or phone
What will be covered: General discussion about honeypots/trappings of dealer program contracts and how difficult they are to get out of. 
Who should attend: Alarm company owners.
Presented by: James Babbitt, Esq. General Counsel, RMR Capital Group [jbabbitt@rmr-capital.com ; 952.467.8610]
Register here: https://attendee.gotowebinar.com/register/7359323076355955715
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
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