Alarm contracts tend to merge the limitation of liability provision with
the exculpatory clause. They are of course different and don't belong in
the same provision.
The limitation of liability provision provides that in the event the alarm
company is found liable for damages then, and only in that event, the alarm
company's damages is limited to the specified contract amount in the
provision. Typically alarm contracts provide for $250.00.
The provision stands out from the exculpatory clause because the
exculpatory clause provides that the alarm company cannot be held liable
for damages, even those arises from its own negligence.
Why would the contract need both provisions? The answer is plain and
simple, in case one of them isn't enforced.
There are certain circumstances where an exculpatory clause is arguably not
permitted. For example, in New York, a contractor can not contract away
liability for its negligence in connection with the construction or
maintenance of real property. On the chance that a fire alarm system would
be deemed real property, or part of the real property, the statute would
bar enforcement of the exculpatory clause.
However, even where a statute prohibits complete exculpation of damages for
liability, a contractual provision limiting liability would not be covered
by that statute. Thus, where the exculpatory clause is not enforced the
alarm company can still rely upon the limitation of liability clause.
Some alarm companies, never happy with the status quo, feel the need to be
different. So rather than use a $250 limit they change the number to $500,
$1000 or more. There is no reason for this from a liability perspective.
You will notice that the properly worded limitation of liability provision
contains an option for the subscriber to increase the limit. This is
typically done by way of formula, six times the monthly charge in the
contract. This provision supposedly changes the limit depending upon the
amount being paid by the subscriber. Except in rare circumstances this
option does not make much difference in the limit.
You will also notice yet a third option. The subscriber is given the option
to increase the limit by paying an additional amount consonant with the
increase in liability. I do provide a form for this option with the
contracts. I do not believe I have ever seen a subscriber pay to increase
the limit. This may be because when I have been called by alarm companies
asking what they do in response to a subscriber inquiry, I tell them to
either get the price a insurance to cover the subscriber [which of course
the subscriber could do on its own] or simply increase the limit by six
times the additional amount to be paid. No subscriber has exercised that
option as far as I know.
You might be interested to know where this right to increase came from.
Early cases dealing with the transportation industry, and at that time it
was the railroad, permitted the common carrier to limit its liability, but
required the carrier to offer additional limits for additional money.
When the alarm industry adopted the limit clause the early cases noted that
the increase option was included and therefore the limit should be
enforced.
I doubt that the right to increase is still a necessary element in the
provision, but for historical reasons and caution, we keep it in.
The limitation of liability clause remains one of the most important
provisions in the alarm contract. Keep in mind that it needs to be worded
exactly properly because judges don't like enforcing it and won't enforce
it if the wording is not precise.