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central station's insurance company forced to settle fire loss case
August 7, 2018
central station's insurance company forced to settle fire loss case 
    We have a central station that operates wholesale monitoring. Last year we got sucked into a law suit as a third party two years after the law suite was started. The suit was started in Alabama against a local alarm company.
    A local licensed alarm company in Alabama installed a burglar alarm for a family. The alarm consisted of just intrusion devices with no fire detection devices. The end user had a fire late one night caused by Christmas trees lights that ignited a factory made artificial tree. The fire caused one death and several others to be injured.
    A law suit was started almost a year later against the local alarm company and nationally known discount store that sold the tree and lights to the end user. The alarm company sold the customer to another alarm company that buys accounts as they are installed. The local alarm company had no insurance so he was let out of the case. The company he sold the customer to had insurance so they got brought into the case.  During the discovery process approximately, 2 years in, it came out we were monitoring the account so we were brought in as a third party defendant.
     We turned the claim over to our insurance company that hired local consul. That was the first big mistake. The claim was defended. I was told by the insurance company attorney that the protective provisions in our contact did not help us in  Alabama because there was injury and a loss of life. The claim was for $12,000,000.00 against all parties. The national discount retailer was able to get out of the case since they could prove that the Christmas tree that started the fire was not sold by them, based on the pieces found and the tree construction.
    The case now landed in the lap of the alarm company that bought the account and us as the central station. Let me remind you that there was no fire alarm and no fire alarm monitoring. The discovery did show the during the fire the burglar alarm did attempt to dial out but no signals were ever received by our central, which could be proved. Our insurance company local counsel told us that we would not win based on Alabama law should this go to trial, so they attempted to settle the claim.
    Our insurance company offered $1,000,000.00 to settle but the the plaintiffs attorney wanted a much greater amount. The alarm company's insurance company also offered $1,000,000 and was also turned down; so at that point we sought your advise. You were able to represent our rights against our own insurance company for potentially bargaining in bad faith. You were able to get our insurance company to offer policy limits [several million] and so did the alarm company's insurance company, so the case was settled.
    You did a great job representing us and saved us exposure to millions of dollars in excess of our insurance. I know that I may have left some details out of this story but I think the industry should know the facts and the need for proper insurance and proper legal representation. Maybe you can give us your view on this.
Alarm Company and Central Station names withheld
    I recall this case; it was last year. The case, at least from the perspective of the cental station, came together like the perfect storm. Here were a few of the issues by the time I got involved:
*  the defense attorney did not believe the alarm contract with *  its protective provisions would hold up
*  the defense attorney advised the insurance company who hired him that the case would be lost if tried
*  the insurance policy limits were in excess of 5 million, but less than the 12 million being demanded by the plaintiff
the claim included a death claim from fire
*  Alabama is a pure joint and several liability state with no right to contribution
*  your carrier offered only 1 million, which was rejected
*  your carrier was [hopefully not any longer] one of the carriers I have suggested you avoid
    So, we had a defense attorney who didn't believe the contract would protect you, an insurance claims representative who didn't know which way was up, and Alabama law. 
    What's with Alabama law? It's a pure joint and several state [like 6 others] which means that any joint tortfeasor who is found liable can be made to pay the entire award and cannot then seek contribution from other joint tortfeasors. That means that the Plaintiff can look to any one joint tortfeasor to pay the judgment and that tortfeasor cannot look to other defendants who may have been even more liable for the loss. Most state permit contribution and also have comparative negligence apportioned at the trial. So here, if you were found liable at all, even for slight negligence, you could have been made to pay the entire loss. 
    When a claim exceeds your insurance coverage your carrier owes you, its insured, a special duty to take reasonable steps to avoid putting you at risk for a damage award in excess of your policy. Your carrier must act in "good faith" and if it acts in "bad faith' then the carrier exposes itself to the excess award.      Here your carrier was advised by its own counsel that you were likely to lose and that the award was likely to exceed policy limits. Also, I managed to get the plaintiff to agree to settle within your policy limits. That was a key element because once the plaintiff agreed to settle within your policy limits your carrier was obliged to pony up and pay the claim, under these circumstances.
    I've had to step in and protect an alarm company from its own carrier on several occasions. It can be a tricky maneuver, but necessary when you consider the alternative of the alarm company facing an award in excess of its insurance coverage.
    Had been consulting with defense counsel from the beginning of the case, instead of brought in to fight with your carrier, perhaps there would have been a different outcome, especially since you monitored a burglar alarm system, not a fire alarm system.
I know it was a relief for you when this case settled, and I also hope you followed my advice and found a new carrier. I recall recommending Security America [listed on The Alarm Exchange in the Insurance Category].
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
516 747 6700