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Comments on subscriber challenges to contract provisions
September 13, 2019
Comments on subscriber challenges to contract provisions from September 5, 2019
            Re:  Sub challenge kills alarm deal.
            For Chuck and others who have had customers balk at the contract provisions.
            Yes every now and then you don’t close a customer due to our contract language but remember this language has been created by Ken and others over many years of claims and litigation.  It is necessary to protect your business.  Do you charge for an alarm system based on the value of the customer’s home and contents?   NO!  Should you be totally responsible for the customers home and contents?  NO!!!   Does your Doctor or Surgeon GUARANTEE you will survive the surgery or procedure?  NO!
            I have found over the years that a clarification of the responsibility to price ratio often softens the customer’s issues with the contract. Simply explaining that we could be responsible for more but then we would have to charge line their insurance company, based on property value etc.   That makes a $40 monthly alarm system now $400 to $1000 per month then we would go to the insurance market and buy coverage for the customer’s home and stuff.  That doesn’t seem to make much sense and with an additional layer of administration on this insurance it would be much more costly for the customer.
            Point out the paragraph that says “Company is not an insurer and insurance must be provided by the subscriber”.
            As to naming you as additional insured, the customer is not going to sue you, their insurance company is, hence the indemnification from 3rd parties by naming us an additional insured.
   Hope this helps
Florida Alarm School LLC
            A comment on Chuck’s email of September 5, 2019 in which a customer complained about contract provisions.  I have run into issues on several acquisitions in which the customer (typically a property manager) substituted their own contract.  The contracts modified or removed substantially all of the protective provisions and many were not assignable by the alarm company.  I each case I got the Buyer and Seller to meet with the customer and explain that the Company was being sold and that it would be necessary for the Customer to sign the Buyer’s contract.  Most balked and threatened to change providers until the Buyer explained that the real issue was service and that any company that was willing to agree to that Customer’s contract terms was probably not knowledgeable enough to be able to provide adequate service going forward.
            Most signed and some shopped around a bit, then signed.  If the Customer suggested reasonable changes, and they represented more than a $100 or so of RMR, the Buyer had their attorney review the proposed changes.  Bottom line, not only do heavily modified contracts represent a huge liability, they are most likely unmarketable should you sell.  Explain to the customer that you are not their insurance company and that you don’t want to become their insurance company.  A reasonable customer should understand, if they don’t it may be an indicator of how they are going to behave throughout the relationship.
Mitch Reitman 
Reitman Consulting Group
Fort Worth, TX
            Excellent points.  Waiting until your company is about to be sold is not the time to be chasing down subscribers to sign new contracts.  You will find it much easier using proper contracts on a regular basis.  When it comes time to sell you will be ready, and you will command the highest multiple for your contracts.
            It’s important to keep in mind that your tolerance for contract modification or no contract at all, is going to be far more flexible than your Monitoring Center and your E&O insurance carrier [and all your subcontractors].  You are the one making the most from the subscriber, but no subscriber is worth risking your company.  Sure, most of the time things go without a hitch.  But, you only need one claim to give you sleepless nights or wipe you out.  Early in my career I represented an alarm company that was second or third generation and getting sold; never had a claim.  Got sued a few days before the closing.  I don’t recall if the company had insurance, but it did delay the closing until I was able to get rid of the claim.  The owner kept telling me how this was his first and only claim.  BTW, he deserved it.  His tech jumped out a contact on a kitchen sliding door, and that was the point of entry.  This was before motion detectors.  And, I do recall, he has no insurance and he was mad as hell that he had to pay me to beat the claim.  Lucky for him, because his contract was as old as his equipment.  
            Before you walk away from a job or give in to a difficult subscriber about contract terms, engage me to negotiate.  It usually works out.

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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