February 12, 2011

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Question

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Ken,

    We have a client who will not sign the agreement as he feels the contract doesn’t protect him if we are negligent when we are physically doing work at his premise. My understanding clauses 17-21 pertain to alarm monitoring only. Can we specify that in the contract for this client?

Kevin

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Answer

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    Well your subscriber is right about one thing, the Contract is designed to protect you, not the subscriber.  In this relationship, you're the one who needs the protection.  Why?  Because you install a system and provide a service intending that your alarm will detect certain conditions and events.  Your subscriber believes that the alarm system and your service is supposed to prevent whatever its installed for, and possibly more.  [it's not uncommon for burglar alarm subscribers to sue alarm companies because a fire was not detected and reported]. 

    The nature of your services and the seemingly unshakable expectations of your subscribers [and their hungry insurance carriers who look for subrogation rights] require you to use Alarm Contracts with protective provisions to protect you from lawsuits every time your subscriber suffers any loss remotely connected with the alarm service.  Those lawsuits alone, without the scary result that you might actually lose a case, are enough to put most alarm companies at financial risk; they certainly will keep you awake at night and worked up during the day.

    But the protective provisions are designed and intended to protect alarm companies from unwarranted, unjust and frivolous  claims and lawsuits, not legitimate claims for damages that any "contractor" would be expected to pay for.  For example, if your installed drops a hammer and shatters a glass table, do you think you can pull out the exculpatory clause?  If your employee comes walking into the house with mud or oil on his shoes and leaves prints on an expensive oriental rug, do you think you can wipe it clean with the limitation of liability clause?

    Don't think that some alarm company and their brilliant insurance defense attorneys haven't tried.  It's a bad idea.  Some courts have addressed the issue by stating that the protective clauses are for alarm conditions, etc, not common damage claims. 

    I routinely advise alarm companies that they can modify the exculpatory clause and limitation of liability clause by adding "except for damage to the property caused by negligence of alarm company's employees while working at the premises".  This usually satisfies the subscriber and his lawyer. 

    Of course, if the insurance procurement provision survives in the contract then it may be the subscriber's insurer who pays for the damage, not the alarm company of the alarm company's insurer.