QUESTION:

 

Hi Ken,

 

I've subscribed for years and appreciate the information.  I would be happy for any feedback

you might provide to me and other dealers on this issue that just came up.

 

We took over a monitored account from another company named, say, ABCalarm.  ABCalarm is

closed and gone.  ABCalarm used the same central station as we use.  Customer knew this when

he signed up with us approx. six months ago.  Customer informed me the other day, by phone,

that he is suing the central station for a burglary and loss that occurred while he was with

ABCalarm.  He apparently had no contract with ABCalarm nor the central station.

 

So the question for me is, do I have any conflict of interest concerns subcontracting

monitoring services from the same place he is suing?

 

Thank you for any consideration you might provide.

 

Marjory Earle, President

 

Froula Alarm Systems, Inc.

 

861 Industry Drive

 

Tukwila, WA  98188

 

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ANSWER:

     I don't see any ethical issue here.  You can continue to use the central station for

this subscriber and others.  If this subscriber lets you know that it is uncomfortable with

the central station in view of the lawsuit I think it would be good business judgment for you

to move that account to another central station.

    You apparently had no involvement in the incident; you took over the account after the

loss.  You don't indicate whether you intend to assist the subscriber in its lawsuit against

the central station, either behind the scenes, or as an expert witness.  That would perhaps

create some difficulty between  you and the central station, although I don't see it as an

ethical issue.  Any alarm company providing testimony against another on liability issues

should remember that what goes around, comes around, and also that eroding the protective

shield created by the alarm contracts would not serve any good for the alarm industry.

    What strikes me as an interesting issue is whether an alarm company can continue

providing service if the subscriber commences an action against the alarm company, or as in

your case, its subcontractor central station.  It seems to me that if the subscriber has not

taken the position that it wants to cancel the contract then there should be no reason for

the alarm company to terminate.  In fact, as long as the subscriber makes payment there would

be no legal basis for the alarm company to cancel the contract.

    If a subscriber is suing an alarm company one of the causes of action is probably breach

of contract.  The breach of a contract by one party generally permits the non breaching party

to terminate the contract.  Therefore, a non breaching subscriber could seek to terminate a

contract if that contract is breached by the alarm company.  We run into this when a

subscriber suffers a loss attributable in part by the alleged failure of the alarm system.

The subscriber stops making payments; the alarm company sues for breach of contract; the

subscriber defends raising as its principal defense that the alarm company breached the

contract.  Does the failure of the alarm system followed by a loss by the subscriber

constitute a breach of contract?  Not necessarily.  There could be many reason the alarm

didn't function having nothing to do with a breach of contract.

    I have been involved in cases where the subscriber is suing the alarm company and yet

remains a paying subscriber.  Not often, but there have been cases.  I have not had a client

terminate the contract just because the subscriber commenced an action.