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follow up on CA LLCs and insurance issue / fire alarm issues in NYC May 15, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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follow up on CA LLCs and insurance issue / fire alarm issues in NYC
May 15, 2017
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follow up on CA LLCs and insurance issue
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    We advised that a California LLC could not name additional insureds on its liability policy.  That's what the CA Consumer Affairs website makes clear, though the rationale for such law was far from clear.  Well, we did report the law accurately, but the good news is that it's going to be changed effective January 2019.
    The current California Statute, Cal. Bus. & Prof. Code § 7599.34, detailing limited liability company insurance requirements, came into effect on January 1, 2017 and shall remain in effect until January 1, 2019.
    Effective on January 1, 2019 Cal. Bus. & Prof. Code § 7599.34 shall state:
    "A licensee shall not conduct a business as an individual, partnership, or corporation unless the licensee holds a valid license issued to that exact same individual, partnership, or corporation. A violation of this section may result in a fine of five hundred dollars ($500) for each violation."
    The Limited Liability Company Insurance requirement will no longer be in the statutory language of § 7599.34 as of January 1, 2019.  Thanks to those who followed up on this issue, bring it to our attention.
     We did a follow up by contacting the alarm division at BSIS.  BSIS presently confirms that LLCs should not name additional insureds on its liability policy.  The rationale is expressed as follows:
    "Paragraph (f)(1) of BPC Section 7599.34 provides: "If a licensee fails to maintain sufficient insurance" the Bureau is authorized to automatically suspend the license until proff of the required insurance is provided.  Given that having other insureds on an insurance policy has the likely potential of diluting the coverage of the policy, the only insured on the policy should be the alarm company LLC licensee"
    I am still not clear why BSIS has singled out the LLC entity when applying this insurance rationale, but after January 1, 2019 it presumably won't matter.
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fire alarm issues in NYC
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Ken,
    When contracting with a commercial customer/end user can an alarm company not licensed to perform certain work required by the contract subcontract those services to another company that is licensed to perform the work in order to provide a complete service to that customer . Examples are:
1.      Professional Architect or Engineering services for Fire Alarm Plans for the installation of a fire alarm system?
2.      Licensed Electrical Contractors for electrical hookups or wiring for Fire or security systems?
3.      NYC Approved Central Stations for monitoring of NYC Fire Alarms that is inspected by the alarm company?
    Can companies who hold an S97 FDNY Certificate of Fitness for Fire alarm systems inspect, test and service also repair a fire alarm system in NYC?
Don’t use my name.
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Response
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    First a general response.  You should not be contracting to perform any service that you are not licensed to perform.  That means, if you don't have the license, you should not be contracting to perform the service and you should not perform the service.  An exception to this would be a "general contractor".  If you're licensed as an alarm company that does not license you as a General Contractor.  In New York, General Contractors are licensed by the Counties' Offices of Consumer Affairs.  In New York, alarm companies are licensed by the State.
    The state alarm license in New York is to sell, install and service alarm systems, which include burglar and fire, as well as camera systems.  This is found in General Business Law article 6-D.  Now let's try and answer the specific questions.
    In New York, if fire alarm plans are required, and they are for commercial fire alarms, the plans need to be signed and sealed by an architect or professional engineer.  An alarm company could subcontract with these professionals or require the fire alarm customer to contract directly with these professionals.  This is less an issue in most other states because licensed alarm companies, particularly if the license includes fire alarms, permits the alarm company to sign and submit the plans.
    Most New York licensed alarm companies believe they are not permitted to install fire alarm systems in NYC, at least not commercial systems.  NYC surely believes that NY licensed alarm companies cannot install commercial fire alarm systems in NYC. It is well settled that a NY licensed alarm company cannot complete the hard wired electrical hookup, at least in NYC, and that work must be performed by a licensed electrician.  But I believe the NY licensed alarm company can contract to install, and install, a fire alarm system in NYC as long as the contract provides that the hookup is by a licensed electrician.  The alarm company can bring in the electrician or require the customer to engage the electrician, which is the better practice.
    In New York, monitoring alarm accounts is not a licensed activity; it's not included in the definition of alarm services and it's not in the alarm license law.  That's why New York City and other municipalities can impose their own requirements or licenses for monitoring services.   In New York City, only central stations approved by the Fire Department are permitted to monitor fire alarms in New York City [and there are only around 14 approved centrals].  This really applies to commercial fire alarms, which are regulated by the building department and NYC Fire Department.  In NYC residential fire alarms are not officially recognized and are unregulated.  NYC requires a Certificate of Fitness F-40 to operators of central stations monitoring fire alarms in NYC.  According to NYC's code:
    "Certificate of Fitness F-40: Operators of Central Station Signaling Systems Description
    Individuals working in central stations reporting fires occurring within the five boroughs of New York City must hold a Certificate of Fitness for Operator of Central Station Signaling Systems (F-40)" 
 
     "Central stations are operated by firms that furnish, maintain and supervise alarm signal monitoring services. Firms that have been issued a valid certificate of operation receive signals from alarms and relay the information to the appropriate services, such as fire alarm signals to the NYC Fire Department (FDNY). Central stations serve businesses or properties that subscribe to alarm monitoring services." 
    The last question raises the interesting issue of, by what authority does New York City impose limitations or additional license or certification requirements on New York licensed alarm companies?  In NYC you need a NYC-FD Certificate of Fitness to inspect, test and service fire alarms.  To answer the final question, service means repair.
    According to the NYC FD website there is a Certificate of Fitness issued to a fire alarm company.
    "Fire Alarm System Company Certificate:  FDNY issues a certificate to a principal of a company that installs, inspects, tests and services for fire alarm systems in New York City."
    The Certificate of Fitness [S-97] is described as follows:
    "A principal of a company that installs, inspects, tests and services fire alarm systems in New York City must hold a Certificate of Fitness for Fire Alarm Systems Inspection, Testing and Service Principal (S-97). The Principal must have received training in the manufacturer's recommendations for different types of fire alarm systems.  The list of approved NYC fire alarm companies are found at http://www1.nyc.gov/assets/fdny/downloads/pdf/business/approved-companies-fire-alarm-system-inspection-testing-service.pdf    
    This Certificate of Fitness is valid only for the specific person to whom it is issued and can be used anywhere within New York City."

    The actual technician who performs "inspection, testing and service" is required by NYC FD to have his or her own Certificate of Fitness [S-98], described as follows:
    "Certificate of Fitness for Fire Alarm Systems Inspection, Testing and Service Technician (S-98).  A technician who installs, inspects, tests and services fire alarm systems in New York City must hold a Certificate of Fitness for Fire Alarm Systems Inspection, Testing and Service Technician (S-98).  This Certificate of Fitness is valid only for the specific person to whom it is issued and can be used anywhere within New York City."
    
I know that the fire alarm associtation in NY assisted NYC FD to promulgate Certificate of Fitness S-97 and S-98.  The association and many of its fire alarm company members accepted the NYC FD rules that prohibited New York State licensed alarm companies from installing, testing, inspecting and servicing fire alarm systems in NYC.  The Certificates of Fitness were intended as NYC FD approval for these companies to inspect, test and repair fire alarms, but not install fire alarm systems.  Clearly NYC.Gov website states that a S-97 Certificate Holder [principal of a company] can install fire alarms.  But more compelling is the clear language of the NY State law.  I'm only a lawyer, so excuse me if I can't read the state law, but here are the pertinent provisions.  How about you tell me what it says. 
        "
§69-l. Definitions
       As used in this article, unless the context requires otherwise:
3. “Licensee” means a person as herein defined licensed to engage in
the business of installing, servicing or maintaining security or fire alarm
systems under this article. 
4. “To engage in the business of installing, servicing or maintaining
security or fire alarm systems”
 means and refers to a person who holds
himself out directly or indirectly, as being able, or who offers or undertakes,
by any means or method, to install, service or maintain a security or
fire alarm system to detect intrusion, break-in, movement, sound or fire. 
         §69-z. Applicability
1. The provisions of this article shall not be construed to limit in any
way the authority of a city with a population of 1,000,000 or more to
enact, implement and continue to enforce local laws and regulations governing
home improvement contractors and their agents or employees that
were in effect prior to the effective date of this article, or to enact, implement
and enforce any amendments thereto after the effective date of this
article.

2. The provisions of this article shall govern notwithstanding any other
law to the contrary; provided, however, that local law shall govern with
respect to inspection of fire alarms by a fire marshall or any other person
designated under such local law
; and provided, further, that this article
shall not be held to invalidate any provision of the laws of this state or any
subdivision thereof unless there is a direct conflict between the provision
of this article and the provision of such law or unless such law is duplicative
of this article, in which case this article shall prevail, except as provided
otherwise in subdivision one of this section. Except as provided in
subdivision one of this section, no local law shall require any fee or license
for the installation, servicing or maintaining of security or fire alarm
systems, except that which is provided pursuant to this article
" [bold added]
    So as you can see, NYC FD has quite a few rules about who can install, inspect and service fire alarm systems.  Curiously the state law that licenses alarm companies as fire alarm installers also permits inspection and service, and without doubt, if the plain language of the statute is to be read, preempts NYC FD regulations that apply to those fire alarm services [install, inspect, repair service].  I am not aware of any legal challenge to this apparent conflict of laws, but I know my office is presently representing one company that is defending a violation dealing with one or more of the above issues.  
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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
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com
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