February 4, 2012
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Question
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Ken,
I enjoy reading your emails during my breakfast. Very informative and worthwhile!
I read a lot about alarm companies getting sued. In your experience, is this the exception or the norm when it comes to the industry?
As a small, locally owned alarm company I try to make sure our installs follow codes are installed with best practices. I will also listen to my gut if I get a "bad feeling" about a prospect and will walk away from that transaction to avoid risk later on. I have even fired customers that don't follow our recommendations on using the system (maintenance or service). I had a homeowner with a 10 year old alarm that had a faulty fire circuit and he didn't want to replace the system..so I let him go.
What is your perspective on the number of cases vs. the number of alarm companies?
Besides a rock solid contract is there anything we can do to prevent a suit from ever happening?
Thanks!
John S Romero, President
Keystone Security Systems
New York
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Answer
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Alarm companies are an identifiable target when a subscriber suffers a loss. When the investigators and damage control people arrive they see lawn signs, window stickers, stickers on panels and alarm equipment hanging on windows, doors and walls. Subscriber had a loss; home owner's policy covers the loss, or not, and somebody has to pay. May as well be the alarm company. What they heck was the alarm for anyway?
Trouble with providing alarm services is that you might end up being the target for a loss that you certainly did not cause, probably didn't contribute to either. Loss could be result of illegal activity, fire caused intentionally or from unknown source, breaking pipes, heat, cold, etc. Every cause other than a loss caused by faulty alarm equipment or wiring - that I've never heard of.
So you get sued because your system or service failed to prevent a loss. You could have and should have installed it better or responded faster.
A lot of alarm companies can go through an entire career without any lawsuit. The problem is that it only takes one. Defending a lawsuit can cost anywhere from a few thousand to a few hundred thousand. If you get tagged with a judgment the loss can be from a few hundred to a few million. The average alarm company, even if it could afford the defense cost, doesn't want to have to. That's why errors and omission insurance is so important. And while I am on that kick, please check your insurance. Make sure your general liability includes errors and omission coverage and that it's written by an insurance company that understands the alarm industry. I just received a denial of coverage from a so called insurance company with an alarm program who had the audacity to deny coverage with a letter from its attorneys that was too complicated for me to understand, just an old country lawyer, but seemed to say that since there was no "bodily injury or property damage" there wasn't any coverage. Well in alarm defense cases there's often a burglary loss, and that's not bodily injury or property damage. And, the alarm company expects coverage when sued for negligence and breach of contract. [more on this - way more - once I am sure the carrier meant what I think it meant]. But - check your coverage and make sure your carrier is going to be there when you need it, not dancing around figuring out how to get out of covering the claim. Call me for some carrier recommendations if you need to. I won't be shy about who not to use.
There is little you can do to escape lawsuits other than have proper alarm contracts and perform your services to the best of your [and your subcontractor's] ability. Being responsive to your subscriber's requests for assistance, service and information is also helpful. If there is a loss however you should immediately report that potential claim to the carrier and should you hear from the subscriber asking for information about the alarm you should insist that your carrier engage counsel immediately to assist you with any response. You paid for insurance and you shouldn't hesitate asking for coverage. By the way, if the carrier assigns an attorney who doesn't know the alarm industry don't be shy about demanding another attorney who does. You can ask for specific counsel, though the carrier does have the right to select counsel, but only if competent.