October 12, 2010
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Question:
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Ken,
I am a user of your alarm contracts as well as your CCTV contracts. I have been working on getting a CCTV project in New Jersey for months and they have finally approved me to be the vendor for the system. It is a co-op board and the lawyer for the board, has looked over the contract and is ok with most points, but refuses to allow his customer to sign the indemnity clause. They feel, “If we get sued, you should get sued.”
What liability would I be opening myself up to by erasing that clause? Is there any, “meeting half way” type wording where I am still protected. My biggest concern is that if someone sues the building because there was an area that wasn’t covered with cameras, why should I be liable for that as the board is selecting where the cameras should go. If I am negligent in my installation then that is one thing, but to bring me down with the ship just because someone sues the building doesn’t seem fair to me..
Any advice? I really need the job as business is slow, but I don’t want to put myself in a position to hurt myself by knocking out clauses of a contract that I purchased to protect myself.
Steve R
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Answer:
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The indemnity provision shifts the responsibility of responding to claims and damages from you to the subscriber. Your contract should provide for such indemnity for all claims, not limited to third party claims. That is the first thing you should check in your contract indemnity clause.
You should have E&O insurance coverage. If you do then the claims and lawsuits will be handled by your insurance carrier, and therefore, as long as the claims are within policy limits, the indemnity clause is for your insurance carrier's benefit, not yours. Of course a claim exceeding your coverage or should you lose your coverage, the indemnity provision would be vital to you.
As long as your E&O policy does not require an unmodified contract as a condition precedent to coverage of a particular claim, you are permitted to modify your contract, even if it has been approved by the carrier as part of your coverage evaluation. If I had to pick a single provision that caused the most issues, it would be the indemnity clause. I often tell clients that they can omit the indemnity clause. It's not the entire paragraph in the Standard Form Contracts, so be sure to delete only the first sentence. Other provisions in the same paragraph are important and not likely to cause issues with the subscriber.
By the way, I am not advocating eliminating the indemnity clause as a matter of course or routine. It's an important provision for your protection. You can't count on insurance coverage to protect you - you need to make sure you are getting the best and most protection you can from your contracts. You and your contracts will likely outlive any carrier who presently offers coverage to the alarm industry. If you have a significant job that you simply can't walk away from then this provision can be deleted. If you have a $16 a month monitoring account who refuses to sign, then let that subscriber find another alarm company.