I am in the burglar alarm business in Michigan and my company was just sued by one of our customers after his store was burglarized because we never received a signal and therefore never notified the police or sent someone ourselves. We were sued for negligence, gross negligence, and breach of contract.  Our contracts have limitation of liability and liquidated damage clauses, will these protect us here?
             This issue is different depending on which state you’re being sued in.  But regardless of what state you are in, my answer to your question is it depends on the validity and enforceability of your contract.  Courts across the country have held limitation of liability and liquidated damages provisions valid and enforceable as a defense to negligence.  Michigan courts in particular have held that any remedy in a breach of contract case is limited to the terms of the contract unless such claims are based on something the defendant did other than allegedly breaching the contract.  For instance, if you are sued in Michigan for negligence and breach of contract by a customer because your employee failed to notify authorities after receiving a trouble signal, the court will limit your liability to the terms of the contract, meaning it would dismiss the negligence claim and limit your liability for breaching the contract to whatever is provided for in the contract.  So if your contract contained a limitation of liability provision limiting any remedy for breach of contract to $1,000, the court will not hold you liable for any amount over $1,000. If your contract is properly drafted, the protective claims such as liquidated damages and limitation of liability provisions, among others, will limit the remedy to what is called for in those provisions.  If you are looking at your contract and have no idea what I am talking about because these provisions are not in there then you need to visit AlarmContracts.com to update your contracts.
            A few years ago ADT was sued in Michigan for false advertising, negligence, gross negligence and breach of contract when its customer’s jewelry store was burglarized and ADT allegedly never received an alarm signal and didn’t call the police or send a representative to the premises as it agreed to do in its contract.  ADT’s contract contained a limitation of liability clause that limited ADT’s liability to the greater of $500 or 10% of the annual service.  The court held that ADT will only be liable up to 10% of its annual service charge (since it was greater than $500).
            In another ADT Michigan case, ADT dispatched EMS to the wrong address. The court dismissed the negligence and gross negligence claims made against ADT because ADT’s only duty to the customer was its contractual obligation, so the court held that the remedy too must be contractual.  In so holding the court limited the amount ADT could be held liable for the greater of $500 of 10% of the annual service charge, as provided for in its contract. The court explained that Michigan law does not recognize a negligence cause of action when someone fails to perform its contractual obligations.  The Court of Appeals upheld the decision stating that the trial court properly applied the limitation of liability clause.  The court went on to note that Michigan courts have consistently upheld liquidated damage provisions in alarm service contracts.
            When you’re in a situation where a subscriber’s store or home has been burglarized and you failed to notify the police or send someone to check the premises, your fate in the matter will come down to the strength of your contract.  If your liquidated damages and limitation of liability provisions are enforceable then you will only be liable for the amount provided for in such provisions.  If those provisions are not enforceable or your contract does not contain them at all, then you can be liable for the entire value of what was stolen.  Do you really want to be liable for a $1 million necklace when a customer’s home was burglarized and your employee accidentally failed to respond to the signal or the central never received a signal because your technician coded the alarm panel wrong when it was installed?  I can’t think of one reason not to use proper contracts that will cap your liability at $1,000 or some other number that is nowhere near the potential multi-million dollar value of your customer’s stolen items.  If you are not confident that your contracts will protect you from such claims then I suggest you visit www.AlarmContracts.com today.  Why take the risk? 
Jesse Kirschenbaum, Esq.
Kirschenbaum & Kirschenbaum, P.C.
200 Garden City Plaza
Garden City, NY 11530
(516) 747-6700 x. 307
    Your general liability policy may not include alarm Errors and Omission coverage, and you need it to.  If your general liability policy costs less then $1000 you need to examine it carefully to make sure it includes E&O.  And make sure you're not with some idiot carrier that tries to distinguish between installation, service and monitoring.  You need to be covered for all aspects of your operation; everything you enter into contracts to provide, even if you're not the one doing the monitoring.  Rest assured, you'll be sued if there is a monitoring failure and the last thing you need is some idiot from your insurer carrier telling you that you're not covered for monitoring.  I've had clients told they weren't covered for a burglary theft because there was no property damage occurrence.  Try and image my telephone call with this guy.  Coverage was given for the claim.  
    But Bart Didden, Claims Administrator from SARRG, let me know of an alarm co owner who was paying only $650 for general liability coverage and thought he had E&O.  Upon renewal apparently the alarm co owner, his broker or the carrier woke up and realized he needed the E&O and the renewal premium jumped over 250%.  The owner called SARRG, which may have the least expensive rates, and will insure with SARRG.  At least I know he'll have E&O coverage and no nonsense if he gets a claim to defend.  
    For insurance check with a broker listed on The Alarm Exchange.  They all know what they are doing.  Careful though, some prefer one carrier over another and it's not likely that your broker carries much sway with the carrier's claims department, and that's the part of the carrier you may have to rely on.