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long time customer with no contract
August 3, 2018
long time customer with no contract
    You have been our attorney for 40 years and I have almost always followed your advise, so here is a question that I think comes up in the industry more often then it should. I have been in this business since 1977 and as we all know sometimes things get missed. We always use your contracts and always will. 
    We came across a customer that signed his agreement with us almost 35 years ago and it has never been updated or re-signed. The client recently had a loss and we turned it over to our insurance company to settle. The insurance company asked for a copy of the agreement which we had trouble finding due the the age of the customer and the length of time involved.
    My questions are as follows. The old contract has provision for automatic 5 year renewals which by NYS law is no longer legal. Will the other protective provisions of the contract still protect us. Can the insurance company find a reason to reject the claim leaving us open to paying the claim. I'm sure I have other customers that have not had the contracts updated, so I need to know how exposed we are.
name withheld
    What happens to the contract after it expires or you fail to follow automatic renewal laws thereby prohibiting the enforcement of the contract once its term expires. It's an important issue for at least two reasons, though they are related. First, if a claim is made against you can you rely on the protective provisions in the contract when the subscriber claims the contract expired well before the loss occurred.  Second, how many potential buyers will reject these accounts as "non qualified"?
    Researching the issue would be exhausting and probably result in contradictory results. But if you understand the dynamics of litigation you know it starts with a Complaint.               Typically the Complaint in an action against an alarm company claiming that the alarm didn't work and a loss occurred, there is an allegation that there was a contract between the alarm company and the subscriber. Thus it's often the subscriber who raises the contract as part of the subscriber's case. In that situation the subscriber won't be able to use just part of the contract; the protective provisions will come into evidence as well. But it's a risky strategy, and you don't want to wait until you've been sued to test if this is how it will play out. 
    There is no doubt that expired contracts or failure to comply with automatic renewal statutes reduces the value of the contracts; it reduces your equity in the business. It's bad business practice.
    I am not aware of any alarm industry insurance carriers writing E&O coverage requiring production of an enforceable contract as a condition precedent to covering a claim. That doesn't mean you don't have that precise requirement, but I don't think you do. But, turn in a few claims with no contracts and expect to be dropped or at least "rated" with higher premiums. 
    Your alarm contracts are the most important asset you have, you and every other alarm company owner. Which contract you use, which version and whether it's up to date, is the single most important criteria for valuation of your business. The fact is that the Standard Alarm Contracts are the industry standard and fetch the highest prices. And for good reason. These contracts are designed to encourage more business with your customers, offer the strongest collection provisions and the strongest defense provisions.     
     There is no good reason not to use these contracts, and plenty of reasons to use them. Order today. Right now. www.alarmcontracts.comCall our Contract Administrator Eileen Wagda at 516 747 6700 x 312

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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
516 747 6700