Question:

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Ken, 

    I have a question regarding all contracts.

    A friend of mine has been in the alarm business for many years.  He has a lot of monitored accounts and contracts are properly in place. 

    Several years ago, a customer of his, with whom he had a valid sales contract and monitoring agreement, experienced a frozen water pipe that burst and caused approximately $85,000.00 worth of damage. 

    He was sued by the customer’s insurance company even though the low temperature alarm was detected and the alarm panel attempted to send the alarm signal to the central station.  The problem was, his customer had alarm panel’s phone line disconnected to save money and of course never notified his alarm company.  Obviously the panel was not set up for any automatic tests.

    His insurance ultimately settled and agreed to pay $25,000.00 in damages, five years later.  After pondering why he had any liability in this case, he asked his attorney about having to pay for something that wasn’t his fault, and why wasn’t he protected by his contracts.      His attorney basically told him to take his contracts, shred them, and throw them away because in litigation, contracts provide no protection.  His point was that you’re going to get sued anyway, no matter what.

    I tend to feel the same way.  You’re going to get sued no matter what, even it it’s not your fault.  That being said, I assume that contracts should help to at least limit your liability?

    Your comments please.

Bob Klein

CT Wireless Fire Systems LLC

Monroe, CT

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Answer:

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    If your friend had a "properly in place" he should have gotten off the hook with no liability.  My Standard Monitoring Contract contains a waiver of subrogation clause, and that provision alone is sufficient to insulate the alarm company from actions brought by subscriber's insurance company under its subrogation rights.  That's a mouthful, I know.  Bottom line is that either your friend didn't have a properly worded contract, modified his contract, or didn't have proper defense counsel - definitely possible in this industry.  The carrier may have decided that it was cheaper to settle the claim than continue defending it after 5 years.  If a claim or lawsuit is hanging over your head for 5 years you should be yelling your head off at your insurance company and its assigned defense attorneys, who by law represent you, not the carrier.  There had better be a good explanation why that claim or lawsuit is still pending against you. [unless you don't have a proper contract - in which event I have no sympathy for you - and you deserve the defense attorney who thinks your best defense is that your subscriber was "driving without a seat belt".  [sorry I had to take a stab at the assigned defense attorneys who think all defense cases are the same and use canned set of papers].

    The waiver of subrogation clause is one of the more potent protective provisions in the alarm contract.  It will bar all claims by a subrogation carrier, and they know it. 

    If an attorney tells you that contracts are not worth anything in the alarm business then you need a new attorney.  It's true that you can't stop someone from suing you, but you can certainly win, and fast. 

    If you have claims pending and you're not happy with the assigned counsel or how the case is being defended then raise hell with your broker, the claims rep and the assigned counsel - and by all means let me and everyone else know.