October 18, 2010
*************
Question:
************
Ken
A national service company wants us to provide service, testing and inspection to their national subscriber accounts in New York City. The company won't let its subscribers sign our Standard Fire Alarm Contract - which is your Fire All in One, which would cover service and inspection [we also have your separate Fire Inspection and Service contracts]. The national company says it will sign our contracts, but won't let the subscribers.
Our insurance broker urges us to do the work only if our contract is signed by the subscriber. Do you agree?
WD
**************
Answser:
**********
An alarm company would be foolish to provide any service to a fire alarm system without a proper contract in place. Potential liability exposes you to enormous damages far exceeding even the most prudent levels of E&O insurance. Really, no amount of business can justify the risk of not using proper contracts in the alarm business, and this is particularly so with fire alarms.
You typically require your subscribers to sign the Standard Fire All in One, so I that you are using a properly worded contract that provides the most protection available by contract.
It's the subscribers you will be performing the fire alarm services for, not the national company, even though the national company is going to be paying you. While the national company is willing to sign your contract, that will provide no protection when the subscriber suffers a loss and it or its insurance company [or a third party] sues you. The indemnity from the national company, assuming it is willing to indemnify you, may not be worth enough, or anything, and in any event an indemnity will not stop the lawsuits against you.
Having the subscribers sign your contract is the safest plan. However, if the national company used my Standard Form Contracts you would be just as protected, because my contracts extend protection to subcontractors. That would be the only way I'd be comfortable with you proceeding without getting your contract signed. Have the national company buy and use my Standard Forms.
While you're at it, make sure the national company is licensed in New York, because if it's not, then it has no business contracting with subscribers in New York, and that goes for most other jurisdictions that require a license. As a licensed company you have certain obligations imposed by the license, including written contract requirements. Although you have a license so you can service New York subscribers, you should not be willing to service subscribers of unlicensed alarm companies. In that situation, you should have a direct contract with the subscriber.