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A property owner leased premises to a tenant supermarket who used the premises as a warehouse. The lease required the tenant to contract with a sprinkler inspection company, which the tenant did. The sprinkler company allegedly failed to make its monthly inspections for several months and failed to report that the sprinkler had been shut down on more than one inspection. Several issues of law are addressed in this case that are important to the alarm industry.
Third Party Beneficiary: Alarm contracts contain a provision that states that there are no third party beneficiaries to the contract. You owe your duty to the subscriber signing the contract and no one else. At least that's the intent of the provision. The reason for this is that your contract "contracts away liability for your own negligence" and you want to be able to enforce that exculpatory clause and the companion limitation of liability clause. A third party beneficiary would claim rights under the contract and yet seek to avoid the contractual protective provisions. Muddy water.
Duty Independent of the Contract: Hand in hand with the Third Party Beneficiary theory is that a duty is owed which is independent of the contract, and therefore there is no contract with protective provisions.
To see how these legal issues affect you, you enter into a burglar or fire alarm contract with a warehouse owner, who in turn leases space to several tenants, none of whom sign a contract with you and none of whom have any direct relationship with you. In other words, you have not provided them with passwords, you don't take instruction or service requests from them, you don't charge them. Your subscriber is the owner and your contract does not mention tenants; in fact it states there are no third party beneficiaries to the contract. The premises burn to the ground or get wiped out in a burglary. The tenants sue you. Typically one defense we would rely on is that the tenants have to claim against you because you didn't owe them any duty. There are cases that hold otherwise, and this sprinkler case is one of them.
In this case the appellate court, upholding the lower court, finds that the owner could indeed claim third party beneficiary status. There is no mention in this appellate decision what the contract terms were, so I don't know if there are any protective provisions. The court held that the owner's lease required the tenant to get the sprinkler contractor and that created enough connection for third party beneficiary status. Also the court held that an independent duty may have arisen because the owner detrimentally relied on the continued performance of the sprinkler company.
The sprinkler company's motion for indemnity from the tenant was also denied. The court didn't really explain this part of the decision other than to comment that the sprinkler company may have been negligent, therefore not entitled to indemnity. I don't know how the indemnity provision was drafted.
Keep in mind that the sprinkler company has not been found liable yet. This was a denial of summary judgment because there are unanswered questions of fact regarding the sprinkler company's negligence or breach of contract. You can read this New York Appellate Court case on my web site at https://www.kirschenbaumesq.com/article/all-american-moving-storage-inc-v-andrews
All American Moving and Storage, Inc., et al., Plaintiffs, v W. Reilly Andrews, et al., Defendants. [And Other Actions] Jerome Ackerman, et al., Plaintiffs-Respondents, D'Agostino Supermarkets, Inc., et al., Defendants-Respondents, Allstate Sprinkler Corp., Defendant-Appellant, New York Marine and General Insurance Company, Defendant-Respondent.