March 30, 2011
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Question
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Ken,
We have been in business for over 25 years as a sole proprietor business in Kansas (small town 3000-5000 folks). In a small community it seems you have to wear many ‘hats’ to make a living. So if it was electronics, we did it, including a few security and fire systems over the years. My main question mainly revolves around the fact; that generally we had NO alarm/security sales or service contracts with any of our security/fire customers! Just a bill of sale… (Stupid, I know!)
One good thing is we have a very limited customer base (10 or less), because we only did commercial systems, NO residential. Our commercial systems ran from a free system ( & maintenance as a community service) we put in the local museum, to a Fire & Security system in a Pharmacy/Doctors office and even a ‘self monitored via internet’ $20,000 system we put in for a local county that is monitored by their county Sheriff. We offer no monitoring on these systems, they are all monitored by local Police or Sheriff, if at all…
We have carried general business liability insurance (work comp, inventory, etc) over the years with the same company, but no errors or emissions insurance…
So, I guess Mr Stupid wants to know “Where do we go from here?” A local attorney used the sage comment, “It’s too late to shut the gate, after the cows are out”. But what can we do to limit our liability going forward? OR is it completely too late to lose sleep over? Can we go back and ‘request’ customers sign an ‘agreement’ years after the fact? Should we just send letters that we are ‘quitting the security business’ and advise customers to seek service elsewhere? Since business has gotten very tight here, should we declare Bankruptcy and find a regular 9-5 job working for someone else?
Please comment on where we should go from here???
Mr. Stupid in Kansas
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Answer:
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There are some positive aspects to your situation. First, you only have 10 fire or burg systems out there, so you can spend your nights on patrol, keeping an eye on those premises, just in case. Second, how fortunate for your future creditor that wins a large judgment against you for the alarm failure that you've been in business so long building up that equity and value.
The good news is that you don't have to quit the business, and you don't have to go bankrupt. [sounds like you may need a new attorney though - seems like he knows about cows - you need an alarm lawyer].
Your installations are in so it's too late for a Sales Installation Contract. But you are providing Service [not "maintenance"] and you should get a Service Contract signed before you do any more service calls. You should also get a Monitoring Contract signed where you are charging for monitoring. When you get these contracts signed it would be a great time to present the Disclaimer Notice and ask that it be signed too. Maybe you can get some new work out of it. Then you'll need the Sales Contract.
Next, contact a broker who knows the alarm industry. You need E&O. It shouldn't cost much more than your current general liability policy, and if it does, it's well worth it.
Do the above and you should be able to change your name to Mr. Well Heeled.