Certificates and non-subscriber reliance on alarm services November 6, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Certificates and non-subscriber reliance on alarm services
November 6, 2018
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Certificates and non-subscriber reliance on alarm services
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If you use a Standard Form Agreement [All in One] there is a specific provision that makes it clear that there are no third party beneficiaries to the agreement.  In other words, you are agreeing to provide your services to your subscriber, no one else.  A claim made by someone other than your subscriber can come in one of two ways, 1) claiming to be a third party or intended beneficiary, in which event the claim is pursuant to contract, or 2) a claim that the alarm company is liable in negligence for causing the non-subscriber’s injury or damages.
            This article will focus on how an alarm company could increase its risk of being sued by a non-subscriber when the alarm company has furnished a Certificate of Alarm Services.  
            Most alarm companies have been asked to provide a Certificate of Alarm Services.  Home owners and commercial business owners ask for the Certificate so they can reduce their insurance premium or in some cases, so they can get the insurance.  Unfortunately, as far as I am aware, the party asking your subscriber for the certificate is not providing the form they are looking for.  There is no form, again as far as I know, sanctioned by UL, EPTL, NFPA or other regulatory organizations.  Each alarm company is at liberty to design its own Certificate.
            The content of the Certificate may depend on the type of alarm services being provided.  For example, fire alarm services may require the alarm company to notify the AHJ before terminating services; the Certificate may state that.  
            What the Certificate should probably provide is that it is not intended to confer any contractual or other rights to the party requesting the Certificate; it's for informational purposes to confirm alarm services, with no guarantee that those services will be continued [subject to a Certificate for fire alarm services and the AHJ requires notice of termination].  The Certificate should make a number of issues clear, such as services are not assured beyond date of Certificate, no third party reliance, no third party beneficiary, date of contract and scheduled termination date.  
             Let's say you issue a Certificate that you know is going to your subscriber's insurance company.  Over course of time the system is non-operational but the contract is not terminated and the subscriber continues to make payment.  When does that happen?  Lots of times.  Either system needs repair and subscriber doesn't want to pay for repairs, or communication lines are down or subscriber fails to set up communication because it doesn't want to pay for a phone line or internet service.  Loss occurs.  Carrier sues.  Let's also assume that the alarm contract is completely inadequate and doesn't contain the protective provisions, including waiver of subrogation.  You'd be right if you thought that the carrier had no claim against the alarm company.  But what if I change the facts and tell you that there is a Certificate of Alarm Services that makes all kinds of representations and warranties to the insurance company, such as service will be continuous and alarm company will notify carrier if service is terminated.  Of course I could word the Certificate even more favorable to the insurance carrier, but even an alarm company dumb enough to provide alarm services without a proper up to date contract is not likely dumb enough to sign a Certificate that is worded in a way that increases its risk.  I know many of you will disagree with that, and you'd be right.
            It's not just insurance carriers that can make the claim.  How about a landlord that gets a Certificate from its tenant that it has alarm services or a tenant that gets a Certificate from its landlord that the property has security and fire protection? 
            The Certificate serves a purpose.  It may be superfluous from the alarm company's perspective [generally there is no charge for the Certificate], but whoever is asking for it obviously intends to rely on it, to some extent.  To the extent they can rely on it, should rely on it, or there are any conditions and terms applicable to their reliance, depends on the wording of the Certificate.   
            I've been asked to design a Certificate and I've resisted.  For 2019 I think we will offer one but you will still have to fill in the type of system and whether you will give notice of termination.  Many of you have sent me a copy of a Certificate you designed and use; send them again and I'll put together a Standard Certificate.  In the meantime, careful what you provide.
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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
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com