Question - Subscriber Written Indemnity And Limitation Of Liability Provision - January 24, 2014

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Ken

    Over the years some of our Subscribers have had issues with our indemnify clause.  This document below is what one Subscriber has come up with.  I know that the indemnify clause is something you feel strong about.  I would like to see your opinion shared with your readers regarding this wording.

Yours for Greater Security,

Bob Vallance II

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7. LIMITATION OF LIABILITY

IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT CONTRACTOR IS NOT AN INSURER AND THAT INSURANCE, IF ANY, COVERING PERSONAL INJURY AND PROPERTY LOSS OR DAMAGE ON OPERATOR’S PREMISES SHALL BE OBTAINED BY THE OPERATOR; THAT THE PAYMENTS PROVIDED FOR HEREIN ARE BASED SOLELY ON THE VALUE OF THE SERVICE AS SET FORTH HEREIN, AND ARE UNRELATED TO THE VALUE OF THE OPERATOR’S PROPERTY OR THE PROPERTY OF OTHERS LOCATED ON OPERATOR’S PREMISES; THAT CONTRACTOR MAKES NO GUARANTEE OR WARRANTY INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS THAT THE SERVICE SUPPLIED WILL AVERT OR PREVENT OCCURRENCES OR THE CONSEQUENCES THEREFROM WHICH THE MONITORING IS INTENDED TO DETECT OR AVERT.

IT IS UNDERSTOOD THAT CONTRACTOR IS NOT AN INSURER FOR OPERATOR, NOR IS OPERATOR AN INSURER FOR CONTRACTOR.

OPERATOR ACKNOWLEDGES THAT IT IS IMPRACTICAL AND EXTREMELY DIFFICULT TO FIX THE ACTUAL DAMAGES, IF ANY, WHICH MAY PROXIMATELY RESULT FROM A FAILURE TO PERFORM ANY OF THE OBLIGATIONS HEREIN OR A FAILURE OF THE SERVICE AND/OR SYSTEM TO OPERATE BECAUSE OF, AMONG OTHER THINGS: THE UNCERTAIN AMOUNT OR VALUE OF OPERATOR’S PROPERTY OR THE PROPERTY OF OTHERS WHICH MAY BE LOST OR DAMAGED; THE UNCERTAINTY OF THE RESPONSE TIME OF THE POLICE OR FIRE DEPARTMENT OR OTHER APPROPRIATE AGENCY; THE INABILITY TO ASCERTAIN WHAT PORTION, IF ANY, OF ANY LOSS WOULD BE PROXIMATELY CAUSED BY CONTRACTOR’S FAILURE TO PERFORM ANY OF ITS OBLIGATIONS OR FAILURE OF ITS EQUIPMENT TO OPERATE; THE NATURE OF THE SERVICES TO BE PERFORMED BY CONTRACTOR.

NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN AND TO THE EXTENT PERMITTED BY LAW, THE AGGREGATE LIABILITY OF THE CONTRACTOR TO THE OPERATOR, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, WILL BE LIMITED TO $3,000.00. THE FOREGOING DOES NOT LIMIT THE LIABILITY OF THE CONTRACTOR FOR ANY INJURY TO, OR DEATH OF A PERSON, CAUSED BY THE GROSS NEGLIGENCE OF THE CONTRACTOR. NOTWITHSTANDING, ANYTHING ELSE IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL OR ECONOMIC LOSS, COST LIABILITY, DAMAGE OR EXPENSES HOWSOEVER ARISING.

8. DISCLAIMER OF EXPRESS AND IMPLIED WARRANTIES

THE CONTRACTOR WARRANTS AND REPRESENTS THAT THE SYSTEM AND SERVICES WILL BE FREE FROM DEFECTS IN MATERIAL AND WORKMANSHIP FOR A PERIOD OF TWELVE (12) MONTHS AFTER INSTALLATION. CONTRACTOR WILL, HOWEVER, TAKE ANY STEPS REASONABLE WITHIN ITS POWER TO MAKE AVAILABLE TO OPERATOR ANY MANUFACTURERS OR SIMILAR WARRANTY APPLICABLE TO THE PROPERTY.

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Answer

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    In my opinion the above provision is not an indemnity clause, is not a limitation of liability clause, is not a liquidated damage clause, raises more problems than it solves, and exposes the alarm company to unnecessary liability.  An alarm E&O carrier, if given the opportunity to review and approve this provision, wouldn't.

    The proper provisions you need in a contract are found in the Standard Form Contracts.  I can assure you that I have spent far more time fine tuning the language in these contracts than you, your lawyer and your subscriber.  The contract terms are designed to protect you.  My litigation department is ready to assist when you decide to make changes, but it's easier for us when you use the Standard Forms as drafted.  

    Sure some changes are permitted, including the Indemnity Clause and the Limitation of Liability provision, but not by a subscriber and not by you.  I don't mean to be harsh about it, but you may as well ask me what size hammer I think you need to knock a round peg into a square hole.  Use any size hammer to smack yourself in the head.

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