KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Can dealer’s agreement with subscriber protect central station and others
March 31,  2022
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Can dealer’s agreement with subscriber protect central station and others
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          Alarm dealers know that they need to use proper contracts with their subscribers when performing any security or fire alarm services.  Only the most unsophisticated in the industry would ignore that advice. It’s also commonly accepted that a dealer’s central station is going to take a very keen interest in the dealer’s agreement with the subscribers.  The central station in fact hopes to rely on the protection afforded to the dealer in the dealer’s agreement with the subscriber.
          So central stations will look at the dealer’s form agreement to determine if it contains provisions the central station thinks are important to insulate the dealer, and more importantly, the central station from liability. One may wonder why the central station is so worried about the dealer when the central station almost always requires the dealer to indemnify the central station and also name the central station on the dealer’s E&O policy as an additional insured. 
          A central station relying on the dealer’s indemnity, even if backed up by the dealer’s E&O policy, would be short sighted if the central station didn’t also evaluate the dealer’s agreement with the subscriber and consider whether the protection afforded in that agreement limiting liability would be available to the central station directly.
          First let’s consider the array of “protective provisions” in the Standard Form Agreements:
  *  exculpatory clause
  *  limitation of liability clause
  *  indemnity clause
  *  insurance procurement clause
  *  limited warranty
  *  clearly defined duties
          Next consider how the central station, and others, can benefit from the provisions in the dealer’s agreement with the subscriber, especially considering that the central station is not a party to that agreement. 
          The Standard Form Agreements have a clear provision extending the contract protection to the subcontractors of the dealer, and that includes the central station.  But how do we know if that provision is going to hold up when challenged?
          A recent case in Florida just tested the provision.  A yacht caught fire and caused another yacht to burn, resulting in considerable loss of charter income.  A lawsuit was brought against the yacht owner, the parent company of the marina and operator, the owner of the marina, operator of the marina.  The marina entered into a contract with the yacht owner to use the marina which contained a “limitation of liability” clause that the Judge also referred to as “Exculpatory clause”. 
          A motion for summary judgment was made to determine the sole issue of whether the parent company, which didn’t sign the marina agreement, could rely on the protection in the marina contract.  The marina contract protected the marina and its “affiliates”.         
           Here are excerpts from the case:
“Exculpatory clauses are unambiguous and enforceable where the intention to be relieved from liability was made clear and unequivocal and the wording [is] so clear and understandable that an ordinary and knowledgeable person will know what he or she is contracting away. Seven argues that the Agreement
lacks “clear and unequivocal wording that could lead an ordinary and knowledgeable person to.  Seven contends that Suntex is not explicitly mentioned in the Agreement, and that the terms “affiliate” or “management” are not defined. Suntex responds that the Company and OPCO clearly and unequivocally relieved themselves and their affiliates from liability from
ordinary negligence.  Suntex also submits that it is covered by the exculpatory
clauses because, as the parent of the Company and OPCO, it is an “affiliate.” In its Reply, Seven maintains that “a non-ambiguous meaning in the context of normal contractual language is not sufficient in an exculpatory clause because no ordinary knowledgeable person can know which un-named parties are being relieved of the obligation of acting with due care.”
          “[I]n determining whether a contract is ambiguous, the words should be given their natural, ordinary meaning, and ambiguity does not exist simply because a contract requires interpretation or fails to define a term.”  “To determine the ordinary meaning of an undefined statutory term, we often look to dictionary definitions for guidance.”  Black’s Law Dictionary defines “affiliate” as “[a] corporation that is related to another corporation by shareholdings or other means of control; a subsidiary, parent, or sibling corporation.” Affiliate, Black’s Law Dictionary (11th ed.
2019) (emphasis added). This meaning is well understood and employed by courts in many contexts. See, e.g., Tyman v. Ford Motor Co., (“parent companies have frequently compelled arbitration where the parent company did not sign the agreements but qualified as an ‘affiliate’ referenced in the arbitration provisions”). Indeed, as aptly
put by one Court: “[t]hat the term ‘affiliate’ has a common meaning requiring no exposition is reinforced by the fact that the terms ‘affiliate’ and ‘affiliates’ appear over 240 times in a wide range of Florida statutes, yet the terms merit explicit definitions in fewer than 20 sections of the state code.”
          "Here, the exculpatory clauses clearly and unambiguously extended to affiliates of the Company and OPCO, such as Suntex.  The Company and OPCO are wholly-owned subsidiaries of Suntex,  and thus affiliated with Suntex. Notably, Seven was well aware that Suntex was the owner of Bahia Mar Marina, while OPCO managed the Marina, given that Seven alleged as much in its Complaint. Moreover, although, as Seven points out, Florida
law disfavors exculpatory clauses, such clauses are nonetheless interpreted under the same contract
principles. See Cooper v. Meridian Yachts, Ltd., (prefacing analysis of exculpatory clause by stating that “general Florida contract law would apply”). Seven presents no authority, and independent research revealed none, standing for the proposition that the term “affiliate” should be defined differently within exculpatory clauses than in any other
context.
          Here, the exculpatory clauses clearly and unambiguously extended to affiliates of the Company and OPCO, such as Suntex.  The Company and OPCO are wholly-owned subsidiaries of Suntex, and thus affiliated with Suntex. Notably, Seven was well aware that Suntex was
the owner of Bahia Mar Marina, while OPCO managed the Marina, given that Seven alleged as much in its Complaint.  Moreover, although, as Seven points out, Florida law disfavors exculpatory clauses, such clauses are nonetheless interpreted under the same contract principles. See Cooper v. Meridian Yachts, Ltd.,  (prefacing analysis of exculpatory clause by stating that “general Florida contract law would apply”). Seven presents no authority, and independent research revealed none, standing for the proposition that the term “affiliate” should be defined differently within exculpatory clauses than in any other context." Citations omitted.  REICHEN KUHL, UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA. Case 0:21-cv-60408-BB
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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
www.KirschenbaumEsq.com