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Comment on contract retention and risk discussion

September 13,  2021
Comment on contract retention and risk discussion from article on September 4, 2021
          I think you omitted a key factor on reply to Name Withheld about "Contract retention / Original or copy" September 4th, 2021.
          I agree with your answer of 6 years, but what I feel you omitted was when does the 6 year clock begin. From my position as a claims manager the clock starts on the day of the last business transaction. This would include the last day of monitoring, the last service call, the last lease payment, the day the completion certificate of the installation was completed or the last paid invoice.
          As a claim manager, we have tools in the K&K contracts to limit the exposure on claims, such as the provision that a claim must be made within one year even though most state laws allow claims up to three years or more from the occurrence. The contract provision rules, but that does not stop some lawyer in a Subrogation Office from filing a lawsuit hoping to get a Judge that doesn't care about that provision. The Judge is not prohibited from make bad decisions, which is why they created appeal courts.
          If a dealer reads your response, without context, they can be harmed significantly by an equally bad decision because they purged the contract.
          Conversely, a dealer may say, Bart, by your view we should keep the contract forever. Well that is not the worst idea, but if I had a claim from a terminated contract even if it was less than 6 years, if the system was still in service and a different service provider was currently or previously providing service, my first defense would be looking for proof from the claimant that it was our action or failure to act that caused the occurrence. My position would be the last provider assumed all liability once they accepted the account and fees.
          This may lead to me to write a future article as what should an alarm company do when they are presented with a single account takeover potential or for you, Ken, to write about due diligence for in the field inspections when approaching an acquisition.
Bart A. Didden, Executive Claims Manager
Security America Reassurance Group, Inc. - SARG
          Thank you for your valuable input, which raises a number of important issues.
          Commencement date:  I suppose you could think there are a number of options, such as date of contract, date of contract term expiration, date of occurrence of an event that may give rise to a claim or date that the alarm company stopped all services and closed the account.
          The correct answer is the last option, 6 years from when the alarm company provides its last service and closes the account.  Any other option would clearly be premature because a claim could arise or be brought beyond 6 years of the other option periods.
          You mention the contractual provision that reduces the time to make a claim under the contract.  The Standard Form Agreements provide for one year from date of loss.  That is actually a legal concept, “date of loss”, and it means the same as another legal concept, “date of occurrence”; they are both the same date.  So a date of loss and a date of occurrence is the date of the burglary, the fire, the water damage or other event.  I suppose “date of loss” is the vernacular term while the “date of occurrence” is an insurance term found in insurance policies.  All jurisdictions have time periods within which a lawsuit must be commenced and those time periods vary according to the various causes of action, typically for the alarm industry, breach of contract or negligence. The time period is called the Statute of Limitations.  When the statute of limitations expires so does the right to bring the lawsuit, though the Statute of Limitations is a defense to an action that has to be raised by a defendant, or it’s waived, except in some consumer cases where a plaintiff can be criticized for bringing “stale” cases beyond the statute of limitation period.   In New York the Statute of Limitations for breach of contract is 6 years and the Statute of Limitations for negligence is 3 years.  As you mention, the Standard Form Agreements reduce this period to one year.
          You also point out that sometimes judges don’t enforce the reduced contractual time period.  The reason is that a reduced time period is scrutinized to make sure it’s fair and does afford ample opportunity for a lawsuit to be brought.  While these provisions don’t necessarily need to be drafted with the same precision that we need for exculpatory and limitation of liability provisions, there is certainly room for error for the inexperienced lawyer [or alarm owner posing as lawyer when he’s not].  One of the most common drafting errors for this provision is starting the clock, to borrow Bart’s terminology, when the contract is dated.  Some lawyers draft the contract to provide that a subscriber must bring a lawsuit within one year of date of contract.  How do you think that plays out when it’s a 5 year contract and the loss occurs in the third year, or any time after the first year?  I can tell you how; it won’t be enforced.  Use updated Kirschenbaum Contracts ™ and save yourself the aggravation. 
          Bart’s final point bears further discussion.  What’s the exposure on account take-over?  Fairly simple.  You buy it, you own it.  You take over the account, you own it. 
          How you deal with the exposure presented by a take-over account is also simple.  You need two Standard Kirschenbaum Contract ™ forms when you do a take-over.  The first is the Standard Form Contract that covers the services to be rendered, which should typically be one of the All in One agreements because it covers you from sale and installation to inspection, repair service and monitoring.  But for a take-over you should be using the Disclaimer Notice, which not only is used to confirm that the subscriber has declined additional equipment and services, but that you have inspected the system to be assumed by you and recommended repairs or upgrades, which the subscriber has authorized or declined.  The Disclaimer Notice will note if the subscriber has refused to permit you to do an inspection before take-over. 
          It’s a terrible idea to take over an account without doing an inspection and getting the Disclaimer Notice signed, as well as the All in One covering your services.  In the alarm industry you do not do any business without a contract, because of you do, the statute of limitations will be the least of your worries.

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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