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Separate entity for monitoring?  Who’s kidding who?
May 12, 2021
Separate entity for monitoring?  Who’s kidding who?
          Back in the early days of our company (1980 time frame) we set-up a separate company to hold our monitoring agreements. The idea was somewhat common in the industry at the time. The idea was that this provided additional protection from liability by isolating the primary company.
          At that time we used your Central Station Monitoring Agreement, your Installation and service agreement and the central stations three party form. We would complete the installation agreement in our primary business name, (Install Inc for conversation sake) since they were doing the work. The Central Station monitoring agreement was completed in the name of the separate company we set-up (Monitoring Inc) as was the central station three party monitoring agreement.
          At some point we switched to using the All-In-One. Since this was an installation and service agreement we started completing it in the name of Install Inc. We would then complete the central station three party agreement in the name of the monitoring company Monitoring Inc.
          By having the end user sign the All-In-One agreement but performing the monitoring in a separate corporate name I believe we created a situation where we are performing monitoring without a contract. Is that correct? I should note that Monitoring Inc is a listed, named insured on the policy of Install Inc.
          There may be good reasons to conduct your alarm business separating monitoring from installation and service with different entities, but shielding the installing and servicing company from liability for the monitoring service is probably not a good reason; it’s likely a waste of time and money.
          Unless you operate your alarm business as two separate entities a lawsuit against one would likely result in piercing the corporate veil of the two, or more, entitles so that they would be treated as one entity.  When courts look to pierce the corporate veil they will look to common ownership, offices, phone numbers, insurance policies, employees, bank accounts, accountant, lawyer and other sharing opportunities.  In other words, are there in fact two separate entities or is there really only one? 
          Most lawsuits against alarm companies start with allegations that the alarm company was negligent in designing, installing, servicing and monitoring.  If a loss is significant enough a subscriber’s lawyer will learn that there are two or more entities involved in the alarm service and sue all of them.
          The long and short of it is that if the reason behind the two or more entities is shielding liability then using proper contracts and carrying sufficient E&O coverage is what you need to be thinking about, not separate entities.

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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