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What if increasing the limitation of liability is too high a number
September 27, 2022
What if increasing the limitation of liability is too high a number
          On your Standard Commercial All in One, I believe the limitation of liability paragraph, the clients gets $1000 or six times the monthly charge. We are bidding a video monitor job where we would monitor 180 cameras at seven locations. We will charge $14,400 monthly for the video surveillance service. If there is a loss, we will have an $86,400 exposure.  If I write Site by site agreements, my exposure might
be $12,000; Any suggestions besides writing seven separate agreements?
          Here’s one suggestion, charge less so six times the RMR won’t be too high.  Only kidding.  The Commercial All in One limits liability damage to $250 or 6 times the RMR [not $1000] but in your case that doesn’t matter because you are well above the lesser amount, 250 or 1000.
          This is a difficult legal issue.  There are cases [no statutes that I am aware of] that require you to offer a higher limit than the minimum liability.  So the $1000 or $250 or $5000 doesn’t really matter; you still have to offer a way to increase the minimum by allowing the customer to pay more.  Yet, you are not in the insurance business and can’t be offering anything that looks or smells like insurance coverage [which unfortunately too many alarm customers think they are getting with an alarm system]. 
          Not all jurisdictions have cases where the courts have mandated a right to increase in order to enforce the limitation of liability.  In some respects the rest of the contract is important because it’s the contract, viewed in its entirety that ultimately get enforced and supports the limited liability for damages.  In order words a court will look to the entire contract to help determine if the limitation of liability provision is reasonable. 
          With that view, let’s start with a massive claim for burglary loss where the alarm for some reason didn’t activate.  Monitoring charge was $60 a month [and it’s the only RMR charge, or include service plan if you want].  Maximum liability is therefore $360.00.  The court weighs that against the multiple million dollar claim and, if this is the only provision to consider, begins to wonder if this limitation is out of line; maybe crazy [or in legal terms, unconscionable and this unenforceable].  But then the court looks at the other provisions in the same contract and those provisions, singularly and certainly read together, convey the unmistakable agreement that the alarm company is not an insurer, accepts no liability for alarm failure, is entitled to insurance to be provided by the customer and is entitled to indemnity from the customer.  Now the $360 almost seems like a gift, well above zero which the rest of the contract promises. 
          Another option is to tell the customer you will obtain, at the customer’s expense, an insurance policy to cover loss.  I suspect most customers will say they already have insurance and don’t need you to buy more at their expense.  That logic should also lead them to consider that since they have insurance they don’t need to think of you are their insurance company.
          Because of how the Standard Form Agreements are drafted I am comfortable recommending that you can remove the 6 times option; leave the limitation at $1000 [again, in the Standard Form Agreements it’s $250 – which is sufficient]. 

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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