Court decision favors ADT over client, carries implications for security managers
PASADENA, Calif.—ADT came out a winner over one of its business clients in a recent court decision here, and the finding carries implications for other security directors who oversee contracts with security providers.
ADT was sued in federal court by a California jewelry store, Manila Fine Jewelers, which lost $821,000 in a burglary. While the trial court found that “ADT failed [to] properly install [the store’s] alarm system and failed to provide notification services when it actually received an alarm signal from the system,” it said ADT only had to pay the jeweler $1,000, which was the amount of the limited damage provision in the contract ADT had with the business.
The case was appealed to the U.S. Court of Appeals, Ninth Circuit, based here, with the jewelry store contending that ADT should pay more in damages. But, in a recent decision filed in April, the appeals court upheld the lower court’s decision.
Kirschenbaum, of Kirschenbaum & Kirschenbaum, based in Garden City, N.Y, explained the importance of the case to Security Systems News, sister publication to Security Director News.
“The court found that ADT was in fact negligent,” he told SSN. However, Kirschenbaum said, the court “then found that the relationship between ADT and its subscriber was a contractual relationship, that ADT owed its subscriber no duty or obligation independent of the contract, and therefore the contract provision that provided for a liquidated damage of $1,000 should the subscriber suffer a loss was enforceable as a contract term.”
He continued, “Here’s the significance of the decision: The enforcement of the liquidated damage provision, more often referred to in other states as a limited liability clause, is a good decision for the alarm industry.”
In addition, Kirschenbaum said, “a better holding was that the court stated that the claim by the plaintiff in the action was limited to the contract terms. In other words, it was not a tort claim [a non-contract claim], but a breach of contract claim. The court found that there was no independent duty separate and apart from the contract terms.”
Kirschenbaum said contracts with limited liability clauses are common on the industry.
“The standard form contract that I provide to the industry, which the majority of the alarm companies out there use, does have a provision that states that any cause of action between the parties is limited to the terms of the contract, and that provision is in there for the very reason of trying to limit any cause of action to a breach of contract claim, as opposed to a tort claim,” he said.
Bob Tucker, director of public relations for ADT, said the company declined to comment. “The court ruling speaks for itself,” he said.
Comments
"The court ruling speaks for itself"
"The court ruling speaks for itself"
It sure does. It says that even though ADT was incompetent and negligent, they were only liable for $1000.00 due to the fine print in the contract.
Kirschenbaum says this is a good decision for the alarm industry and technically it is.
However, if a company fails to provide the protection they claim while indemnifying themselves contractually, what will that do to their reputation?
Furthermore, will the client’s insurance companies, who end up covering the loss, take more of an interest in future contract language?
Lastly, ADT’s “no comment” public relations approach doesn’t encourage me to ring them up for my security needs.
ADT Lacks Customer Service
I'm can relate to this kind of commentary on ADT. Suffice it to say I'm a retired reserve officer and am a security consultant and know a bit about the business. The short version of this story is that over a year ago my wife accidently electronically paid $310.00 to ADT instead of $31.00 They refused to refund the money - and dug in deeper when we noticed that the system wasn't working. We had forgotten our code word and they simply put up barriers - "send us faxes" (we had no working fax) ; "send us letters;: et. We finally stopped paying them when the $310 ran out - they refused to repair the system which I determined wasn't operating without our paying a $150 minimal diagnostics fee...and ultimately put a collection agency after me - and then had the chutzpah to bill me an additional month - and send the $31 into collections - because even though I paid them for no service provided to get my credit record clear - they required 30 days notice to close the account....It took getting the government invoved to halt the nonsense.. They refuse to refund any money for services never provided - pointing to fine print in the contract. My contact in consumer protection suggests taking them to small claims court. At least we were only "robbed" by ADT and didn't suffer another loss.
With simple professional customer service and security professionalism (I was able to finally close the account by guessing my code word on the 6th try - I told their agent then and there that was proof they were a bush league non-professional outfit) they still would have had me as a satisfied (but clueless as to their ineptness) customer. Simple customer service.
Big companies are run in many cases by idiots who don't realize that by having non-professional and uncaring line representatives who refuse to make things right that they ultimately are hurting their bottom line. ADT now has a security professional and former college professor in the Homeland Security field exchanging this tale of woe with everybody he consults with and for that they NOT use ADT. Of course the last executive I had in one of my classes laughed at this and said "We never use them...they're just bad news and unreliable." He cited incidents with fine print and major losses just as in this string of comments.
No Suprises Herte
Here’s likely the core problem: there was probably likely no bona fide risk analysis completed before the alarm system was installed. Had the alarm system been installed based on the results of a bona fide risk analysis, as opposed to a “guestimate” by ADT, then the loss would likely never had occurred. ADT personnel install equipment and ARE NOT qualified to conduct a professional risk analysis. So, the lack of a risk analysis being completed is the responsibility of the businesses and not that of ADT. On the other hand, ADT has the ethical obligation to inform organizations they are not qualified to conduct a professional risk analysis. This is an age-old case in point of security measures being installed in the absence of risk analysis being completed. The failure is therefore not at all surprising.
Contracts
Don't be foolish enough to sign any contract with a security contractor, supplier or monitoring company. I work in Corporate Security for a major national bank and we would never sign their paper. If they want to do business with us they sign our paper and that includes companies like ADT, Diebold, Red Hawk, etc. The first thing that our lawyers do is blow out and renegotiate limitation of liability clauses. If they refuse to do so, their competitors will. My experience is that most security vendors perform to minimum standards unless forced to live up to their agreements. Its imperative monetary penalty clauses are inserted in all contracts with these vendors.