Averting Warranty Wars

Customers generally like to have the security systems and services they purchase backed up with warranties. At the same time, those warranties serve the dual purpose of protecting the security provider against claims beyond a certain period of time or unreasonable client demands, acts of God, etc. That is why it is critical these agreements are crystal-clear as to what is covered and for how long. There can be no gray area as a recent question submitted to me demonstrates. 

“We sold a burg/camera system eight months ago to a customer located near the ocean. The customer had us respond to a system problem. We redid the coax connectors, which cleaned up the picture. We tested the cameras and they are working fine. However, the customer wants us to replace the cameras at no charge via the warranty. I provide 90 days’ labor and one year parts warranty. Would corrosion be covered under the warranty of the Standard Sales Contract [K&K Standardized Alarm Contracts]?”

This is an interesting question complicated by the fact it cannot be the Standard Form Contract since that does not include a one-year parts warranty. Here is part of the warranty in the Commercial All-in-One Contract: “In the event that any part of the security system becomes defective, or in the event that any repairs are required, ALARM COMPANY agrees to make all repairs and replacement of parts without costs to the Subscriber for a period of ninety (90) days from the date of installation. ALARM COMPANY reserves the option to either replace or repair the alarm equipment, and reserves the right to substitute materials of equal quality at time of replacement, or to use reconditioned parts in fulfillment of this warranty. This warranty does not include batteries, reprogramming, damage by lightning, electrical surge, wire or communication pathway interruption of service.”

This warranty is for 90 days, thus the provider would not be making any repair under the warranty eight months after the installation. However, if the subscriber signed up for service, also covered in the Commercial All-in-One, then the alarm firm obligation would be: “Service, if included as a service to be provided, includes all parts and labor. All repairs, replacement caused by any means other than normal usage, wear and tear, shall be made at the cost of the subscriber. Batteries, electrical surges, lightning damage, obsolete components and components exceeding manufacturer’s useful life are not included in service and will be repaired or replaced at subscriber’s expense.”

So the repair obligation in the warranty and the service provision are somewhat different. The warranty provision, as far as equipment goes, really shouldn’t be any broader than the manufacturer’s warranty. In the case presented, the provider should pass the cost of the defective equipment back to the manufacturer. It’s bad enough the security company has to contribute the labor. But when service is included in the warranty then you have to replace the equipment, which is likely out of warranty with the manufacturer, and you have to contribute the labor. Service is, however, pretty much limited to ordinary wear and tear.

Is corrosion ordinary wear and tear? In my opinion, if equipment corrodes, especially within eight months, some environmental issue must be the cause. For example, a device near a steam shower or an indoor device installed outside or an outdoor device installed near the ocean.

If the security provider knows about the environmental issue before installing the equipment, there is a responsibility to advise the customer of the risks. And by advise I really mean cover your butt in the contract (and the disclaimer notice). In fact, the alarm company would probably want to exclude that equipment from warranty and service due to anticipated problems, in this case corrosion. On the other hand, if the equipment is sold knowing about the environmental issues and equipment was selected (and charged for) based on its suitability for that environment, the provider should replace it during the warranty period and under the service contract.

Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters. The opinions expressed in this column are not necessarily those of SSI, and not intended as legal advice.

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