Legal Briefing: As Technology Becomes More Complex, Expect Alarm Contract Forms to Be Complex
Continuing to use outdated contract forms is almost as bad as continuing to sell and install obsolete alarm systems.
TIME KEEPS CREEPING ALONG and staying the course in 2016 is probably not going to cut it much longer. Like all the new technology, you too need to evolve. That means changing for the better, improving operations, exercising sound business judgment and taking calculated risks that hopefully will increase cash flow and equity in your business.
Since the focus of this column is legal (a topic many of you prefer to ignore even though it crops up like a headache once in a while) I’ll skip the electronics lesson. Suggesting that you should be selling, installing, servicing and monitoring intrusion, fire, cameras, access control and environmental alarms and security, with remote access features, shouldn’t come as a surprise. But what may surprise you is what may happen if you don’t quickly arrive at that conclusion during 2016.
We witnessed consolidation of large alarm companies in 2015 and growth of the dealer programs. We saw aggressive, well-run operations designed to capture large segments of a territory.
It’s likely that the security industry is going to experience tremendous growth this year, driven by crime and fear. Security systems will be accepted as essential, no longer a luxury item. All the social struggles of the past year have followed us into this year, and they continue to increase our concerns for ourselves and our families. Since all the politicians seem to be catering to or trying to revive or create a middle class, the alarm industry needs to be ready to provide the security that the middle class is hopefully going to need.
A week doesn’t go by that I don’t receive an inquiry about nationwide operations, companies deciding to reach out well beyond their traditional home base and territory. This is no doubt fueled by technology that has created what may be the greatest potential threat to the alarm industry’s revenue stream: do-it-yourself (DIY) installation and, more significantly, DIY monitoring. Not only are established alarm companies engaged in this area but other operations, like national retail chains and hedge funds, are getting into the DIY market. The only real question is whether DIY is going to expand or take away from the “alarmed” market.
DIY offers every alarm dealer a nationwide marketplace and the equipment and self-monitoring can be attractively priced. Be mindful that in addition to your Web site, telemarketers, a manufacturer and central station ready to work with you, you’ll need licensing in many jurisdictions and a nationwide agreement that covers (as best it can) all the consumer requirements in the many jurisdictions you will be conducting your sales and monitoring operations. Since you will be contracting for monitoring you’ll need that monitoring license and won’t be able to just rely on the wholesale central station that will also need to be licensed.
Fire alarms and enforcement of fire alarm codes will continue to become more ubiquitous. Have you shied away from installation of fire systems because you fear the potential liability, or are too lazy to acquire the technical skills or license to engage in fire alarm work? Well, this is too important and significant an area of the alarm industry to give up.
Consumer rights continue to march along as well and courts are straining more and more trying to figure out a way to avoid enforcement of contractual provisions designed to insulate and protect the alarm industry from untold liability exposure. Continuing to use outdated contract forms is almost as bad as using outdated equipment and continuing to sell and install obsolete alarm systems.
New legal concepts are evolving almost as fast as electronic technology – almost. Those of you who continue to use poorly drafted contract forms and perform services in a way that attracts lawsuits will provide the courts with sufficient impetus to erode the protection afforded by the alarm contract. This may also attract the attention of legislators who look for new ways to regulate the alarm industry, and that isn’t going to bode well for the protective provisions.
Why should you care? Well it wasn’t long ago that medical doctors practicing in certain specialties were driven out of business by their malpractice insurance premiums; some still are. Think that can’t happen in the alarm industry? It can. So just like alarm systems have become more complex, expect the operation of your business to become more complex. Expect your alarm contract forms to be more complex. Expect potential buyers of your alarm business to be more discerning, careful not to pay too much for an antiquated alarm business with outdated systems and subscriber contracts.
All in all, 2015 was a good year for the alarm industry, at least from where I am sitting. This year, 2016, should be even better. Get with the program and enjoy the ride.
Bio: Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. The opinions expressed in this column are not necessarily those of SSI, and not intended as legal advice. He can be reached at [email protected]
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