Legal Briefing: What to Consider When Switching Central Stations

Central stations are one of the most important decisions alarm dealers make. Here’s how to firm up your dealer agreements.

Legal Briefing: What to Consider When Switching Central Stations

Adobe Stock image by Bartek

If you are a dealer, then the central station you choose is certainly one of the most important decisions you have to make as an alarm dealer.

It’s a marriage of sorts and your central station becomes, hopefully, a reliable “partner” assisting you in more ways than simply adequately monitoring your accounts.

Most good central stations treat their dealers like family, maintain frequent contact, develop and offer advice and programs to enhance dealer operations and experience in the monitoring operation. Some central stations offer conventions, others seminars and webinars, perhaps facilitate or host manufacturer presentations.

Some central stations assist with billing or other dealer operational issues.  At the very least I think central stations can be useful by insisting that dealers engage in best practices including using proper contracts and carrying proper E&O coverage.

Every reputable central station requires their dealers to sign a dealer agreement.  These agreements are sometimes a K&K dealer agreement, in which event I think you will at least be able to read and understand it; other central stations have dealer agreements drafted in-house or by their attorneys and these Dealer Agreements are less “readable.”

However, every dealer agreement is going to be written for the primary benefit and protection of the central station, not the dealer. While the relationship starts all warm and fuzzy like a new marriage, rest assured this dealer agreement can be more appropriately viewed as a prenuptial agreement, and you’re the one getting the short end of the stick.

What to Include in Your Dealer Agreements

I get calls regularly to review the central station dealer agreement for new alarm companies and those seeking a new central station relationship. I’ve boiled the important, essential, issues down to 12 or so points and address them in a rider to central station agreement. You should, as you surmised, start with this rider.

The rider will open your eyes to what I assure you is addressed in the dealer agreement, even if you haven’t noticed it or understood it. Some items may not apply to you.

For example, if you’re getting consideration to come to the new central station, then it may be appropriate to commit to exclusivity or extended term, but most of the items in the rider are going to apply and you may consider some [and you should] absolutely essential.

Your approach is to get the rider and then, after making sure the items pertain to you, present the rider to the central station telling them ,“do not change or modify your dealer agreement,” What you want is for the rider to be attached, added and supersedes the dealer agreement.

Of course, the rider can be modified to suit your deal with the central station, but if you use the rider, you will be going into the contractual relationship with the central station with your eyes wide open.

At least one item in the rider is, in my opinion, a deal-breaker, especially if your central station is engaging in remote work-from-home operators. Why? Because the (pretty fair and reasonable) presumption is that work-from-home operators increases risk for error.

How does that impact you and the dealer agreement? Every central station requires the dealer to indemnify the central station (just like the dealer requires the subscriber to indemnify the dealer, unless you change that provision in your contract, or worse, don’t have it in your contract).

While indemnity may be a reasonably calculated risk you can take because you carry E&O coverage (stop reading now and exit the alarm business if you don’t), you must insist that the dealer agreement be modified by limiting your indemnity to your E&O coverage. Again, that is particularly appropriate and important if your central station uses work-from-home operators.

One final thought: If you really have found a central station that doesn’t use or require you to sign a dealer agreement, run, don’t walk; you are dealing with a stupid and irresponsible central station. It isn’t doing itself or you a favor by working on a handshake. If it can’t follow best practices for itself, it sure isn’t going to be helping you with your best practices.

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About the Author

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Security Sales & Integration’s “Legal Briefing” columnist 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.

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