Business & Legal Topics the Security Industry Must Watch in 2020

Legal expert Ken Kirschenbaum shares topics to keep an eye on in 2020, including recurring monthly revenue, the exculpatory clause, insurance coverage and more.

Business & Legal Topics the Security Industry Must Watch in 2020

Time moves along and presents new challenges as technology and societal norms evolve. You see it more easily when you look back several years and take it all in from that perspective.

While a change from 2019 to 2020 may not be readily apparent, embarking on a new decade allows us to consider what transpired the preceding 10 years and in that context the changes from, in this case 2010 to 2020, become much more conspicuous. Yet some things remain a constant.

Somehow the years seem to be moving faster and faster. Evolving technology in the electronic security industry requires your full attention to keep up. Perhaps fortunately, legal issues seem to move at a slower pace.

In 2019, I can’t recall any significant development that changed or helped better define legal issues affecting the alarm industry. That’s a good thing because the law still looks favorably on many alarm industry issues.

What matters actually do most affect the alarm industry or company owners? Those concerns haven’t changed much since the industry discovered recurring monthly revenue and the exculpatory clause. In fact, those two elements still form the foundation of company growth and value.

The alarm industry, if that is still the appropriate way to refer to alarm integration professionals, is still an RMR model business. Its customers remain residential and commercial. Its services still revolve around intrusion security and fire for the most part.

Of course you didn’t see remote access to systems, particularly cameras, years ago, but I don’t think we are seeing the devices that were introduced by Captain Kirk in “Star Trek” just yet. I’m far from technical but I’ll venture to say that 5G is around the corner and will begin making headway this year or next.

The security and fire alarm industry continues to grow beyond smaller mom and pop operations and we see a good deal of consolidation.

There is still plenty of room for the smaller firms, and I think there always will be, but giant alarm companies, some with outside money, continue to grow by acquisition and aggressive sales tactics.

Monitoring centers also have come into their own and are going to continue to thrive as an essential service to the alarm industry. Efforts by municipalities to usurp the private monitoring centers will probably continue, and likely fail.

Manufacturers are likely to continue trying to figure out how to get into the RMR game and we may see more dealer or distributor programs.

Just be careful to retain your own RMR on your own contracts. The name of the game in the alarm industry is still building equity through proper contracts with RMR and cashing in with a sale of accounts either as a structured plan to continue operations or retirement plan.

We will continue to see greater scrutiny of your operation by insurance carriers before they commit to writing your E&O insurance coverage. There is a good reason for that. The trend of a higher level of due diligence being applied to reviewing customer contracts will persist.

We are seeing more subscriber challenges to more provisions of the alarm company contract, and a disturbing pattern in which certain categories of subscribers are demanding their general vendor agreement be signed, sometimes refusing to sign or incorporate the alarm company contract with that vendor agreement.

Couple this with the more intensive attention courts are giving to enforcing alarm contract provisions that preclude or limit common law remedies and rights, and we are likely to see more exposure and liability for alarm companies, especially those failing to keep their contracts up to date.

The law in all jurisdictions continues to enforce the alarm contracts and it’s important to be mindful that the alarm contract (and I use that term to include all the types of security and fire, including nonalarm electronic systems such as access control and cameras) provides the first layer of protection.

The contract is also the single most significant criteria for creating equity that raises the value of your business. Keeping your contract updated is just as important as keeping your license current because ignoring either one will jeopardize your business and livelihood.

There’s going to be plenty of same old same old in 2020. But change is coming. If you can’t imagine it, think about the changes from 1920 to later years. We know that technology is moving much faster today so how can we even conjure up what 2050 or 2090 will look like?

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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