Court Negates $4M ADT Ruling; Alarm Industry Reassured

TRENTON, N.J. —The alarm industry breathed a collective sigh of relief on news that an appellate court in New Jersey reversed a $4 million judgment against ADT in a case that involved a burglary of computer equipment from a warehouse. 

In 2002, ADT installed an alarm system for Synnex Corp., a New Jersey-based computer company. About six months after the installation, Synnex was burglarized and lost an estimated $8 million worth of equipment. An investigation revealed that the intruders disabled or destroyed parts of the alarm system, including the cellular backup. 

The insurer of the stolen equipment, Mitsui Sumitomo Insurance Group, paid Synnex a multimillion-dollar settlement. Sumitomo then sued ADT under its subrogation rights in Synnex’s name. The complaint alleged that ADT had been negligent both in designing the burglar alarm system and in communicating with Synnex after it received alarm signals on the night of the burglary. ADT moved for summary judgment during the discovery stages of the case based on an exculpatory clause in the contract. 

However, a state court judge ruled the clause was not enforceable. According to the judge, the absence of multiple signatures on the original contract by authorized representatives of ADT — the contract was signed by one ADT representative, but should have been approved by at least two company signatories — precluded ADT from relying upon the exculpatory clause. 

The judge allowed the case to proceed to a jury, which would eventually decide ADT was liable for half the $8 million paid by the insurer. ADT filed an appeal to the Superior Court of New Jersey, Appellate Division, arguing the judge should not have negated the contract simply because one of the ADT representatives failed to sign the contract. The appellate court agreed and reversed the jury’s decision, binding both parties to the terms of the contract, including the exculpatory clause.

(For an additional perspective on this story, see the letter on page 4 in the September issue.)

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