There are a number of provisions that are expected to be in your agreement with your subscribers.
Generally, these provisions are essential to establish the relationship with the subscriber, set expectations for both you and the subscriber and define the legal obligations and responsibilities.
It’s these parameters that create the equity — the value — in your security and fire alarm business. The drafting of these provisions must be precise in order to provide the intended protection.
While you can call an orange an apple, it’s not. Labeling a provision something doesn’t make it so, either.
The protective provisions generally run against general legal concepts and principles. They are understandable only in the context of the security and fire alarm industry when you have a good understanding of the dynamics the industry faces.
The development of the protective provisions, while perhaps not unique to the alarm industry, evolved over time as alarm customers and third parties became more imaginative in cooking up reasons why the security or fire alarm company should bear responsibility for burglary, fire and related loss.
Ever-Evolving Legal Protections
Because the judges who are charged with interpreting and enforcing the contracts are reluctant to enforce these protective provisions, the need to tighten the wording is constantly changing.
Technology also contributes to the change in exposure, as more and more devices are touted as being essential to safety and maintaining life-safety environments. So, while the titles of the various provisions have remained constant, the wording changes with the times.
Trying to capture the precise wording at any one time is a good start but, without continuous review and monitoring, even the most well-written agreement becomes questionable over time.
Nevertheless, it is important to know what these provisions are and, to some extent, why they are included in security and fire alarm agreements.
Suffice it to say that alarm dealers depend on various vendors. These include, first and foremost, insurance companies and central stations. An exit strategy is also a looming consideration almost from the start of the business: When and how will you sell your business, and how much will you get for your lifetime endeavor?
You should be using agreements with your customers, for one-time sale and installation, and subscribers, those signing up for your recurring revenue services. That is a given.
Don’t Forget These Alarm Contract Provisions
Here are the provisions you should be looking for in your agreements, and if your agreements are not updated at least every two years, they are not likely up to date.
Even contracts from 2025 do not have the latest updates because the contracts evolve continuously because of changes in law, technology, custom and practice.
Here are the provisions your contracts require at a minimum:
Exculpatory clause: This is the most basic of the provisions and the foundation of the others. It is a risk-allocation provision that clearly and concisely provides that you are not going to be liable for loss, even if it is alleged to be caused by your negligence. The effect of the provision: no liability for loss suffered by your subscriber.
Limitation of liability provision: Should you be found liable for loss, the damages you suffer are limited, again, even for your negligence. In view of the nominal amount of the limitation of damage, this provision is often confused with the exculpatory clause.
Waiver of subrogation: As most lawsuits against alarm companies are from subscribers’ insurance carriers suing in subrogation, a waiver of that right effectively bars that claim. This provision can eliminate or successfully defend against a subrogation claim.
Insurance procurement provision: More closely aligned with the waiver of subrogation provision, the insurance procurement provision is important because it shifts primary insurance coverage to the subscriber’s insurance carrier.
The rationale for the provision often escapes even the most astute attorney or contract administrator, who sees this merely as a risk-allocation shift. It actually has a more potent purpose: It bars the subscriber’s carrier from suing you because you too are an insured; a carrier cannot sue its own insured to recoup the loss insured against.
Indemnity: This rounds out the protective provisions. Though effective against the party who signs the security or fire alarm agreement, your contract cannot be used to bind a non-signatory to the agreement. This provision calls upon your subscriber to defend you and pay damages, if necessary, against claims.
All of these provisions are important in their own way. The drafting of the provisions requires expertise and constant review and revision, and negotiating changes in terms is very tricky and fluid depending on the circumstances.
