A federal court in Utah recently issued what may become an important case for alarm companies providing video monitoring, video verification, remote guarding, talk-down service and other interactive monitoring services.
In Garff Enterprises, Inc. v. Netwatch North America an intruder broke into an automobile dealership. The monitoring system detected the intrusion and transmitted alarm conditions to the monitoring center. The monitoring specialist reviewed the images but mistakenly concluded that the person was authorized custodial staff.
The alarms were isolated. No voice-down warning was issued. No customer notification was made. The intruder allegedly stole a Ferrari and caused more than $300,000 in damages.
I am not aware of any interactive video monitoring lawsuits; this may be the first.
There seems to be operator error by not recognizing an intruder at a car dealership who ended up stealing a car and causing damage.
What Did the Judge Say in Garff Enterprises vs. Netwatch?
The judge described how the service was supposed to work and what was done wrong:
Netwatch’s security monitoring system operates in the following manner. When Netwatch’s video monitoring software detects motion within a customer’s building, it triggers an “alarm condition.” The system then creates a GIF—a collection of three sequential still frame photos from the camera associated with the alarm—which is sent to an offsite Netwatch Monitoring Specialist.
The Monitoring Specialist then reviews the GIF and determines a proper response. If the Monitoring Specialist observes the alarm condition was a false alarm or triggered by an authorized person, such as a night janitor, the Monitoring Specialist will “isolate” the alarm for a period of ten minutes.
Isolating the alarm temporarily “turn[s] off the alarm[ ]” for the Monitoring Specialist. This allows the Monitoring Specialists to focus on detecting intrusions elsewhere and not be overwhelmed by false alarms. However, if the Monitoring Specialist detects a potential threat, they will review the live camera feed.
Should the live feed show an intruder on the premises, the Monitoring Specialist performs a “voice down” where they order the unauthorized person—through installed speakers within the premises—to stop and informs the intruder they are notifying law enforcement. The Monitoring Specialist will then contact a list of individuals previously designated by the client on its “Protocol Form” and inform them of the intrusion.
Garff Enterprises sued for breach of contract, negligence and gross negligence. The facts may have supported errors by the operator:
On July 23, 2023, an intruder entered Garff’s downtown location by breaking a glass door. The Netwatch monitoring system triggered multiple alarms for the intrusion. However, instead of responding to the intrusion by issuing a voice down and contacting the proper individuals pursuant to Garff’s protocol, the Monitoring Specialist isolated the alarms for 10 minutes.
The Monitoring Specialist later stated he had mistakenly determined the intruder was authorized custodial staff because the man “was not dressed as a normal intruder.” Garff alleges the intruder stole a 2019 Ferrari 488 Pista owned by a Garff customer and damaged several other exotic luxury vehicles in the showroom. The intrusion caused damages in excess of $300,000.
Legal Analysis of the Case and the Judge’s Ruling
Netwatch’s contract with Garff Enterprises had the protective provisions we expect in this industry. The judge focused on the “no guarantee and no liability” language, but, most importantly, Garff did not oppose dismissal of the breach of contract cause of action, deciding to rely on the negligence cause of action.
The negligence and gross negligence claims failed because of the economic loss rule. The economic loss rule is one of the most important legal doctrines protecting alarm companies and monitoring centers. It is also one of the least understood.
The concept is simple: When parties enter into a contract and one party claims that the other failed to perform the very service required by the contract, the claim belongs in contract, not tort.
In other words, if the complaint is that the monitoring company failed to monitor properly, failed to notify properly, failed to dispatch properly, failed to issue a voice-down properly, failed to supervise properly or otherwise failed to perform its contractual obligations, then the customer generally should not be permitted to simply relabel the claim as negligence and avoid the contract terms.
When there is a written contract, the alarm company’s duty to perform is pursuant to contract and the consequences of not performing or performing in substandard way is a breach of the contract, not negligence. In order for there to be a negligence cause of action, there needs to be an independent duty apart from the contract.
The general principle of tort law that every person must act reasonably under the circumstances is not enough to create a separate duty when there is a contract in place for the very acts or failure to act that allegedly caused a loss.
This was a video monitoring agreement; the duty arose from the contract, and the contract governed that relationship. Had there been no contract or the contract was successfully contested the decision could have been very different.
The Commercial All in One and Residential All in One cover video monitoring. There is also a separate agreement for Camera Service [if that’s all you do], Video Doorman and Virtual Guard Service, which is video and audio remote gate service.
