Tyco Integrated Security-Eli Lilly Case Shows Scary Exposure Security Providers Can Face

Security company prevails but had to persevere six years of uncertainty in $60 million lawsuit.

The largest reported alarm defense case in history began its story on March 14, 2010 when five burglars cut their way through the roof of pharmaceutical company Eil Lilly’s warehouse and stole $60 million of Prozac, Zyprexa and other prescription drugs. The burglars were caught, convicted and sentenced, except one who has yet to be sentenced. Three are going to prison and one got probation so far. While the criminal trials were prosecuted ADT, now Tyco Integrated Security (TycoIS), was sued by Eli Lilly’s insurance carrier, National Union Fire Insurance Co. of Pittsburgh.

The theory of the case was that ADT had done a survey of the premises detailing the deficiencies in electronic security protection and that somehow, through ADT’s negligence, the report made its way to the burglars who used the information to successfully break into the premises. Allegedly they were able to learn from the report what part of the roof was vulnerable, how to disarm the alarm system and where to part a tracker trailer out of view of surveillance cameras.

The case was tried before a jury in federal court in Miami, Fla., which returned a verdict in favor of TycoIS. TycoIS reportedly defended by claiming that the burglars did not have the confidential report.

Only a handful of alarm companies could have survived this litigation, mentally and monetarily. Undoubtedly the claim of $60 million was well beyond insurance coverage carried by almost all alarm companies. That dollar amount is also beyond the value of all but the top alarm companies, so a loss in the case would bankrupt the alarm company. How would you like this hanging over your head since 2010? The defense cost alone might have been enough to bankrupt a majority of alarm companies. Keep in mind that your insurance carrier can always tender your policy limits, leaving you to fend for yourself. So if you carrier’s limit is $1 million in coverage, in this case it may have caved in long ago.

What added to the stress of this case was the uncertainty of the jury trial. That can be a real crapshoot, even in federal court, which is often thought to be a forum where justice is more likely to prevail because of a higher caliber of judge and jury; still not a comfortable place to be.

The theory of the case, as reported in the news, is interesting. Presumably and hopefully, ADT’s report had a number of “protective provisions” and “disclaimers” just in case errors were made (though ADT didn’t ask me to write or review it – too bad and too late for them), but the theory of the case apparently wasn’t the efficacy of the survey or report, but the failure to maintain and safeguard the report. A contract would have to be very carefully drafted to consider that contingency, and quite frankly it’s one thing to have exculpatory and limitation of liability provisions applicable to your breach of contract or negligence in providing your alarm services, and quite another to try and have those provisions apply to your failure to safeguard reports that would increase a customer’s security risks.

The news report I read didn’t mention what should be an obvious question. Since the authorities captured the burglars it should have been easy enough find out if they had the report and how they got it. That could have been through depositions in the civil case or through some cooperation by the criminal prosecutors. Since the five pled guilty that information regarding the details of the planned burglary should have been part of their elocution.

In the end, congratulations are due to TycoIS.

About the Author

Contact:

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.

Security Is Our Business, Too

For professionals who recommend, buy and install all types of electronic security equipment, a free subscription to Security Sales & Integration is like having a consultant on call. You’ll find an ideal balance of technology and business coverage, with installation tips and techniques for products and updates on how to add sales to your bottom line.

A free subscription to the #1 resource for the residential and commercial security industry will prove to be invaluable. Subscribe today!

Subscribe Today!

Get Our Newsletters