The subscriber argued the actions of ADT’s installation technician in assuring plaintiff the system worked after the upgrade amounted to fraud, entitling plaintiff to avoid the contractual risk protections as a matter of law. The court rejected that argument as well, probably because the subscriber failed to raise the argument until late in the case. On appeal, the federal circuit court affirmed the trial court’s ruling in enforcing the liquidated damages provision.
The bottom line for the industry is that courts will continue to enforce risk allocation clauses in electronic security contracts. This means that well-drafted contracts will go a long way to dissuade subscribers, insurers and their lawyers from pursuing claims against your company. Making sure your contracts have the necessary protections to limit your company’s liability now can save you thousands—or hundreds of thousands—of dollars in the long run.