Contract legislation in NY would affect dealers, monitoring firms

Industry experts say New York senate bill would create liability and insurance concerns


A new piece of proposed legislation in New York would significantly affect the contracts that alarm monitoring and security installing firms use, if accepted in its current form.

According to the summary of NY Senate Bill 2074, it "declares void and unenforceable certain contract terms indemnifying or exempting manufacturers, sellers and/or monitors of burglary protection systems from liability for negligence; such terms must provide for recovery of no less than the cost associated with the installation, service and maintenance provided by the manufacturer, seller and/or monitor; applies only to agreements entered into after the effective date of this act."

What the bill affects are what are known as exculpatory clauses and limitation of liability clauses which protect equipment manufacturers, installing firms and security monitoring companies, according to Ken Kirschenbaum, Esq., a New York lawyer who specializes in contracts written for security systems installations and monitoring.

"New York's General Obligation Law does have provisions that restrict or prevent exculpatory language in contracts for certain industries," explained Kirschenbaum. "The alarm industry is not one of these industries. Presently every state and every jurisdiction in the United States recognizes and enforces the exculpatory and limitation of liability clauses, perhaps with some minor restriction, usually unrelated to the actual design and purpose of the alarm system."

Kirschenbaum said that this is not the first time this legislation has been proposed, but this time the bill has recently passed the New York State Judiciary Committee, which makes it clear that this piece of legislation may have more momentum than in years past.

The bill is currently being opposed by the New York Burglar & Fire Alarm Association (NYBFAA) and the Electronic Security Association (ESA), formerly known as the National Burglar & Fire Alarm Association.

"The bill would have a devastating effect on insurance creating a deteriorating situation for security alarm dealers and monitoring companies where insurance could become scarce or unavailable," said Tim Creenan of Amherst Alarm in Amherst, N.Y., and legislative chairman for the NYBFAA. "Many small businesses would be forced to close their doors and those remaining would be forced to charge such a premium for their services that alarm systems would become unaffordable for most homes and businesses."

The danger, Kirschenbaum said, is that "any crack in the shield [of exculpatory and limits of liability clauses] is going to likely affect laws in other states; perhaps spread to all states."

Kirschenbaum's concerns about the spread of this legislation are shared by ESA's Director of Government Relations John Chwat.

"State bills in California and New York have a tendency to be copied by other states in rapid order," Chwat said. "If this bill survives the year-long session in New York, it will generate copycat bills in the 2011 state legislative sessions nationwide. This bill is a real threat to the security industry and we need to stop it."

More information: Included below is a status report, memo and the bill's text:

S2074 Summary
Declares void and unenforceable certain contract terms indemnifying or exempting manufacturers, sellers and/or monitors of burglary protection systems from liability for negligence; such terms must provide for recovery of no less than the cost associated with the installation, service and maintenance provided by the manufacturer, seller and/or monitor; applies only to agreements entered into after the effective date of this act.

S2074 Actions
S2074 - REFERRED TO JUDICIARY - Feb. 11, 2009
S2074 Committee Meetings
Judiciary: Apr 8, 2010: Chair: John Sampson / Location: Room 124 CAP

S2074 Memo
BILL NUMBER: S2074

TITLE OF BILL : An act to amend the general obligations law, in relation to declaring agreements indemnifying or exempting manufacturers, sellers, and/or monitors of burglary protection systems from liability for negligence void and unenforceable

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