2010 New York State Senate Bill 2074 would affect alarm and monitoring company contracts' exculpatory and limits of liability clauses.
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:
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 - REFERRED TO JUDICIARY - Feb. 11, 2009
S2074 Committee Meetings
Judiciary: Apr 8, 2010: Chair: John Sampson / Location: Room 124 CAP
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
PURPOSE OR GENERAL IDEA OF BILL : Renders unenforceable contract provisions which indemnify or exempt from liability manufacturers, sellers and/or monitors of burglary protection systems.
SUMMARY OF SPECIFIC PROVISIONS : Adds a new
Section 5-326.1 to the General Obligations Law, to render void and unenforceable contract provisions which indemnify or exempt manufacturers, sellers and/or monitors of burglary protection systems from liability for bodily injury and/or property damage caused by their negligence.
JUSTIFICATION : Currently, manufacturers, sellers and/or monitors of residential burglary protection systems include in their contracts disclaimers and/or indemnification clauses which limit their liability, exempt them from liability, or require the purchaser to indemnify them in the case of a judgment against them. By removing accountability such clauses deny the victims of bodily injury and/or property damage from seeking fair damages arising out of negligence. Because these clauses often appear in "form contracts" the purchaser is often either unaware of the clause, or unable to negotiate or modify any changes and modifications to the contract. Therefore, the consumer must accept the contract as written in order to purchase the system. This measure would afford protections to those consumers who become the victim of a crime as the result of negligence of the manufacturer, seller and/or monitor of a burglary protection system.
STATE OF NEW YORK
Senate Bill 2074
2009-2010 Regular Sessions IN SENATE February 11, 2009
Introduced by Sen. KLEIN -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary 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 THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
Section 1. The general obligations law is amended by adding a new section 5-326.1 to read as follows:
S 5-326.1. AGREEMENTS INDEMNIFYING OR EXEMPTING MANUFACTURERS, SELL ERS, AND/OR MONITORS OF BURGLARY PROTECTION SYSTEMS FROM LIABILITY FOR NEGLIGENCE VOID AND UNENFORCEABLE. 1. EVERY COVENANT, AGREEMENT OR UNDERSTANDING IN OR IN CONNECTION WITH OR COLLATERAL TO ANY CONTRACT ENTERED INTO WITH THE MANUFACTURER, SELLER AND/OR MONITOR OF A BURGLARY PROTECTION SYSTEM RELATIVE TO THE SALE, INSTALLATION, MAINTENANCE AND/OR MONITORING OF A BURGLARY PROTECTION SYSTEM EXEMPTING FROM LIABILITY OR LIMITING THE LIABILITY OF SUCH MANUFACTURER, SELLER AND/OR MONITOR OR PURPORTING TO INDEMNIFY OR HOLD HARMLESS SUCH MANUFACTURER, SELLER AND/OR MONITOR AGAINST LIABILITY FOR DAMAGE ARISING OUT OF BODILY INJURY TO PERSONS OR DAMAGE TO PROPERTY CAUSED BY OR RESULTING FROM THE SOLE NEGLIGENCE OF SUCH MANUFACTURER, SELLER AND/OR MONITOR, HIS AGENTS OR EMPLOYEES, TO AN AMOUNT WHICH IS LESS THAN THE COST ASSOCIATED WITH THE INSTALLATION, SERVICE AND MAINTENANCE PROVIDED BY THE MANUFACTURER, SELLER AND/OR MONITOR IS AGAINST PUBLIC POLICY AND IS VOID AND UNEN FORCEABLE. 2. FOR PURPOSES OF THIS SECTION, A "MONITOR" OF A BURGLARY PROTECTION SYSTEM IS ANY PERSON, FIRM, ORGANIZATION, CORPORATION, PARTNERSHIP, ASSOCIATION OR OTHER ENTITY WHICH, FOR COMPENSATION, RECEIVES SIGNALS FROM A BURGLARY PROTECTION SYSTEM AND TRANSMITS NOTIFICATION TO THE EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD02655-01-9
S. 2074 2 POLICE, OR OTHER AUTHORITIES AND/OR SUCH OTHER PERSONS AS ARE SET FORTH IN THE CONTRACT BETWEEN THE MONITOR AND THE CONSUMER.
S 2. This act shall take effect on the thirtieth day after it shall have become a law and the provisions of section 5-326.1 of the general obligations law, as added by section one of this act, shall apply only to contracts entered into on or after such date.