Legal Watch: Five Trends in Monitoring

May 8, 2014
Tips for navigating the evolving industry from a legal standpoint

It is an interesting time to be in the alarm monitoring business. As an industry, we are at a technological crossroads — the turns we make now will determine our future. Here are a few thoughts from someone who spends much of his day trying to help alarm monitoring providers build their business while staying safe from potential catastrophic risk.

1. This is not your father’s monitoring market. Device monitoring has come a long way from the McCulloh loop. Today’s market is moving away from POTS lines toward cellular and IP communications. More and more, we are tied into the “Internet of things.” As important, what we are monitoring today differs dramatically from what we monitored just ten short years ago.

Increasingly, my practice focuses on protecting clients bringing video to the central station, connecting mobile users to the monitoring facility and exploiting technology to permit industry players to provide sophisticated services aimed at making subscribers safer and more informed.

2. There’s gold in them thar hills! Data plays an increasingly important role in our lives. Big data means big bucks. Google just paid a $3.2 billion for Nest, the maker of smart thermostats and fire detection devices, ostensibly to provide Google a gateway into data in our homes. Many of us are in the home already — why shouldn’t we get our fair share of data monitoring revenue from the home and the office? There’s a ton of data out there to monitor and we happen to be well situated to exploit the data monitoring market. Think big. Think big data.

3. Focus on the foundation. Nothing beats a sound risk allocation scheme. Sure, you should reach for the stars — just make sure you are well grounded when you do. There’s nothing that will protect your company (and your investment) better than a good, sound contract — whether for end-users or alarm dealers.

I am not talking about contracts grounded in the 1970s; in fact, in today’s market, an ancient approach may not adequately protect you. Your contracts should be premised on the realities of today’s market. Besides, there are better ways to protect your company today than to rely on a $250 limitation of liability clause.

4. Address end-user privacy and the potential for data breach. Chances are, you are in the security business, and if you are in the security business, chances are, you are storing subscribers’ personally identifiable information (called “PII” in the data privacy space). That means you need to make sure your customer data is secure (unless you want the distinction of being a security provider with insecure data protection systems). You also need to establish a sound privacy policy — one tailored for your business by knowledgeable counsel; not one copied from someone else’s website.

Keep in mind that data breaches take many forms — not just getting hacked by Eastern European troublemakers. A stolen or errant laptop is as disastrous as getting hacked. Put policies in place to protect your interests. And keep reading, because insurance plays an essential role in protecting your company in the event of a data breach.

5. You can never have too much insurance. My advice on insurance is pretty simple: Buy until it hurts. If you are monitoring in today’s market, it is tough to have too much insurance (no, I don’t make a commission on the sale of insurance).

It is not enough just to increase your policy limits, make sure you have the coverage necessary to do business in today’s markets. If you are storing any form of PII, make sure you have cyber-liability coverage. Otherwise, a data breach means you may find yourself in bankruptcy court risking the loss of your company. Today, most commercial general liability policies exclude this coverage, which means you need to ask and pay for cyber-liability coverage.

If you are an alarm dealer obligated to indemnify a wholesale monitoring facility, make sure you have “incidental contracts” or “insured contracts” coverage to respond to claims for indemnity in loss situations. And make sure you meet with a knowledgeable insurance professional annually to find out what coverages you may be missing.

The bottom line is, do not be afraid to ask for directions, even if you have relied on paper maps in the past.

Eric Pritchard is a Philadelphia Lawyer who spends his workday making the world safe for electronic security providers. He can be reached at [email protected]. This column does not constitute legal advice; please contact an attorney with questions. 

About the Author

Eric Pritchard | Eric Pritchard

Eric Pritchard is a partner in FisherBroyles, a law firm with office throughout the United States and in London. He spends his days trying to make the world safer for the security industry. You can reach Eric at [email protected].