Legal Watch: Don’t Become Part of a Conspiracy

Feb. 11, 2015
Making installation agreements that violate the law is a quick ticket to ruin

Lawyers love hypotheticals. This month’s issue is focused on installations, so let’s consider hypotheticals applicable to the installation of fire detection systems.

Scenario #1: A new car dealer (ABC Cars) realizes it can earn more money by selling airbags removed from new cars received from manufacturers. When the company sells an airbag to a third-party, it receives a bounty for the airbag, plus it sells the car at a significantly lower price. They disclose the absence of air bags to the consumer; thus the car dealer and consumer enter into an agreement for the sale of modified car at a significantly reduced price. Everyone wins, right? The dealer makes more money selling the airbags and the car; the market for airbags benefits; and the consumer saves money buying a new car at a reduced price.

It’s a silly hypothetical, right? Everyone knows that consumer protection laws require airbags to protect drivers and passengers and new car dealers can’t remove airbags from new cars without violating federal safety standards.

Scenario #2: Assume the same facts as above. Assume further that a purchaser of a modified car (Paul Purchaser) is in an accident while driving Peter Passenger. Passenger is injured significantly, and these injuries are exacerbated by the lack of airbags. Passenger sues Purchaser and ABC — alleging that Purchaser and ABC conspired to violate federal safety standards by removing the airbags. Under the law, an agreement to do something unlawful is a conspiracy, which can give rise to significant potential liability, including a violation of criminal law.

Scenario #3: Sally Subscriber contracts with XYZ Alarm Company to install a fire alarm system at a facility (residential or commercial). The state fire code applies to the installation and requires certain types of smoke detectors in specific places. XYZ’s written proposal indicates a code compliant fire alarm system; however, Sally, for financial reasons, asks XYZ to install fewer detectors than required and not to comply with code. XYZ agrees, reasoning that it has informed Sally of what the fire code requires and, after all, Sally is the authority having jurisdiction at the premises, so she can choice to waive those requirements. After all, some fire protection is better than none — plus XYZ has a contract provision that indicates Sally selected the system even though it may not strictly apply with the fire code.

Should be no problem, right? Wrong. Assume there’s a fire at the premises with significant property damage, physical injuries or even death. Under those circumstances, I think there is a significant likelihood that the “agreement” between Subscriber and XYZ to ignore the fire code (i.e., to violate the applicable law) will result in a conspiracy claim against XYZ in any litigation. I don’t see any difference between the car dealer ignoring the airbag and XYZ ignoring the fire code. I think that’s true for any fire system installation that doesn’t satisfy the applicable code.

I would also be concerned that a violation of the law constitutes gross negligence — the grounds most often used to get around a limitation of liability clause — or even whether XYZ’s liability insurance will provide a defense and indemnity in a case in which its insured is alleged to have violated the law, perhaps even a criminal violation, not just a matter of negligence. Nor do I think an AHJ’s inspection provides protection.

Bottom line: installing a fire alarm system in violation of the law is a mistake. Don’t do it, no matter what the incentive or justification. And an agreement doesn’t help. You can’t get the subscriber to “agree” to waive the requirements of law — that’s just a conspiracy.

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