A recent case decided by the United States Court of Appeals for the Sixth Circuit should serve as a reminder to alarm companies nationwide of the importance that properly drafted contracts play in operating an alarm business. Following a burglary at a jewelry store to which ADT Security Services, Inc. (“ADT”) did not respond, the customer brought suit claiming, among other things, that its alarm system had been negligently designed. The subscriber defeated ADT’s motion to dismiss the complaint, with the Court concluding that ADT’s alarm contract was ambiguous and, therefore, not effective in dismissing all of the subscriber’s claims.

What was the ambiguity in the alarm contract that the Court found fatal to ADT’s motion?

After relying on the alarm contract to dismiss, among other claims, the Plaintiff’s claims of negligence and gross negligence, the Court ultimately ruled that ADT was not entitled to dismissal of the breach of contract claim because the contract itself was ambiguous for including conflicting provisions regarding ADT’s liability. ADT had argued that the contract barred all claims for damages. The Court noted that while the alarm contract contained a waiver of subrogation provision that shielded ADT from liability for claims brought by the subscriber’s insurance company, the same clause also purported to limit damages to $1000 in those circumstances where ADT were to be found liable. The Court ruled that this language created an irreconcilable ambiguity that could not be resolved through ADT’s motion to dismiss.

Protect Your Business from Crippling Liability With Properly Drafted Alarm Contracts

The decision out of the Sixth Circuit is another high profile example of the pitfalls that alarm companies can experience when utilizing poorly written contracts. Even industry leader ADT could not escape the consequences resulting from a faulty alarm contract, as it was unable to rely on the protective provisions of its contract to ensure a full, quick and favorable resolution of a lawsuit brought by a customer. Accordingly, in order to avoid the fate that befell ADT, it is critically important for alarm companies to work with knowledgeable counsel that can ensure that the alarm business has proper contracts that offer both the strongest possible protections and maximize business value.