ADT case could set bad precedent

Attorney's advice: 'Buy insurance till it hurts'
Thursday, October 22, 2009

MINNEAPOLIS--A recent decision by a U.S. District Court judge here could set a very bad precedent for the security industry--where a negligent security company could be found liable and have to pay 100 percent of damages for a murder--even though the murderer intentionally committed the crime.

The case involves a double murder here and security giant ADT. A man and woman were murdered by the woman's ex-boyfriend. The family of the woman who was murdered is seeking damages from ADT, saying the ADT system did not function. Further, the federal judge's opinion says that the murder victims specifically sought a security system that would warn them if the ex-boyfriend tried to break into the house.

It's a complicated and unusual case that industry attorney Eric Pritchard, a partner in the law firm of Kleinbard, Bell & Brecker, where he specializes in security industry matters, sums up this way: "Bad facts, bad case, bad law." And it's not good for the industry, he said.

The case is ongoing and could ultimately be decided in ADT's favor, but U.S. District Court Judge John R. Tunheim on Sept. 28 issued a decision that says that ADT could be "jointly and severally" liable in this case.

What this means, Pritchard said, is that, "The plaintiff can recover 100 percent of the judgment from the negligent security provider even though the negligent security provider is only one percent liable and the intentional wrongdoer [the murderer] is 99 percent liable."

ADT spokeswoman Ann Lindstrom declined comment on the case because litigation is ongoing.

The case has garnered the attention of security company owners. Asked about the case, John Jennings, CEO of super-regional security company Safeguard Security in Scottsdale, Ariz., said the judge's decision "quite frankly should be somewhat unnerving for our industry. I would not be expert enough to comment on the legalese, but I would be concerned [about liability]."

Rich Perry, CEO of Security Networks, a super-regional in West Palm Beach, Fla., expressed the same concerns. "From my perspective, generally all any alarm company can do to protect themselves from this type of situation is: operate their business in an acceptable manner according to industry standards; make sure they have a strong contract that includes all the legal protections and customer indemnities; and, carry an appropriate amount of liability insurance."

Perry noted, "alarm companies are not insurance companies. In other words, we cannot insure that a customer will not suffer a loss. We can only provide a service that is intended to reduce the probability of a loss."

What's a security company owner to do? "It's not an issue that can be dealt with through contracts. You can't contract yourself out of comparative negligent statutes," Pritchard said. "My suggestion is that you insure yourself against the risk. Make sure you've got plenty of insurance. Buy insurance till it hurts."