Industry responds to NY bill: Cost for security companies 'would be astronomical'

Legislation could inspire copy-cat legislation, but SSN finds it's unlikely to pass
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Thursday, April 15, 2010

ALBANY, N.Y.—The alarm industry is mobilizing forces to defeat a bill in the New York Legislature some say could send alarm companies’ insurance costs sky high and inspire “copy-cat” legislation in other states.

While the bill was passed out of committee last week, however, it appears highly unlikely that the bill would be voted on during this legislative session. “This bill is not a priority for the Senator. His primary focus is the budget, public safety and individual rights,” a senior staff member for Sen. Jeffrey Klein, who introduced the bill, and who would only speak on the condition of anonymity, told Security Systems News.

While it may not be an immediate threat, the time to act is now, said Tim Creenan of Amherst Alarm and NYBFAA legislative chairman.

If the bill, S2074, did become law, “insurance rates for security companies would be astronomical or may not be available at all. It would be a disaster for the industry,” Creenan said. “It would also be a disaster for the consumer, because it would become much, much more expensive to get security systems because companies having to pay for very high insurance would have to pass that cost on to the consumer.”

The bill seeks to get rid of the limit of liability for alarm companies, as well as monitoring companies and manufacturers of security systems. On April 8, the bill was voted out of the Senate Judiciary Committee. The N.Y. Senate has not yet scheduled the bill for a vote.

Security Systems News contacted Sen. Klein’s office to find out why the senator introduced the bill. A representative from the senator’s office said that he would not be available to answer questions today. Klein represents parts of the Bronx and Westchester County and is deputy majority leader in the NY Senate. He has served in the Senate since 2004; before that, he served in the state assembly for 10 years.

Creenan urged all alarm company owners, manufacturers and monitoring centers to “call your state senator at their local office and in Albany and let them know how this bill would impact your business.”

Eric Pritchard, head of the security practice at Kleinbard Bell & Brecker, agreed that the industry should act now. “It’s very important that the industry cut this off at the pass,” he said. “They need to get all to the folks from NYBFAA and the Metropolitan BFAA involved.”

While it’s well understood within the industry that a limit of liability for security installers makes good sense, it’s not something that’s understood outside of the industry, “there’s a lot of educating the industry needs to do,” Pritchard said. Someone outside of the industry would reason that “you sell me an expensive security system and charge me a monthly rate for monitoring and you have no liability? Huh? What are you talking about?” Consumers do not always understand that limit of liability provisions are “what make electronic security affordable ... and that your alarm company is not your insurer.”

Pritchard noted that New York is at the forefront of understanding this argument. The New York courts “will enforce limit of liability, exculpatory and indemnity provisions,” he said. This legislation, however, “would tie the hands of the court.”

History shows, too, he said, that the industry is wise to fear copy-cat legislation.

New York was the first state to have an automatic renewal statute enacted, for example. Now, “in the last few years many states have picked up the same laws. Before you know it, you’ve got 15 or 25 states with those laws, and [the industry’s] got a problem.”