NJ court case may affect liability limitations

Monday, January 1, 2007

SAN FRANCISCO-- At the December California Alarm Association convention, held here, industry leaders were beating the drum to raise awareness about Synnex vs. ADT, a New Jersey court case they say could leave alarm companies nationwide open to liability lawsuits.
Alan Pepper, a partner with Mitchell, Silverberg & Knupp, which represents the alarm industry, told the crowd more than once that they should "be reaching for their wallets" to support National Burglar & Fire Alarm Association efforts to fight the decision.
"The Synnex vs. ADT case in New Jersey could have far reaching implications if the lower court decision is upheld," Pepper said. "Alarm dealers are licensed in many jurisdictions and if this decision is upheld it might be used in other states as an argument that alarm dealers, as a matter of public policy, may not contractually limit their liability," Pepper said.
"This would be contrary to a very long and well-reasoned list of cases that have upheld the limitation and has been a fundamental reason that alarm dealers can offer security to its customers at very affordable prices," he added.
So, what happened in the case? Bart Didden. a past president of the NBFAA and owner of USA Central Station, based in New York, explained that ADT installed a system for N.J. computer company Synnex Corporation. The company was burglarized and lost $8 million worth of equipment.
Synnex filed an insurance claim and was paid $7.1 million by its insurance company, Mitsui Sumitomo Insurance Group. Looking to recoup some of its loss, Mitsui Sumitomo hired a subrogation attorney who noticed that the contract (which had been in effect for three years) was missing one of three required signatures--one from the ADT home office.
Normally an insurance company would not be able to go after an alarm company to recoup its losses. The missing signature, Didden explained, provided Mitsui Sumitomo an opportunity to argue a point and opened a door to go after ADT, which it did in the name of Synnex. The jury found in favor of the insurance company and ordered ADT to pay $4.1 million in damages.
However, Didden pointed out that the most important part of the case is a set of comments made by the judge that are not part of the published decision. He said he believed that ADT's limitation of liability clause was not enforceable because of New Jersey's licensing statute. That statute says that a licensed professional, such as a home inspector, may not limit their liability. As a licensed professional, ADT, he said, should be held the same standard.
ADT is appealing the decision in Appellate Court, and the judge's remarks during the case, though unpublished, will be "at the heart of what the Appellate Court will look at," Didden said.
As Security Systems News went to press on Dec. 11, the NBFAA was awaiting word on whether it would be permitted to file an amicus brief in connection with ADT's appeal. "The request highlights that ... the alarm industry and the public in New Jersey, as well as elsewhere, would be adversely affected if the appeals court were to affirm the ruling of the lower court on this issue," said Georgia Calaway, spokeswoman for the NBFAA.
In the meantime, the NBFAA is soliciting donations to defray the cost of filing the amicus brief.
No one at ADT was made available for comment.