Contract woes in the Sonitrol Security lawsuit

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09/22/2010

I wrote a story back in late August about a lawsuit filed against Sonitrol Security by Core-Mark Midcontinent and it's insurers. The long and short of it was that Sonitrol lost and was judged to have been negligent. ADT, which owned Sonitrol Security back when the loss happened refused to comment since it "does not comment on ongoing litigation."

Here's some of what I wrote back then:

DENVER—Jurors here deliberated over the accumulated facts in an appeal case at the Colorado Court of Appeals and decided in favor of the co-plaintiffs in a nearly decade-long legal battle against Sonitrol Corp. The lawsuit stems from a 2001 fire in which a warehouse owned by co-plaintiff Core-Mark Midcontinent was broken into and burned. The original decision in the lawsuit was that Sonitrol Corp., because of the exculpatory clauses in its contract was only liable for $500 in damages. That decision was appealed, and the result of that appeal, announced on Aug. 18, is that the three co-plaintiffs—insurers Commonwealth Insurance and United States Fire Insurance, and the insured, food distributor Core-Mark Midcontinent—are now owed a total of $18.3 million. Pre-judgment interest of 8 percent per year in Colorado could add millions to that number, according to Cozen O'Connor, attorney for the insurance companies.

The real question now is who will be left footing that rather hefty bill?

Ken Kirschenbaum recently took a brief look at some of the language in the Sonitrol contracts and I thought it was interesting.

Here's some of what Ken had to say:

Where was the waiver of subrogation clause?  This is perhaps the most potent provision in the alarm contract because, as in this case, most cases against alarm companies are brought by insurance companies [incredibly some of the same insurance companies who write alarm errors and omission insurance].  A waiver of subrogation clause will put a stop to the case, but of course the defense attorneys need to raise the clause as a defense.  I could not imagine that the Sonitrol contract didn't have a waiver of subrogation.  Well guess what?  The contract is so poorly written that its hard to tell.  The contract has this provision:

    "Client hereby waives his right of recovery against Dealer for any loss covered by insurance on the premises or its contents to the extent permitted by any policy or by law."

    What the heck does that mean?  Does it sound like "Subscriber hereby waives any right of subrogation any insurance carrier may have against alarm company?"

    How hard was that to say?

Legalese is all Greek to me, but I thought it was interesting anyway. I assumed there must have been something wrong with the contracts that usually protect alarm companies from such cases as these.

By the way, Ken sells contracts for alarm companies... Check him out.