A pending lawsuit against Tyco Integrated Security ("Tyco") in the federal district court for the Southern District of Florida went to trial last week. The facts and procedural history of this case should serve as yet another reminder that a properly drafted alarm contract is one of the most important assets to any company operating in the security industry.
How did Tyco's contract fail to protect Tyco in this lawsuit?
The lawsuit was brought following the theft of nearly $80 million worth of pharmaceuticals from a distribution facility to which Tyco had contracted to provide, among other things, premises security and monitoring services. Before the burglary, and in anticipation of submitting a new bid proposal at the expiration of the contract, Tyco conducted a survey and needs assessment for the distribution facility. In the assessment, Tyco highlighted the location of the existing motion detectors and door contacts, specified the blind spots in the then-existing video surveillance monitoring, and identified the locations for placement of recommended equipment. Shortly thereafter, a theft occurred at the distribution facility in which the burglars entered through both a section of the roof and through an area of the facility that Tyco's report had flagged as being unmonitored.
The complaint alleged, among other things, that Tyco failed to safeguard the confidential information contained in the assessment. In response, Tyco filed an early motion to dismiss the complaint, relying on the underlying contract's waiver of subrogation and shortened statute of limitations provision. The Court denied Tyco's motion, however, finding that Tyco could not rely on the contractual protections because the Plaintiff's claims stemmed from Tyco's alleged breach of a duty beyond the contractually defined scope of work, which was limited to the provision of equipment and monitoring services, and did not contemplate the safeguarding of information.
Protect Your Business With Properly Drafted Alarm Contracts
This case further illustrates that even industry leaders, such as Tyco, are not immune from the consequences resulting from a deficient alarm contract. By failing to take the necessary steps to limit its liability beyond the narrowly-defined scope of work in the contract, Tyco has found itself embroiled in years-long litigation, facing tens of millions of dollars in potential liability. Accordingly, in order to avoid a similar fate as Tyco, 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.
If you are interested in this topic, need help with your contracts or wish to set up an alarm or security venture, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.
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