When preparing contracts for companies providing burglar and fire alarm services, a third-party indemnification provision always should be included in the contract.

In a recent case decided in Connecticut, the plaintiff tenants filed an action against the defendant corporation claiming that the tenants’ property was damaged because the defendant corporation failed to monitor fire and sprinkler alarm systems.

In its answer, the alarm company set up a defense claiming that the client agreement that the corporation had with its building managers contained lawsuit restrictions which limited the damages recoverable and rendered the tenant’s action time barred.

The tenants filed a motion to strike the defense, asserting that the client agreement the corporation had with the building managers did not apply to the tenants, who are not parties to the client agreement referenced in the company’s defense.

The trial court agreed with the tenants and granted the tenants’ motion to strike the alarm company’s defense. This was done on the grounds that a non-party should not be subjected to suit limitations contemplated by the contracting parties, because a contract cannot be enforced against a person who is not a party to the contract.

In discussing the case, the appellate court pointed out that on a contractual obligation, there must be privity of contract. The plaintiffs are not parties to the client agreement referenced in the defendant’s special defenses.

In referring to previous case law, the court held that the plaintiffs are not successors in interest to or express beneficiaries or subrogees of the contracting parties’ rights or obligations. Plaintiffs, therefore, should not be subjected to suit limitations contemplated by the contracting parties. Therefore, the motion to strike the defenses was granted.

It should be noted that had the security company included a third-party indemnification provision in the contract, the liability would have been shifted to the owners of the building or their insurance company, where the exposure belongs.

Such a provision would have stated that should any third party not a party to the contract file an action against the alarm company, then the customer, in this case the owners of the building, would indemnify the alarm company for any loss or damage.

Security dealers and systems integrators should make sure that their contracts are reviewed and up-to-date for whatever security services they are providing, whether burglary, fire or others.

One last item: the court pointed out that the case is unreported and may be subject to further appellate review.