This Month’s Article will deviate somewhat from our normal review of current litigation cases: as a fairly new entity has arisen in the security industry: the Management Company.

In the past, when a security provider dealt with a gated community, an association, an apartment building or an apartment or business complex, the company normally dealt with the principal or their attorney. The contract was negotiated and entered into between the security company and its direct subscriber.

Today, many of these facilities have engaged management companies to represent them in dealing with all of their vendors. The management companies have prepared their own agreements in dealing with their vendors. To summarize, the management agreement requires the vendor (security company) to indemnify them for anything that goes wrong. This is totally contrary to the terms and conditions contained in the contract the security company has with its subscriber.

The security company will normally have in their contract, among other things, a limitation of liability provision, a liquidated damage clause and a third party indemnification provision. These provisions are essential, as the security company is not an insurer and only provides additional protection. The subscriber cost for insurance is based on a premium determined by the value of what the insurance company is protecting. The security company, however, charges its subscriber based on the value of the system installed and the service to be provided, not on the value of the person or property where the system is installed.

Why is this important? The management company doesn`t care. They want the security company to indemnify them. Their agreements generally seek an indemnification for any claims or damages of any kind or character arising from any actual or alleged acts of the security company.

We have counselled our clients NOT to sign these agreements as submitted. We have been successful in negotiating with the management company to remove the indemnification provision from their agreements in most cases; but occasionally the management company refuses. We understand that the management company can be a very valuable source of business, and it may be prudent to maintain a good relationship with them. If, however, they refuse to remove the indemnification provisions, our advice to our client is to suggest the subscriber go elsewhere.