Errors and Omissions Insurance Case Study: Alarm Monitoring

By Laura McCormick

The following is a claim scenario involving teleservices companies, based on combining facts from actual claims made against the ATSI Professional Liability plan. Following the scenario are some helpful suggestions on how your company can avoid such claims.

A Business Alarm Monitoring Company Is Sued Over Response Delays

A teleservices and business alarm monitoring company was retained by a department store to monitor its fire and intruder alarms. The client provided the company with protocols, including the procedure to be followed if an alarm was received.

Late one night, the company received notice of an intruder alarm. Pursuant to the protocols provided by the client, the company called the store’s night security staff, but was unable to reach them because the line was busy.

There had been a number of recent false alarms, so the company’s agents tried three times over the course of 10 minutes to reach the store’s security staff by telephone, then called police.

It turned out that intruders had cut the telephone wires, broken into the store’s jewelry cases, and made off with several thousands of dollars worth of merchandise.

The company’s client was reimbursed by its insurer, which, in turn, made a claim against the company.

The basis for the claim was that the company’s agents had not followed protocols when they attempted repeatedly to call the store’s security staff rather than calling police immediately after the first unsuccessful attempt.

The delay of 10 minutes allowed the intruders to take more merchandise and get away before the police responded, the client’s insurer alleged.

The matter was reported by the teleservices company to its errors and omissions insurer. It was determined that the store’s protocols did allow for an initial attempt to call the security staff for verification purposes, but directed that the police should be notified immediately thereafter.

The teleservices company was able to argue, however, that the amount of time that had elapsed would have allowed the intruders to escape with a substantial portion of merchandise anyway. Therefore, a settlement was reached for a sum below the total value of the stolen goods.

How This Claim Could Have Been Avoided or Mitigated

The company’s agents, while provided with protocols and trained to follow them, had altered the protocols because of recent false alarms without consulting the client.

Where there are written guidelines, they should be followed unless the client has directed the teleservices company to do otherwise. If unusual situations arise, the client should be consulted before any protocol procedures are changed.

Agents can also be trained to recognize that unusual situations, such as busy signals, or lack of a response from a source that generally should be available, can be warning signs that mandate immediate action, rather than further attempts at contact.

Often, it is better to act on a false indication than to mistakenly allow a real problem situation to escalate.

The amount of damages in claims such as this can often be subject to legal challenge. Response times for police or firefighters can be questioned, especially as they relate to historical data, along with conditions at the time and the type of situation in question.

More experienced intruders would know they had little time and would likely have gotten away, regardless of the timeliness of the company’s call to the police. Perhaps at the time the incident occurred, all patrol cars were too far from the location to have made it in time. Investigation into all possible factors is necessary.

For more E & O Case Studies, see Laura’s previous article.

[From Connection MagazineJan/Feb 2003]

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