7.26.22 – SSI – Ken Kirschenbaum
Legal expert Ken Kirschenbaum explains why the decision of this ADT lawsuit is likely to come back to haunt the alarm industry for a long time to come.
A homeowner’s insurance carrier recently sued ADT for $700,000 for water damage to their home caused by freezing pipes. According to the complaint, ADT agreed to install and monitor low temperature in the home. It’s alleged that ADT failed to notify anyone of the low temperature.
As I read this the tail of “Three Blind Mice” kept coming to mind. The judge eventually got around to an acceptable decision, though this case is likely to come back to haunt the alarm industry for a long time to come. Thanks ADT; and yes, it’s your fault. Why? Three reasons, at least.
First, ADT either didn’t have a written contract (unusual for ADT) or lost it. ADT claimed it couldn’t find the contract and tried an end run, unconvincingly apparently. But the failings of the plaintiff subrogation counsel saved ADT, somewhat, because the complaint did not separate the allegations supporting the complaint’s three causes of action: breach of contract, negligence and gross negligence.
Second, ADT moved the case form an upstate New York State court to a New York upstate federal court. Why the ADT attorneys thought they would do better in federal court is beyond me.
For one thing, appeals in federal court are limited while the case is making its way to final judgment. Also, a federal judge will look to what the state’s highest court has ruled on the issues, and so you have a federal judge trying to interpret what the state court has previously ruled.
In this case, the federal judge decided to discuss a state court ruling dealing with a large monetary NYC fire loss where New York’s highest court ruled there are times that even a breach of contract can support an independent tort claim (for negligence).
So far, that NYC case hasn’t had much traction adverse to the alarm industry, but that is very likely to change as a result of this new federal court decision. On behalf of subrogation lawyers and their insurance carrier clients as well as alarm customers, thanks ADT! If this was a state court decision there would be chance of appeal, but not in this federal case.
Third, and finally, ADT’s lawyers decided to make a motion attacking the pleadings, something I wrote about in the March 23 article, “Medical Alert Lawsuit Survives Motion to Dismiss in Death Case in GA.”
As I mentioned there, a pre-answer motion to dismiss based on failure to properly plead a cause of action rarely works. What it does do is generate lots of money for the lawyers and often leads to bad decisions (bad in the sense of being prejudicial to the litigants and also making bad law, which it might in this ADT case).
If ADT didn’t have a contract it could find, it probably should have considered a different defense strategy that didn’t include a pre-answer motion to dismiss.
This case certainly drives home the necessity of using, getting signed and retaining proper alarm contracts with your customers. Do not work without a proper contract! Of course, my opinions expressed here are my own, for what they are worth. We all wish ADT well in the case (Great Northern Insurance Company A/S/O Shira White v. ADT), which you can keep up with at the website noted above.