This month’s magazine focuses on cybersecurity; my column does, too.
If you read me regularly, you may recall columns and articles regarding a class action lawsuit filed against ADT where plaintiff, a residential subscriber, alleged ADT’s wireless home security equipment that could be hacked by third parties (see www.securityinfowatch.com/12067881).
As a result, the complaint claimed, signals from ADT’s systems (from panel to peripherals and back again) could be intercepted and interfered with by persons who wanted to gain access to premises. This month’s column provides an update – and a resolution from ADT’s perspective.
Since I last wrote about the initial class action lawsuit (Baker vs. ADT – read the full complaint at www.securityinfowatch.com/12022162), additional groups of plaintiffs filed similar class actions against ADT in other state and federal courts. All said, ADT faced consumer protection-type class action lawsuits in state or federal courts in four different states – California, Illinois, Arizona and Florida.
Generally speaking, the various class plaintiffs claimed that third parties – burglars – could disable or suppress ADT’s residential security systems or cause those systems to activate where there actually was no security breach. According to plaintiffs, would-be burglars could do so in order to determine if police were dispatched in response to an alarm and, waiting until police were not dispatched, in order to strike. At least one plaintiff also alleged hackers could use a subscriber’s security cameras to spy on subscribers while in the premises.
The crux of the legal claim was that ADT told its customers the systems were secure when they were not and that ADT knew the systems were not secure.
Following months of expensive discovery, including 17 depositions and ADT’s production of 45,000 pages of documents, extensive settlement negotiations and a two-day mediation conference, ADT recently announced a $16 million settlement of the lawsuits, translating into a nationwide class settlement, the payment of legal fees for class counsel and monetary awards for subscribers ranging from $15 to $45. The amount that goes to subscribers seems quite low given plaintiffs’ allegations, but that is typical of many consumer class actions.
The class consists of all residential subscribers between 2009 and 2016. The settlement excludes a subscriber’s claims for personal injury or property damage (preserving subscriber claims for catastrophic losses).
The Impact
Getting sued is bad enough, but class action lawsuits for business defendants can be especially terrifying for two reasons. First, more and more insurance policies exclude coverage for class actions – meaning that if you get hit with one, you may not have an insurance company to reimburse rather significant legal fees. Second, class action lawsuits require specialized legal counsel – lawyers experienced in defending companies who know how to protect your interests. Those lawyers – and the class action process – are extraordinarily expensive.
I suspect the potential problem runs deeper than just ADT. How do you know if the wireless equipment your company installs can be hacked? Unless it is in writing and in your supplier’s contract, chances are you are not adequately protected. It is unlikely the agreements you have with equipment manufacturers provide you or your subscribers any protection.
For your part, you may want to make sure your equipment is not susceptible to the same sort of issues. One way to deal with this may be through your subscriber contract – after all, a good form of contract alerts subscribers to the fact that no system is foolproof; in fact, my form of contract addresses the wireless security issue directly.
Another way to protect your company may be to deal with the possibility of a class action in your subscriber agreement. You can try to limit a subscriber’s right to bring a class action, but it is not as simple as some think – especially when trying to preserve contract-based liability protections in the event of a catastrophic loss. You should also check your insurance coverage.
Eric Pritchard is a Philadelphia Lawyer who works to make the world safer for security and life safety providers. Reach him at [email protected]. This column does not constitute legal advice; please contact an attorney with questions.
