Legal Watch--3 Ways to Minimize PERS Claim Risks

This article originally appeared in the July 2013 issue of SD&I magazine.

We're all familiar with the television commercial in which poor Mrs. Fletcher moans: "I've fallen and I can't get up" and the dispatcher soothingly advises that help is on the way. The image and script doesn't begin to describe accurately the breadth of what the Personal Emergency Response System (PERS) involves for the installing contractor. It does, however, illustrate one of the principal differences between providing PERS services and providing other electronic security services. PERS services involve the life and health of real individuals and specifically people who are in vulnerable situations, including the elderly, ill or infirm.

PERS providers can minimize their risks three main ways:

1. Purchase comprehensive insurance coverage
2. Know and fully comply with state and federal laws and regulations
3. Use enforceable contracts with well-crafted provisions

Those of you who've heard my presentations and read my previous articles are probably thinking "this isn't anything Pritchard hasn't said before." But take a moment to recall poor Mrs. Fletcher. Now imagine Mrs. Fletcher's lawyer telling the jury about poor Mrs. Fletcher, all alone and injured, when she relied on your company to protect her. Not as funny as the commercial's verbiage, is it?

Comprehensive insurance coverage

You already know that insurance protects you by transferring the risk of loss to a third party that is obligated to provide you with defense and indemnity in the event of a claim. What you may not know is that traditional security industry insurance programs are unlikely to provide adequate coverage to those of you offering PERS services.

Many of you may be concerned that your cost of insurance will skyrocket if you disclose your PERS services. Some of you might even be tempted to omit it from your application, hoping that you never need to call on your insurance company for a loss.

Don't do it! Not only is it not worth the risk — in addition to the potential risk of high-value PERS-related claims, you could jeopardize your entire insurance program by failing to fully disclose material information. Comprehensive coverage is not as expensive as you think and your insurer may be able to add it to your existing program. Use an insurance agent with expertise in the industry, however, since she not only knows how to provide comprehensive coverage, but will also advise you on contract provisions like limitation of liability clauses that may be required as a condition of coverage.

Comply with state and federal laws/regulations

• Do you know the answers to these questions?
• Do you need to be licensed to provide PERS in states in which you market your services?
• Does your monitoring facility need to be licensed in states where your subscribers are located?
• Does your sales program need to comply with the FTC's Door-to-Door Sales Act regulations? What about state right-to-cancel provisions?
• Does your contract meet state "plain language" laws and consumer protection laws?

If you don't know the answers to these questions, you leave yourself open to substantial legal and financial risk, including an unenforceable contract. Even if your contracts are legally enforceable, they limit your risk of liability if they're not properly drafted. Subscriber contracts don't make good do-it-yourself projects, especially in the PERS context since there are a number of state laws that specifically apply to these services and limit the contract's enforceability. As with insurance programs, make sure you consult a lawyer who has both industry experience and knowledge of specific PERS-related issues. And once you have a well-drafted contract, make sure you use it for each and every account. Otherwise, you're putting your hard work and your company at risk.