Security Litigation

Best Practices for Managing and Preventing Security-Related Lawsuits

Eddie Sorrells

• Publisher: Butterworth-Heinemann
• Year: 2015
• Print ISBN: 9780128019245
• eBook ISBN: 9780128019375
• Topic: Law
• Subtopic: Information Management
• Index: Law

Security Litigation: Best Practices for Managing and Preventing Security-Related Lawsuits provides practical guidance and examples on how to deal with the most difficult legal issues that security executives face every day, also exploring the key issues that occur before, during, and after a lawsuit. The book demonstrates scenarios that have actually played out in courtrooms, depositions, and contractual negotiations, and provides answers to challenging security litigation questions such as, What does this contractual provision mean if we get sued? Am I in legal trouble if I assign unarmed vs. armed officers and a crime occurs? How do I defend my company without blaming my customer? Increasingly, issues such as security surveys, contractual indemnification, and even marketing language are at the center of lawsuits concerning security practices. Many organizations face security-related lawsuits on an increasing basis, and this book provides a much needed resource to help security professionals successfully navigate the unique nature of security-related lawsuits. Accessibly written for those without a law background, the book assists readers through education, awareness, sample contract language, and assessment templates, offering meaningful recommendations and solutions. - Presents practical guidelines for security professionals involved in the prevention of security-related lawsuits - Demonstrates how to address real world problems not always found in case law or rules of evidence - Provides a much needed resource to help security professionals successfully navigate the unique nature of security-related lawsuits - Offers learning aids such as sample documents and graphs that illustarte common liability issues, along with documents from actual cases

Chapter 1

The contract security triangle (the company, the customers, and the plaintiffs)

Abstract

I have been fortunate to work with some of the best defense counsel available in cases where we have found ourselves in the defendant’s chair, but over the years I have found that one simple concept can sometimes elude them: You may be put in the position of fighting for yourself and your customer. This is never truer than when you find your customer is also in the defendants’ chair because of an alleged lapse of security.

This chapter will focus on the early stages of the contractual relationship and the contract process. It will explore the unique dynamics of contractual language and how it will impact future claims and lawsuits. This chapter will also explore the role a security company’s insurance company and various policies will play in the life of the relationship. These concepts will include indemnification, additional insured, and subrogation.

Keywords

contracts

indemnification

subrogation

customer

plaintiffs

“You’re the expert-you tell me!” When I first heard those words as a young branch manager of a contract security company, I at once felt a rush of fear, mixed with accomplishment, spring forth in my mind. I had not been in the security industry for a long period of time, and as a young 24-year-old manager I was not sure I deserved the label of an “expert” in any area of my chosen vocation. But this abrupt response to a question I had posed to a potential customer about where he wanted his security officer stationed, made me feel an immediate sense of pride about my role in this process of providing him with what I thought would be a simple quote-after he told me exactly what he wanted. That feeling quickly vanished when I came to the realization that he was looking to me to not only provide the personnel to stand guard over his business, but I was also being called upon to give some level of expertise on how his security program should work. As I stumbled over words such as “Well, it depends how tight you want your access control to be,” and “I will need to see your emergency evacuation plan first,” I began to realize that the contract security industry is much more than simply supplying people to customers who use them as they wish. It is about providing a level of expertise to our customers that allow them to have a sense of confidence that they are receiving one of the most important services they will ever purchase. In hindsight, I would have been shocked if my future customer would have turned to me and said, “How do you think I should go about running my factory?” I would have quickly told him that I had no knowledge of operating a facility that produced paper goods, and I would have thought that he was a little misguided for asking. But for far too many security professionals, it is hard to comprehend that we are the experts who should be advising our customers on what they should be doing, and how it can be done.

Over the past 25 years, that conversation has often come to mind as I have sat in depositions while an overly aggressive plaintiff’s attorney continually refers to me as an “expert” on topics such as security staffing, training, wage rates, and any other issue that can be used to inject doubt about the effectiveness of a particular security program. While it would be easy, and in some cases a better answer than some of the ones I have given, to simply say “I’m no expert, we’re just the company they hired,” I have come to learn it is not quite that simple. Every decision made, contract signed, post order produced, and training program developed, can and will play a part when litigation enters the picture. And as our industry grows, we have to be ready to confront these issues on a more frequent basis.

Every day in the United States, over one million security officers protect people, property, and countless other assets in a variety of environments.¹ Security officers outnumber sworn law enforcement personnel by a margin of two to one worldwide.² These dedicated men and women perform a vital role in protecting commercial properties, healthcare facilities, industrial sites, and serve as our nation’s first line of defense at many critical infrastructure locations. Security officers are routinely responsible for securing access, patrolling property, and serve as the eyes and ears to intercept potential criminal activity and the ever-present threat of terrorism throughout our nation. It is anticipated that the private security industry will continue to grow as corporate America continues to seek competent and comprehensive solutions to protecting their assets. This growth will also bring with it an increase in security litigation and an analysis of every step of the contracting process.

I have been fortunate to work with some of the best defense counsel available in cases where we have found ourselves in the defendant’s chair, but over the years I have found that one simple concept can sometimes elude them: You may be put in the position of fighting for yourself and your customer. This is never truer than when you find your customer is also in the defendant’s chair because of an alleged lapse of security. I always begin by having a standard conversation with our outside counsel about the responsibility that I have, to effectively and vigorously defend my company from lawsuits; but at the same time, I make sure that we are upholding the promise we have made to our customers. This can sometimes result in very tough decisions, and it is not a goal I can always achieve. Regardless of the philosophy of the security company, it is at minimum a complication that is always there in many situations.

The contracting process

Before we can talk meaningfully about addressing the pitfalls of security-related litigation, we must first fully understand the relationship of our companies, our customers, and the potential plaintiffs. There are many reasons that companies, large and small, outsource their security functions to a third party. Whether it is supplying officers or some type of electronic security solution, most organizations have come to realize that a reputable security company can offer cost-effective solutions that offer a variety of benefits. For example, if the company is selective in who it hires to manage its security program, it can take full advantage of the security company’s expertise, consulting services, and personnel management skills. This leaves the customer to do what it does best (manufacturing, healthcare, retail, etc.) without spending valuable time and other resources on an area where there may not be much “in-house” knowledge. Another benefit is to transfer some of the risks associated with security liability. While this is not always, and never should be, the sole reason to hire a third-party security firm, it is nonetheless an ever-present issue throughout the contacting process.

Most companies will follow a similar type of format when seeking proposals from security companies that often include a list of duties, officer qualifications, insurance requirements, and in some cases, contractual terms. This is where the groundwork for any potential litigation is laid. When incidents turn into lawsuits, questions such as: Who decided on how many officers to hire? Who decided if they would be armed or not? Did you offer to do a security assessment for your customer, and if so, did they refuse? are sure to be asked. So it is imperative to address them early in the relationship when dealing with a proposed contract. These questions may be factually simple, but can be difficult to address during litigation if you wish to maintain the relationship. How this situation can play out will be discussed in much more detail later, but for now, it is important to understand that going to battle in a security-related case is not always as simple as choosing sides. What if the plaintiff is your customer’s employee? What if it is a third party, you were instructed to keep out? What if it’s your own employee? I have been involved in many lawsuits over the years, and I don’t remember ever having a situation where there was not at least one minor, or major, complication that could potentially have an impact on future customer relationships.

Before we go any further, let me address the obvious: contracts are rarely perfect for either side, and it is inevitable that one, or hopefully both, will have to assume more risk than they would like. I have come to realize that managing risks is an everyday task that never goes away. I am often asked to evaluate potential business to determine if the financial benefit to our company is worth the apparent risks that will likely be present throughout the life of a contract. I learned long ago that if I am waiting on an account that poses zero liability risks before we jump into a contractual relationship, I will spend an eternity waiting and our company will not last very long. They simply don’t exist. The attorney in me is sometimes at war with the businessman, but at the end of the day our management team has to decide the level of risks that they are comfortable with. That is the real world that is not always taught in law schools or insurance seminars. No one ever trained me how to handle a situation where the other party responded to a well-drafted agreement by saying, “nice try, but we’re not signing this.” I have had dozens of well-meaning insurance professionals come to me over the years and suggest “standard” contractual clauses to be used to shield our company from any and all liability in a variety of situations. While the language may be legally sound, extremely well drafted, and will likely accomplish the stated purpose, it still has to be signed off on and agreed to by your customer – who most often also has a well-informed attorney looking to push as much risk as they can back to your side of the table. That is where the education truly begins.

Knowing which contractual provisions pose the most risk, and what type of risks, is of utmost importance from the outset of the relationship. This goes far beyond just running down a list of “what-ifs” when attempting to dream up worse case scenarios if something should go wrong during the course of service. It is having a fundamental understanding of some of the key concepts that can have a drastic impact on a lawsuit years in the future. Several years ago, I gave a presentation at the annual ASIS International Seminar and Exhibits about how security contracts play a major role in future litigation. During the Q&A, one of the attendees asked me a question and followed up by requesting that I answer as a “security professional and not a lawyer.” Talking with him later, I realized that even though he had been in the industry for over 20 years, he still struggled with certain insurance and contractual issues because he had never gotten a “layman’s” explanation. Some of the most common provisions are also the most misunderstood. We will dive into each of these in much more detail later, but for now, here is a basic understanding of what these concepts really mean.

Indemnification

As a young security professional, many years before I made the decision to formalize my legal education, I had many experiences with the concept of indemnification. I can remember being asked to sign a hold harmless/indemnification agreement with a current customer and asking a more seasoned colleague what the word “indemnification” meant. He replied, “that just means they’re legally responsible if they do something wrong, and we’re legally responsible if we do something wrong.” While that simple explanation satisfied me at the time, I have since learned that the concept of indemnification is far more complex and must be approached taking many different factors into consideration. Imagine my surprise after a particular incident occurred where all the facts pointed to the conclusion that our employees did nothing incorrect or legally negligent, only to find out later that this concept called “indemnification” may make us responsible for defending someone else who is in the crosshairs of a lawsuit, or paying an insurance loss. Situations can become further complicated when the duty to indemnify can literally turn on a few words or sentences in the lawsuit itself. Only by looking at these obligations at the contractual stage can you truly assess your potential risk and the future scenarios that may play out if or when you’re involved in a lawsuit with your customer. Indemnification clauses in contracts are responsible for springing forth many lawsuits between security companies and their customers that no one sees coming.

In its simplest form, indemnification is the assumption of liability that otherwise would belong to someone else. That “someone else” could be your customer or a related entity. You, and in reality your insurance company, are essentially agreeing to cover the loss when a claim or lawsuit happens in the future. This could include payment of defense costs, investigative efforts, loss of product, and court judgments. Depending on how broad or narrow the indemnification obligations are, this could have dire consequences for the security contractor if they are agreeing to accept the majority, or in some cases all, of the responsibility for a loss.

Additional insured

Another commonly misunderstood occurrence is the granting of additional insured status in a contract. This is also one way to provide the assurance of indemnification. The basic concept of granting someone additional insured status in itself is not extremely complicated and fairly easy to comprehend. Simply put, it means that the security company is allowing the customer to take advantage of the benefits of being an insured under their policy. This is primarily designed as a tool to allow the customer to be shielded from risk that may arise from or because of the security company’s operations. This request is extremely common in security services contracts, and is not in itself a huge risk to either party. However, simple things such as other contractual terms and policy limitations can play a large role in future disputes. This is also one way that indemnification obligations are further secured. For example, if for some reason a security company does not honor the indemnification language in the contract, or the indemnification clauses is later proved to be unenforceable, the customer can attempt seek to the same protection under additional insured status.

Subrogation

It is a reoccurring nightmare for any businessman, much less anyone engaged in the security profession, to get the dreaded phone call that there’s been some type of loss experienced by the customer. This can range from lost product, loss of equipment, or even injury to employees or visitors. Any such event requires an exhaustive investigation to find out the root causes and the responsible parties. It is always a somewhat satisfying moment to find out, at the conclusion of the investigation, that the customer does not hold the company or its employees responsible for such loss and even commends the security company on a job well done in how it handled or reacted to the incident. Case closed? Not so fast!

In the world of contract security the concept of subrogation is never far away. This is one of a few situations that is rarely contemplated when the relationships starts and the terms are being placed in the contractual agreement. It can be difficult to comprehend how a third party that has no contractual relationship with your company can now “stand in the place” of the damaged party and attempt to recover. Subrogation most often occurs in the private security world when there’s a loss suffered by your customer, or third parties operating on your customer’s premises, and an insurance claim is paid directly to one of those parties. The insurance company that paid the claim then begins to see if they can hold anyone else responsible to reimburse them for the claim. Depending on the state’s statute of limitations, this can sometimes occur several years after the actual event. I can recall many occurrences where I have packed up my files on a particular case only to drag them out later when I get hit with a subrogation claim I did not see coming.

Potential plaintiffs

“At least we can’t get sued over this.” I have heard this statement countless times over the years. This statement usually comes at the end of a long and dramatic explanation concerning some security event or a loss that occurred at a customer location, along with a list of facts that purport to show that “we” did nothing wrong. This is often followed up with a briefing on the various phone calls that have been made that resulted in firm assurances that we “don’t have to worry about this one.” While I have come to admire the naiveté that prompts such conclusions, and frankly I often wish I too had such an optimistic view of our legal system, but unfortunately these reports force me to begin the process of laying out scenarios of how a potential plaintiff could bring an action and how it could b...

Table of contents

• Cover
• Title page
• Table of Contents
• Copyright
• Dedication
• Introduction
• Chapter 1: The contract security triangle (the company, the customers, and the plaintiffs)
• Chapter 2: Who is the DECIDER? Risk assessments, industry standards, and operating procedures
• Chapter 3: Sign here please: rules of legal engagement
• Chapter 4: You’ve been served: are we in this together?
• Chapter 5: The adventure of discovery for a contract security company
• Chapter 6: Trial survival
• Chapter 7: Case closed: where do I go from here?
• Appendices
• Subject Index