The RMR Customer That Could Cost You Millions

Why a customer who pays every month can still be one of the most dangerous accounts on your books

Recurring monthly revenue is a big asset in the security industry. A customer with many locations who pays on time, rarely complains, and stays loyal for years seems perfect. On paper, this looks great. But there’s one question that often gets missed:

What happens when that customer refuses to sign a contract?

Not all recurring monthly revenue is good. In the wrong situation, a customer who seems great can actually become one of your biggest risks.

Imagine This Scenario

The following scenario is fictional, but the risks behind it are very real.

Let’s say the customer is Majestic Cinemas, a regional movie theater chain with dozens of locations that has worked with your company for years. They pay their monitoring bills every month, call when something needs fixing, and your technicians know their buildings well. The relationship feels easy and familiar.

But there’s a problem: Majestic won’t sign your monitoring agreement. Whenever you bring it up, they say, “We’ve been doing business together forever. Why do we need a contract?” Since they’ve been a reliable customer for years, it’s easy to see the unsigned agreement as just paperwork, not a real risk.

There are other issues as well. The company can’t show proof that every fire alarm system is being inspected and maintained. Some locations have known problems, and needed repairs haven’t been approved. Management is aware, but the account stays open because the customer pays on time and no one wants to lose a big recurring revenue account.

This is how steady revenue can hide real risks.

Then, one night, one of the theaters catches fire. The building suffers major damage, operations come to a halt, and millions of dollars in property damage and business interruption claims begin accumulating. Within days, attorneys, insurance companies, consultants, and investigators start asking questions.

• When was the fire alarm last inspected?
• Who knew about the deficiencies?
• Why weren’t they repaired?
• Who was responsible for maintenance?
• What exactly was the alarm company being paid to do?
• What did the customer agree to do?

Then comes one of the most important questions: Where is the contract?

There is no signed agreement. Suddenly, all those years of steady payments don’t seem so safe.

The Economics Can Turn Upside Down

Suppose Majestic paid you $250 a month. That’s $3,000 a year, or $30,000 over ten years, not counting your costs. Now compare that to a possible $7 million loss from property damage and business interruption.

No one paid the alarm company $7 million to insure the building. The $250 monthly fee was never meant to cover that kind of risk. But without a clear contract explaining who is responsible for what, the alarm company could end up fighting about this in court.

This is why alarm contracts often have terms that seem strict to customers. These terms aren’t there because the company expects to do a bad job. They’re needed because the price of alarm service usually bears little relationship to the value of the property where that service is being provided.

An alarm company might make only a few thousand dollars from an account, even though the property, inventory, and possible lost income could be worth tens of millions. That gap needs to be addressed, and the contract is where it happens.

Now Consider What Happened in a Real $7 Million Fire Case

A federal case decided in August 2026 provides an almost perfect example. In Frankenmuth Insurance Company v. ADT LLC, a golf course and its insurance company sued ADT following a fire that caused more than $7 million in alleged property damage, business interruption losses, and other expenses.

According to the complaint, construction work triggered smoke detectors at the golf course clubhouse in April 2024. ADT allegedly told the customer it would place the fire alarm system “on test” for one week while construction continued, but the lawsuit claims the system was never restored to normal monitoring. Four months later, the clubhouse caught fire.

A passerby reportedly saw smoke and alerted authorities. By the time firefighters arrived, conditions were already too dangerous for them to enter the building. The lawsuit further alleges that ADT did not notify the customer or the fire department of the fire and contacted the customer roughly ten days later because it was no longer receiving a signal from the property.

These are allegations, not findings of negligence. But here is the part every alarm company should pay attention to: neither ADT nor the customer apparently could produce the monitoring contract. The customer’s copy may understandably have been lost in the fire, but ADT apparently could not locate its copy either.

Why That Missing Contract Matters

ADT asked the federal court to dismiss the negligence claims, arguing that its duties to the customer arose from their contractual relationship. In simplified terms, if the dispute was fundamentally about the services ADT agreed to provide, then the contract should help define those duties and what remedies were available if ADT failed to perform them. The problem was that the judge did not have the contract.

That left the court with a basic question: How can every alleged duty be determined to come from the contract when nobody can show what the contract actually says? Because the agreement could not be produced, the court would not conclude at this early stage that every alleged duty was purely contractual. The judge allowed the negligence and gross-negligence claims to continue, while dismissing the separate actual and constructive fraud claims.

This does not mean ADT has been found responsible for $7 million. It means ADT was unable to dispose of significant claims at an early stage of the lawsuit. The case can now proceed further into discovery, depositions, expert testimony, litigation expenses, and perhaps ultimately trial.

Having the contract would not have automatically made the allegations disappear. It could, however, have made a significant difference in defining the parties’ obligations, the available defenses, and the contractual limitations applicable to the dispute.

There’s another lesson for companies that already use strong contracts. If you can’t produce the contract later, enforcing its protections may become much more difficult. Getting a signature is only half the job. The signed agreement must be stored, organized, backed up, and linked to the customer and property so you can find it when you need it.

A Contract Is Not Just Permission to Send an Invoice

This is something customers—and sometimes alarm companies—get wrong. A monitoring agreement isn’t just for billing. It is a risk-allocation document that defines the responsibilities of the customer and the alarm company.

A properly drafted agreement may address issues such as:

• the services the alarm company agreed to provide and those specifically excluded;
• the customer’s responsibilities for inspection, testing, maintenance, and repairs;
• limitations on liability and recoverable damages;
• insurance requirements and waiver of subrogation;
• indemnification obligations;
• procedures involving impaired systems; and
• the understanding that the alarm company is not an insurer of the customer’s property.

Before something goes wrong, these contract terms might just look like legal boilerplate. But after a disaster, they help show who was responsible for what, how risk was shared, what damages can be claimed, and what defenses are available. That’s very different from just letting someone send an invoice.

But There Is Another Side to This Story

A strong contract can’t replace good operations, and that’s another lesson from the ADT case. The claims describe a system that was supposed to be on test for one week but stayed that way for about four months. No matter what the lawsuit finds, this should be a wake-up call for anyone in fire alarm monitoring.

When a fire alarm system is impaired, disabled, placed on test, or otherwise unable to provide normal protection, there must be a clear process. Someone needs to be in charge, the reason should be documented, and there should be a set time for follow-up. If the problem isn’t fixed, it must be escalated, and the records should be kept.

The same goes for known problems. You can’t just let an issue get lost in someone’s inbox because the customer doesn’t want to pay to fix it. Writing it down is important, but sometimes you need to push further to control the risk.

Sometimes the Right Answer Is No

This brings us back to Majestic Cinemas. They pay on time, have been a customer forever, and generate great RMR. But they will not sign an agreement, will not document an active maintenance program, and will not correct known deficiencies.

At some point, leaders have to decide if keeping the account is worth the risk. Some customers are worth keeping, and some relationships are worth extra effort. But taking on huge, unclear risks for a few hundred dollars a month isn’t good business.

It is poor risk management.

Sometimes, the best business move is to ask the customer to fix the problem, make sure the relationship is properly documented, or let them find another provider willing to take the risk. Revenue alone doesn’t make a customer profitable, and recurring payments won’t make a big risk go away.

Three Rules Every Alarm Company Should Follow

The ADT case reinforces three principles that should be basic operating procedure throughout our industry:

Contract it. Do not provide ongoing services without the appropriate written agreement. If the relationship changes, make sure the agreement still reflects the services being provided and the responsibilities of both parties.

Document it. A signed agreement does no good if nobody can produce it years later. Contracts, deficiencies, impairment records, service history, customer communications, approvals, and other critical records all need to be retrievable.

Control the risk. Known deficiencies, systems on test, disabled equipment, overdue inspections, and customers refusing required repairs cannot become permanent exceptions simply because an account pays its bills. Problems that materially increase risk need an owner, a follow-up process, and a clear path for escalation.

The recurring revenue on your financial statement shows what a customer pays you, but not what they could end up costing you. Sometimes, the most dangerous account is the one everyone thinks is your best customer.

A contract matters least on the thousands of days when nothing happens. It matters most on the one day when everything goes wrong.