270.6-34

CLASSIFYING RISK–ALARM SYSTEMS

(April 2019)

INTRODUCTION

Fire, smoke, and burglar alarm systems are found in many businesses and homes. Fire suppression systems, such as automatic sprinkler systems, are important fire protection devices for larger businesses, schools, and public buildings such as shopping or convention centers. Lives are saved and damage is minimized when sprinkler systems and alarms function properly.

BUSINESS CATEGORIES

There are four types or categories of businesses involved with alarm systems or fire suppression systems. Each presents unique issues to consider when classifying them.

• Manufacturing
• Sales
• Installation, service, and repair
• Monitoring

MANUFACTURING

The manufacturing classification that applies is based on what the alarm or safety device actually does. Alarm systems notify someone of a problem or a change in condition. They can be audible or silent and can be monitored locally, at a distant facility, or by a combination of the two. Alarm systems can be hard-wired or battery-operated. In addition, they can be customized for specific applications or be pre-packaged and sold for general use.

There are three different classifications that apply to alarm and fire suppression systems manufacturing:

• Class Code 51205: Alarm Manufacturing–Burglar
• Class Code 51206: Alarm Manufacturing–Fire or Smoke
• Class Code 53229: Fire Suppression Systems Manufacturing

Note: Class Code 53229 is used for only the manufacturing of smoke or explosion suppression systems. The manufacture of alarms to be used with such systems must be classified and rated separately.

None of these classifications include direct sales or installation. The sales and installation activities must be classified and rated separately.

SALES

Class Code 12707: Fire Protection Equipment Dealers and Distributors is the only classification that specifically applies to the sale of equipment used to protect a building from fire. The equipment is not restricted and includes alarms, extinguishers, and other types of suppression systems. Fire, smoke, and explosion are the only causes of loss the equipment can protect against. This classification does not apply to equipment used to protect against theft or any other cause of loss.

There are no specific codes that apply to the sale of burglar alarms. As a result, those sales fall into a Not Otherwise Classified (NOC) classification based on the purchaser and the seller. One of the following might be appropriate:

• Class Code 10040: Appliance Distributors–Household Type applies if the seller is a wholesaler or a distributor that sells household burglar alarms.
• Class Code 10042: Appliance Stores–Household Type applies if the seller is a retailer that sells household burglar alarms.
• Class Code 12362: Distributors–No Food or Drink applies if the seller is a wholesaler or distributor that sells commercial burglar alarms.
• Class Code 45993: Manufacturers' Representatives applies if the salesperson is simply the intermediary between the manufacturer and the customer.

Related Article: Classifying Risk–Selling Operations

INSTALLATION, SERVICE, AND REPAIR

Installing alarm systems requires a careful evaluation and assessment of the customer’s specific needs. The installation cannot begin until the assessment is completed. For the alarm system to remain effective, it should be on a regular maintenance service contract and be updated whenever the customer’s operations change. Two classifications should be considered:

• Class Code 91127: Alarms and Alarm Systems–Installation, Servicing, or Repair is used for all alarm and alarm installation, service, and repair that are not related to a fire suppression system.
• Class Code 94381: Fire Suppression Systems–Installation, Servicing, or Repair is used for all fire suppression systems, including the alarms that work with that system. However, if alarms that protect other causes of loss are installed along with the fire suppression system, Class Code 91127 described above is required and the payroll for that portion of the system reported separately.

Note: Both classifications can include incidental sales. However, the receipts for the cost of the actual alarm system or fire suppression system must be reported through one of the manufacturing or sales classifications described earlier.

MONITORING

An alarm system is only effective if action is taken when the alarm is activated. There are two effective ways for the alarm system to request such action. The first is a central station monitoring system. This system notifies a monitoring service or the local police department that the alarm has been triggered. This is considered the most reliable and efficient method because action must be taken, and the action is recorded.

• Class Code 91130: Alarms–Security Systems–Monitoring applies to businesses that monitor or respond to alarms. This class does not include alarm installation, service, or repair.

The second method is through using local alarms combined with a hired security or patrol agency that has instructions on the action to take when an alarm is triggered.

• Class Code 98751: Security and Patrol Agencies applies in this situation.

The least effective alarm has a local gong that is neither monitored nor responded to. Counting on near-by businesses or neighbors to contact the fire or police department usually fails, wastes money, and generally creates a false sense of security. Everybody is familiar with the obnoxious chirping of auto alarms and how they are almost universally ignored!