KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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comments on raising limitation of liability to your insurance coverage
March 7, 2019
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comments on  raising limitation of liability to your insurance coverage from February 25, 2019 article
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Ken 
            You’re right that insurance carriers expect and depend upon an alarm company’s contract with its various protective provisions for premium calculation purposes, but it can be even more serious than that: We’ve seen some liability insurers for alarm companies place such a high importance on their standard contract being used on each and every job that they place an endorsement in the policy that excludes jobs that are not under that unmodified contract unless specifically approved by underwriting.  That type of endorsement is overly restrictive and should be avoided.  These days that kind of exclusion is not so common, but it pops up every once in a while, so it’s worth it to ask about when reviewing policies.
Thanks,
Larry St John, CIC, CRM
Eclipse Marketing & Insurance Services
lstjohn@eclipseinsurance.com
707.469.6776 x102
www.eclipseinsurance.com ‚Äč
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Ken,
            our opinion on "raising limitation of liability to your insurance coverage February 25, 2019" is correct and the insurance broker does not understand the idea of claims activity and loss runs.
            I have told underwriting on more occasions that I care to admit NOT TO RENEW companies because they are train wrecks currently or waiting to happen. One such example is a company that had a typo in their contract (not yours) but could be plagiarized from many sources which had the limitation of liability set at $250,000.00.  He submitted a claim for a sprinkler system that froze and resulted in over $600,000.00 damages, TWICE, each time. After the first claim, I sent him to your website and directed him to resign all of his clients ASAP. When I received the next claim, I asked him how we was progressing on resigning his customers, he had not started. "I am to busy", "Its a lot of work" and I don't have anybody to work on it". We refused to renew, and with his loss run he will be paying the next company for the next five years, even if he has your contracts in place now.
            Another insured we cancelled was for excessive defense costs. We never had to pay for indemnity but we defended him and the attorney fees mounted to where we paid out more than we took in and we didn't see any change to this pattern in the future.
            We routinely tell our insureds that you can freely raise the limit of liability to your deductible on your policy, $1000.00 or $5000.00, because if we were to pay out, you would be out that money anyway.
            Finally, you stated a couple of times, "If you really want the work", this is dangerous because all policies have an aggregate, two full limit claims and most alarm companies will not find a new carrier. You are correct that these policies are priced based on the industry "best practices" for contract construction which you have perfected. All policies have exclusions for gross negligence, willful and wanton acts, but there may still be the requirement to defend.
            But the bottom line is that every alarm company should consider their insurance carrier as a business partner and trusted vendor for help and advice. If you use a broker like the one mentioned, he does not have your best interests in mind, rather he is just a yes man to keep the most favored relationship in place for the next renewal.
            Between Crystal, Rhett and myself we are here ready to help with not only the insurance company's interest but the alarm dealers interest in place as well. 
Bart A. Didden, Executive Claims Manager 
Security America Reassurance Group, Inc. - SARG 
877-872-1266 
bdidden@securityamericarrg.com 
www.securityamericarrg.com
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Response
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            Larry, you should share with us which insurance company or companies added the Exclusion Endorsement.  Even though I think that insurance company is smart, alarm dealers should avoid that company as long as there are other insurers out there still willing to insure alarm companies without insisting of proof of approved contract before coverage is confirmed.
            Most alarm company owners don't realize how important this issue is because they haven't experienced cancellation of a policy, a premium increase intended to cause the alarm company to go elsewhere or refusal to write a policy.  Carrying insurance is one of those things you don't think about and take for granted, until you need it.  
            Consider this scenario.  You have what you think is an iron clad contract.  You don't bother to carry insurance.  Your sales people, without consulting you, routinely raise the limitation of liability provision.  You go to sleep every night thinking that your exposure is $250 for any claim, only to come to the office one morning and find out that your limitation of liability has been raised to "all payments under the contract", or "one million dollars" or that the clause has been deleted entirely and you have no limit.
            Now think how your insurance company will feel when it happens to it.  Unless it's the carrier mentioned by Larry, your carry will be stuck and guess who it will eventually take it out on.  That's right, you.
            Do yourself a favor.  Use an insurance carrier that insists or recommends that you use the Standard Form Agreements.  At least you'll know that the carrier is worried about your and its butt.
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com