Indemnity Follow Up

    February 15, 2013



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 Question

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Hi Ken,

In your answer  in the article on January 15, 2013  you discussed adding the subscriber as an additional insured as one possible resolution.  While ins. co.’s do not charge for this, my question is, are you not basically insuring the customer and accepting the liability at the same time. If issues did turn up through no dealer fault, would the claim to be paid by the alarm dealers policy anyhow? If the answer is yes or maybe yes, wouldn’t this be a poor practice?

Bob

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Answer

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The "additional insured" endorsement will be subject to the terms and conditions of the contractual relationship between the insured [the alarm co] and the additional insured [the subscriber].  That is of course assuming the endorsement is written properly.  If written properly then the exposure of the alarm company's insurance company will not be any more than the alarm company.  Both alarm co and its insurance carry will rely upon the protective provisions of the alarm contract.  That's one reason insurance companies require properly drafted contracts.  The Standard Form Contracts are accepted by all insurance companies that I am aware of.  

Indemnification continues to be a constant tug of war between alarm co and subscriber and between central station and dealer.  Ideally each party would agree to look to their own insurance coverage and leave the other alone, but it doesn't always work that way.  Be careful what you agree to by contract when signing an indemnity agreement.  If you don't have insurance coverage you will find yourself contractually bound to provide defense cost and pay damages on behalf of the party you agreed to indemnify.  That committment can exceed what you agreed to be responsible for in your alarm contract.  The safest way to go is to use the Standard Form Contracts and keep the indemnity provision in tack.  Then it's someone else's indemnity problem.

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