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              Indemnification is when one party agrees to be responsible for another’s obligation.  Typically it’s financial, and usually covers cost of defense and any damage award.  The term “indemnity” or “indemnify” is not however descriptive enough to inform what the full extent of the duty entails.  For example, an agreement to indemnify against claims or damage awards will not include the obligation to pay defense costs unless legal fees are specifically included.  Cost of expert witnesses will not be included in the duty unless included in the indemnity provision. 

               In the alarm industry indemnity is commonly found in several situations.  Let’s start at the bottom of the totem pole.  Dealers will require the subscriber to indemnify the dealer from claims, third party of all claims.  A good example of how this may come about would be when the dealer has an intrusion alarm in a commercial building which shares a common wall with another business that is not owned by the subscriber and not included in the alarm coverage.  Intruders successfully break into the alarmed building and cut through the common wall gaining access to the adjoining premises.  The adjoining owner sues the alarm company claiming negligence in failing to detect and prevent the intrusion in the alarmed premises.  You can have the same scenario with a fire loss in the adjoining building.

               Your first thought might be that the adjoining property owner has no privity of contract with the alarm company and thus has not viable claim in contract.  Furthermore, since the alarm company owed no duty to the adjoining property owner there can be no viable claim for negligence.  Even if you’re correct, and you’re not entirely correct, the dealer will invoke the indemnity provision and look to its subscriber to provide defense and coverage for the claim by the adjoining property owner.

               Central stations will require dealers to provide indemnity.  When a claim is brought by the dealer’s subscriber the central station will look to the dealer to provide defense and cover the loss.  A claim by an adjoining property owner or third party on the subscriber’s premises would also be covered by the indemnity.

               Manufacturers and communication networks require central stations to provide indemnity when the manufacturer is also providing a continuing service, usually automated, such as relying radio or other communication signals to the central station or to subscriber’s smart phones or other Internet connected devices.

               You are a party to agreements that require you to provide indemnity.  You need to know that the obligation has been agreed to, by you, and you should expect the indemnified party to invoke its right to indemnity if the occasion arises.  My office is presently defending a central station on a burglary claim.  We tendered the defense to the dealer [both dealer and central station were had insurance covering the loss].  After much resistance the dealer’s insurance carrier agreed to pick up the cost of defense, which at the time it finally agreed to accept the indemnity, was over $100,000.  That’s just the lawyer fees so far [much of it spent fighting over the indemnity issue].  In this case the central station’s insurance carrier [the one who hired my firm] recouped it’s expenses and got off the hook for the remaining litigation costs and ultimately any damages that might be awarded in the case, including those against it’s insured, the central station.  The dealer’s insurance carrier is on the hook.  As you can see the indemnity provision is potentially a potent and essential provision in the alarm contract.

               Since you are, unwittingly or knowingly, agreeing to indemnity provisions you need to make sure that your insurance coverage is broad enough to cover your contractual indemnity agreement.  Don’t guess or assume.  Email your insurance broker today.  Send a copy of this email and ask if you would be covered in the event of a claim as described in this article.  Ask for a response in writing and hold on to it.  If your broker does not give you a sufficiently clear satisfactory answer then check The Alarm Exchange under the Insurance brokers / insurance companies for alarm industry category for an alarm industry broker and get the proper insurance and assurance you need. 
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TO SUBMIT QUESTIONS OR COMMENTS REPLY TO THIS EMAIL OR EMAIL Ken@Kirschenbaumesq.com.  Most comments and questions get circulated.

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Speaking Engagements

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Metropolitan Burglar and Fire Alarm Assoc of New York.  May 15, 2014 4:30 to 6:30 PM at Marriot Hotel, Uniondale, NY.  Comprehensive analysis and comparison of the Standard Form All in One contracts.  All alarm dealers welcome.  No charge for attendance. Dinner and MBFAA meeting will follow the seminar.  For more info and to RSVP contact Alan Glasser, Executive Director of MBFAA at 718-894-6712 or mbfaa.ny@gmail.com

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Northeast Security & Systems Contractors Expo  Thursday, May 22, 2014 10 am to 5 PM at  Royal Plaza Trade Center,  Marlborough, MA.  registration  https://www.expotracshows.com/neacc/2014/  Presentation on Alarm Law issues and Q&A will be at 2 PM.  For more info contact Gary Spaulding, NEACC President

207-384-2420 gary@spauldingsecurity.com
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Alarm Association of Greater St. Louis.   September 16, 2014.  at Tech Electronics HQs office at 6437 Manchester  Ave, St. Louis, MO 63139.  Meeting is from 11:45 – 1:30  Video conference presentation starting at 12:15 CST.  For more information or to register contact Tony Drago adrago@tyco.com  www.alarmstl.org/
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Alabama Alarm Association.  AAA's Fall Meeting and Trade Show - October 21, 2014 from 3 to 5 PM at DoubleTree Hotel 808 South 20th Street Birmingham, AL 35205  for more info contact AAA Executive Director: director@alabamaalarm.org  (205) 933-9000 

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Electronic Security Summit for 2014.  October 22-24, 2014  at the landmark Broadmoor Hotel. Colorado Springs, CO.  For more information contact Alexander J. Quirin, CEO & Managing Partner, Advisory Summit Providers, LLC.,  (786) 999-9738    alex.quirin@aspsummits.com    www.aspsummits.com

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