QUESTION:

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Legal question.

Dear Ken,

We carry Errors & Omission insurance and we do use alarm contracts with the limit of liability wording. An independent Sale rep has asked me if they are open for liability for jobs she sells. How is that different than our own employees liability for working on customers jobs or recommending add-ons? How much will your fee be for the answer?

Thanks,

Mike

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ANSWER:

    Your company has several different players involved in a transaction with a subscriber.  Assuming you are operating as a corporate entity [which I strongly recommend] you have 1) that corporate entity, 2) its shareholders, directors and officers, 3) its employees, 4) its independent contractors, whether they be sales agents or subcontractor installers or service people, and 5) third party wholesale monitoring company or radio company.

    How each protected from subscriber claims?

    Your Errors and Omissions insurance will cover all insured entities and persons.  Of course that begs the question; who are the insureds?   The business entity that takes out the policy is the primary insured.  It's employees, including its directors and officers, would be covered.  Shareholders, if sued in the their capacity as employees, would be covered.  Third parties however, would not be covered absent a specific endorsement extending coverage to them.  Thus, independent sales, installation or service people would not be covered.  The monitoring company would not be covered.  So carrying insurance will not protect others unless you specifically provide for them in the policy.

    Your contracts should provide protection for the business entity.  The contracts can also extend protection to independent contractors, whether sales or installation, etc., and to third party monitoring companies.  The provision in your contract should be clear, which means clearly written and understandable.  Read your contract and if you have trouble reading this provision then toss the contract and get a new one at www.alarmcontracts.com.  I have seen clauses in contracts that are so poorly written I think you risk enforcement.  It's really simple.  You want your protective provisions in your contract to extend to you, your employees and all those you subcontract to in the performance of your contractual obligations.