You can read all of our articles on our website. Having trouble getting our emails?   Change your spam controls and whitelist 
Allocation of Risk between alarm company and alarm customer
November 22 2022
Allocation of Risk between alarm company and alarm customer
          I know per the All in One the client should have insurance and supply, but we have a client that wants us to list them as additional insured and supply a COI [certificate of insurance]. Aren’t they changing the terms and shifting risk?
          Allocation of risk is a big deal.  The wrong bet can put you out of business, exposing your entire company, all its assets.  A somewhat lesser lesson can get you kicked out of your central station, fired by a contractor who hires you for subcontracting, dropped by your E&O insurance carrier and, well, isn’t that enough?  Wake up.  You’re getting $XXXX a month for monitoring and $XXXX for inspection and $XXXX for repair service, do you think that means you should pay if your customer suffers
  *  a burglary and loses its inventory
  *  a fire and customer wants you to re-build the building
  *  a break-in or fire and an occupant gets hurt or dies and someone wants you to pay for that loss
  *  someone unlawfully gains access to a building and damages property or hurts or kills someone and someone wants you to pay for the loss and damage. 
          How did you enter the insurance business, offering comprehensive casualty, property damage, inventory loss, personal safety, and whatever else may be available for a hefty insurance premium?  The obvious answer is you didn’t intend to, but that’s what you agreed to in your alarm contract.  Just as obvious is that you shouldn’t be agreeing to this undertaking.
          Perhaps the number one purpose of the Kirschenbaum Contracts™ is to make it crystal clear that the subscriber bears the risk of loss, period.  There can be no misunderstanding, no lack of clarity, no way to misinterpret the contract provisions, no room for error in draftsmanship.  The risks are too high, too consequential.  It only takes one loss, one risk you shouldn’t have bet on, to expose you to loss far exceeding your insurance coverage and the asset value of your business [and if you haven’t properly conducted business as a legal entity, your personal assets as well]. 
          I don’t know about you but I haven’t built a business and accumulated personal assets just to lose them because I was too greedy or stupid to follow proper advice and take customary precautions.  “Just because you’re paranoid doesn’t mean they aren’t out to get you”.  [This adage has been attributed to Delmore Schwartz who wrote short stories and poetry and who also suffered from mental illness. In addition, the saying has been ascribed to the political scientist and negotiator Henry Kissinger.]
          It’s not uncommon for a subscriber to demand that you carry insurance and list the subscriber, and others, as Certificate Holders and Additional Insureds, sometimes [usually] adding you’re your insurance be primary and non-contributory.  This means that your insurance is the first line of coverage in the event of a loss [not something your insurance carry will thank you for since it has calculated or collected an insurance premium to cover those risks].  When agreeing to this you must be sure that your coverage is for your mistakes only.
          The problem almost always isn’t just the insurance procurement provision, but other provisions insisted on by the subscriber that you provide indemnity for loss.  That indemnity, backed up by your insurance policies, shifts the risk of loss to you.
          What exactly is that potential loss you just agreed to?  Well, let’s look at a fire alarm for a building.  Is it a large commercial complex, a high end residence, an apartment building, a warehouse that might have been empty when you saw it but now has millions of dollars of stored property [same with that empty jewelry store you put a $2500 alarm in and charged $50 a month to monitor]?  You carry one million dollars insurance; think that will cover the loss if you have to replace inventory or re-construct a building or pay for personal injury or death?  It won’t, simple as that.
          Your alarm contract must clearly allocate risk of loss to the subscriber, and that too is, simple as that.  You do that with the Standard Form Agreements.  Every provision is designed to protect you.
          Here’s the thing, the more you agree to change any provision the more you reduce the effectiveness of the alarm contract.  Does that mean that no changes can be made?  Certainly not, there are many changes that can be made.  Should you be making those changes yourself?  Certainly not if they are legal provisions; you can change business decisions, should as the term [reducing the 10 year term to 2], or the time you will respond to a request for repair service [from 26 hours to 10 minutes, if you think that’s doable].  Of course the pricing is all you; so are completion date penalties – you want to agree to $1000 a day for late completion, that’s on you. 
          You can be more flexible with purely installation contracts.  There’s no reason you shouldn’t accept the same responsibility as other contractors on the premises doing construction.  But once complete you can’t essentially guarantee that the security or fire or environmental system will prevent loss, and that’s what the All in One accomplishes. 
          I’ve been in the law business protecting alarm companies for almost 50 years and I still won’t try to rewire my alarm panel so it works better.  You shouldn’t be re-wiring your alarm contract on your own.  Simple as that.

To order up to date Standard Form Alarm /  Security / Fire and related Agreements click here:

To order up to date Standard Form Alarm /  Security / Fire and related Agreements click here:
CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY You can check out the program and sign up here: or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304.
ALARM ARTICLES:  You can always read our Articles on our website at  updated daily             
THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily
Wondering how much your alarm company is worth?  
Click here:
Getting on our Email List / Email Articles archived: 
    Many of you are forwarding these emails to friends or asking that others be added to the list.  Sign up for our daily newsletter here: Sign Up.  You can read articles and order alarm contracts on our web site

Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301