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Can you raise the limitation of liability

June 23, 2022
Can you raise the limitation of liability
          We would like to offer an increase in the limitation of liability.  Is that OK and is there anything we should be thinking about?
Name withheld
          Did you ever have an idea that you re-visited sometime later asking yourself why you decided to make that decision, and the only answer you can come up with is that “it seemed like a good idea at the time”?
          The customary limitation of liability in the alarm industry is $250.  It’s a nominal amount, and it is generally only available if the subscriber can prove liability.  Proving liability means that you are found to have been in breach of the contract or negligence in the performance of the contract. 
          There is a difference between offering a “guarantee” and a limitation of liability.  Let’s say you come up with a marketing plan that offers customers XXX dollars to cover any loss which the alarm system is designed to detect, i.e. burglary or fire loss.  Maybe the plan only requires the customer show the loss, a police report, insurance claim, alarm signal or reason why there wasn’t an alarm signal, etc.  Here is there is no requirement that there be a finding of breach of contract or negligence.  Your guarantee is in the nature of insurance reimbursement.  [whether you’ve crossed the line and your guarantee is tantamount to offering insurance without a license be beyond the scope of this article]. 
          Before you decide to offer a guarantee or raise your limitation of liability you should think about who you expect to pay that money, you or your insurance carrier.  If it’s your insurance carry then you need to let the carrier know and you should get its consent.  More likely than not you had to give your insurance carrier your form contract and it had to be approved by the carrier’s underwriters.  While it’s highly unlikely that any carrier is going to complain that you updated that form with an updated Kirschenbaum Contract™  changing the limitation of liability to a significant number would be deemed a material change in the form contract.  While a change from $250 to several thousand dollars may not make a difference to the carrier, especially if the limitation of liability is still within your insurance deductible, some customers demand that the limitation of liability be one million dollars or the amount of the contract payments or some other number that is going to be well beyond your insurance policy deductible. 
          Does an increase in the limitation of liability [or a guarantee] make much difference from a marketing and sale perspective?  I’d be surprised to hear that it does.  It seems to me that there are more important factors that go into the customer’s decision to select an alarm company other than the limitation of liability or nominal guarantee.

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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