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Does dealer need to name central station as additional insured
February 3, 2020
Does dealer need to name central station as additional insured
            We are a nationwide wholesale central station and I have a question for you. We require our dealers to carry both general liability and E&O (Professional) Insurance. We also require them to list us as an additional insured on both policies.
            A dealer has advised that its underwriter and its insurance provider say that this is uncommon. Because of this, the dealer feels they do not need to add the central station as additional insured.  
            We have been advised by our insurance provider that it is an uncommon practice in most industries, but is applicable in our industry. I wanted to know from a legal standpoint, does the dealer need to list their central station as an additional insured on both general liability and E&O? 
            As new dealers sign up with us they are shocked that we require both general liability and E&O (Professional) insurance.  We have been told many times that we are the only wholesale central station that requires both.  What is your opinion on dealers required to have both GL and E&O insurance?

Name withheld
            This is really scary.  Dealers need to very careful understanding their relationship and legal responsibilities with their central station.  A dealer getting advice from Dumb and Dumber deserves what they end up with.  I’ll start where I would normally end up; have K&K review your Dealer Agreement [Installer Agreement or whatever the central station calls its agreement with its dealers].  I generally attach a Rider to balance out the terms of the agreement.  Cost is $500, and well worth it.  Now, proceed at your peril.
            Here is the really short answer to the question and the business sense that supports it.  The dealer is agreeing to indemnify the central station for claims.  That means providing a defense, including legal fees, and paying any damages ultimately awarded in the claim or case.  Do you think it makes sense that the dealers carry insurance to cover that indemnity obligation?  I do.  
            Do you think the typical E&O policy includes the contractual indemnity obligation?  It doesn’t.  You can get contractual indemnity coverage but you probably have to ask for it and it may not be available from all alarm E&O carriers – another reason to be careful who you use for your E&O protection.  [I’ll wait for others to comment on this issue- which carriers to look to].
            Naming the central station as an additional insured will provide the coverage you need for the contractual indemnity.  So the dealer should always name the central station as an additional insured.
            What about the broker who tells the dealer it shouldn’t be or can’t be done?  Or the carry who says the same thing?  Get rid of them, fast.  They don’t understand the alarm industry.  You have a large enough selection of brokers and carriers on The Alarm Exchange in the Insurance category to make your selection.  
            I want to just make one other observation on the alarm industry and indemnity.  It’s true that the alarm industry turns what is common in the indemnity world on its head.  In all other construction related industries indemnity flows from subcontractor, to contractor, to architect and finally to owner.  In the alarm industry, indemnity flows from the customer, to the dealer [contractor] to the central station [subcontractor].  Backwards.  That’s the way it is.

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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