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E&O insurance – why and how much
April 14, 2020
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E&O insurance – why and how much 
          I have perused the articles you wrote which are posted on your website at   You have written articles on the pitfalls of Dealers not having an E&O policy of at least one million dollars, and I would like to comment on that.
          Some Dealers are very good business people and, of course, don’t need such advice in an article, but some do need the encouragement of experience in that area and further explanation. Those folks need to realize what a terrible downside they could find themselves in should that ugly position of facing a lawsuit with no insurance. Imagine facing the loss of all they have, and may ever have.  Too often they don’t realize or fully accepted this reality.
          I believe they would be more receptive to hearing that from you than anyone else I can think of, particularly if you were able to cite some cases of failure to have the much needed insurance and the cost it led to.
          I believe that would be appreciated by many in the industry.
Thank you, 
Bob Keefe, President
All American Monitoring Central Station
          Errors and Omission insurance coverage is part of your general liability insurance policy and covers you for errors in your alarm business.  Without question, you should not be in the alarm business without E&O coverage.  No one likes to think about or pay for insurance.  I get it, neither do I.  But when that claim comes you will be grateful that you have the protection.  Claims against alarm companies are common, more common now than years ago, and likely to be even more prevalent in the future.  People who suffer a loss either look to their insurance company for monetary recovery, or someone else, or both.  Even if they look to their insurance company you can expect the insurance company to be looking for someone else, exercising its subrogation rights.
          Sooner or later that somebody is going to be you.
          While you may think that some alarm companies face greater loss potential than others, and that is probably true in some respects, all alarm companies share the potential for loss that could exceed their insurance coverage, the value of their business and, if you’ve been taking more out of your business than you should or you were the one who was negligent, your personal assets as well.  How can that be?  Maybe your business concentrates on residential accounts, cheap or free installation and under $30 bucks a month for monitoring.  Your basic system includes some intrusion detection and a smoke detector.  A loss occurs.  Do you know the contents of that home?  Do you know who is living there and their vulnerability in an alarm event?  A simple intrusion can turn into the most horrific sense if occupants are home.  A fire can cause unimaginable personal injury and death.  Our system of justice compensates those harmed with money.  You mess up, it’s going to be your money.
          Bob suggests I tell you a few horror stories.  Why should you believe me?  Read the cases yourself:  All states have reported cases and I have the leading cases posted on my website under Alarm Law Issues / Leading Cases – Sorted by State.  For the many cases handled by K&K see our Reported Cases.
          Alarm E&O coverage is, or use to be in the good old days, a bit different than other insurance you customarily carry.  Insurance companies writing car, home, general liability coverage expect to not only defend claims, but pay those claims.  Not so for alarm E&O.  The insurance companies writing the alarm E&O expect to defend claims, but not have to pay out on claims.  The reason is that the insurance carriers know enough to require their alarm company insureds to use proper contracts with their subscribers.  These contract provide insulation from liability, for the insurance company and the alarm company.  Without the contractual layer of coverage both alarm company and insurance company would be exposed to claims and those claims would get paid in many cases.
          Alarm companies need to carry insurance with E&O for several great reasons.
  *  the E&O policy will provide defense costs if you are sued, and will pay the claim if necessary
  *  as a dealer you have agreed to indemnify your central station, and other third party vendors, and you need insurance coverage to back up that indemnity obligation.  Without the insurance you will be left defending the central station and paying any damages awarded.  Most if not all central stations require dealer indemnification.  Many, the smart ones, will require minimum E&O coverage, and will require you to name the central station as an additional insured.  You should, especially if you are providing indemnity.
          What coverage do you need?  I’m sure brokers will have their opinions.  We can start by suggesting that, at the very least, you should have one million single occurrence, two million aggregate.  If you do commercial fire I would suggest more coverage, maybe 2 million.  The amount of insurance you want to carry will also be influenced by the value of your company.  Just like you don’t want to insure your million dollar home for half that amount, you don’t want to insure your two million dollar company for less that you think your exposure is.  Of course, unlike the house, where your exposure is the cost of the house, your exposure for a subscriber’s claims [or third party claim] is unlimited.  Unlimited, that’s right.  Just change the scenario to keep adding the exposure.  
          You are in the business of protecting your subscribers.  There are those how are in the business of protecting you.  Your E&O carrier is one of them.  I’ve recommended that you chose your carrier carefully.   A lower premium is something to consider, but whether and how your carrier will be there for you if there is a claim is more important.  That’s why I have recommended Security America, the risk purchasing group owned by ESA.  If you’re a member of ESA that makes you an owner, I suppose.  No, you can’t set your own rates.  You want a carrier who understands the alarm industry and knows how to handle the claims; Security America is your best bet.  Security America is listed on The Alarm Exchange in the Insurance Category.
          You’re going to find out that your insurance company is not as dumb as they were years ago.  They know the importance of a good alarm contract.  Most may not know whether a contract is good or not, but I can confidently say that they all recognize the Kirschenbaum Contracts ™; some may require these Standardized Forms.  Same goes for the central stations.  They depend on your contracts, as well as your indemnity.  They know if you have proper contracts they have less chance of losing a claim.  
          Use proper contracts, select an insurance carrier who will be there for you, and do business with a central station who cares about you, like Bob at All American.  All American Monitoring Central Station is listed on The Alarm Exchange in the Central Station Category.

Reaching K&K during the lockdown
     During this crisis the most efficient way to reach our attorneys is via email.  You can also call and if not picked up, leave a message and your call will be returned promptly.
    Here are a few departments to contact directly:
alarm / security / pers / fire department:  Ken - or call and leave a message with return number at 516 747 6700 x 301
health care professionals:  Jennifer Kirschenbaum,Esq 516 747 6700 x 302;
alarm licensing:  Alison Gallup,Esq 516 747 6700 x 317; or Eileen Wagda, Licensing Administrator, 516 747 6700 x 312
Employment issues:  Kieran Bastible 516 747 6700 x 315; or Jennifer Kirschenbaum,Esq
Concierge Alarm Clients have full access through our Concierge Program Coordinator, Stacy Spector, Esq  516 747 6700 x 304 or 
Collections:  [courts are shut down at this time, so don't expect much progress.  We will however continue to prepare papers on our end so that we will be ready when the courts normalize]  Kathleen Lampert  516 747 6700 x 319
Pending litigation:  Caroline Wallet,Esq  516 747 6700 x 305 and Maureen Biel,Esq 516 747 6700 x 303  MBeil@Kirschenbaumesq,com
Bankruptcy and debt collection issues:  Steve Sheinwald,Esq  516 747 6700 x 309 or Scott Dillon,Esq  516 747 6700 x 318

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You can check out the program and sign up here: or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304.
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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