More on ADT’s gross negligence win / danger relying on subcontractor’s insurance March 19, 2019

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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More on ADT’s gross negligence win / danger relying on subcontractor’s insurance
March 19, 2019
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More on ADT’s gross negligence win from article on March 9, 2019
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Ken,
          I guess I am confused. Was it ever established "why" ADT did not call the police? For me that is the crux of the issue and was never explained. Maybe I am missing something. As an alarm company owner and alarm system user, I would expect on an alarm (except when specified) that the police should have been called. Please explain.
Frank
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Response
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          The facts of the case as reported in the judge’s decision didn’t mention a dispatch, only a call to the house and message left on an answering machine.  I believe the facts were provided by the subscriber – plaintiff.  What was actually apparent is that the Plaintiff did not present a sufficient argument for gross negligence, and that’s the fault of the attorney for Plaintiff.  There as insufficient preparation or understanding of what would be needed to avoid the protective provisions of the alarm contract.  The court noted that no expert witness provided an affidavit in opposition to the motion for summary judgment.  I think the judge was correct, holding that the Plaintiff failed to make a case for gross negligence.  Keep in mind that missing one signal would not be deemed gross negligence.
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danger relying on subcontractor’s insurance from February 23, 2019 article
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Ken, 
          Jeanine’s liability insurer is putting her in a precarious situation.  Basically, it sounds like the fire-sprinkler work that she does, via a subcontractor she hired in her case, is excluded from her own liability policy, so she is trying to find out if she can still be adequately protected by getting an insurance certificate from her sub.
          The answer depends on a few things, but the bottom-line advice would be for her to switch her insurance to an carrier that will insure ALL her operations, since relying solely on your subcontractor’s insurance is questionable at best.
          Ideally, Jeanine’s own policy should cover all her operations, even if she subs some of them out, like the higher risk fire-sprinkler work.  A good alarm-program policy will recognize that she is subbing this work out and therefore not charge her the corresponding higher premium as long as she gets a certificate from her subcontractors insurance that names her as additionally insured, which should be a requirement of whatever contract she uses when she hires them to work for her, so that if there is a claim from her customer related to the fire-sprinkler work her sub performed, then that sub’s insurance will respond and will defend her until its own policy is exhausted before Jeanine’s insurance has to step in, which it might eventually have to do if the damages are high enough.
          It’s never a good idea to rely solely on your sub’s insurance protection because in the event that you have a claim related to your sub’s work:
-          What if your sub’s insurance cancelled mid-year?
-          What if your sub’s insurance has exclusions that affect your claim?
-          What if your sub’s insurance has already paid out other claims that year and has very little coverage $$ left for your claim?
-          What if your sub’s insurance carrier argues that your sub wasn’t at fault in your claim and so denies coverage?
          In all of those cases, as long as you have your own policy that doesn’t exclude that type of work, then at least your policy can step in and protect you even if the sub’s insurance can’t or won’t.  But if your policy excludes that type of work, well then… not so much.
          In the situation where an alarm company decides to accept work that isn’t covered by its own policy, and subcontracts it out to another company that has its own insurance, the alarm company should not only get a certificate of liability insurance from the sub stating that it is Additionally Insured, but ALSO make sure to get a copy of the actual endorsement from the sub’s policy that confirms the Additional Insured status, as well as wording that says the sub’s insurer guarantees it “WILL notify” the alarm company of any cancellation or reduction of coverage (as opposed to the typical “will endeavor to notify” wording which has no guarantee).
Larry St John, CIC, CRM
Eclipse Marketing & Insurance Services
lstjohn@eclipseinsurance.com
707.469.6776 x102
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Response
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          I agree.  You should not rely on a subcontractor’s insurance, and if you’re the subcontractor, you shouldn’t be relying on the hiring company’s insurance.  Your company needs insurance for the work you perform.  Getting named as an “additional insured” is extra coverage, whether designated as primary or secondary.  
          It’s not only insurance that you need to be concerned about.  You need to make sure that you have all the insurance required for your business, which includes E&O in the alarm industry, that you are complying with all licensing laws, manufacturer requirements, dealer program requirements and that you have your own contractual protection.  The risks and consequences are much too extreme to rely on someone else.  You need to be responsible for your business and take all steps to protect it.
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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
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com