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More on insurance / duplicate coverage / insurance for indemnity
February 4, 2020
More on insurance / duplicate coverage / insurance for indemnity
            We are a central station and received the following explanation and advice from our insurance broker.  Can you comment on this advice?
            “The insurance agent of the your dealer is correct for most industries.  The alarm industry is very unique.  In most other industries, there is NOT a cross additional insured endorsement listing each other as additional insured.  Typically it goes one way.  Meaning a subcontractor would list the general contractor as additional insured on the sub’s policy.  But it wouldn’t go the other way.  The General contractor would not list the sub as an additional insured on the General’s policy.  That is for the general liability policy. 
             …in the alarm and PERS industry both the monitoring company and the dealer list each other as additional insured on both the professional and general liability policies.  This is VERY unique.  The reason this is required is because both entities could be deemed the primary contributor and or negligent for an error or omission.  As both are acting in behalf of the other.  When a subscriber calls in to the monitoring center, the operator doesn’t answer Central Station, but instead answers the name of the dealer.  Likewise, the dealer doesn’t mention Central Station as the monitoring company when selling the alarm system.  If and when a claim arises, both need to have coverage on each other’s policy.  If it is the dealer’s error, then the monitoring company will receive defense and coverage under the dealer’s insurance policy.  And the same would go the other way if the monitoring company were liable, then the dealer would piggyback on the monitoring company’s insurance policy
            Typically, you would not add an additional insured under the professional liability policy because the two entities are in two different professions.  And when that happens, it prohibits one from suing the other.  It actually reduces coverage in most industries.  In the alarm industry, it is not the monitoring company nor the dealer suing each other for professional liability.  It is always a third party.  In the alarm industry, the monitoring company and the dealer are in essence on the same page and same profession. 
            Most alarm dealers should have their professional and general liability with the same carrier.  All of the carriers we represent will allow this additional insured endorsement on both the general and professional liability policies.  Hopefully this makes sense.”
            Maybe I am confused, but I don’t agree with most of the above.  Initially, let’s discuss general liability coverage and Errors and Omission coverage [broker refers to it as Professional Liability].  Far as I know, the E&O is part of the General Liability policy.  The GL policy covers damage to person or property.  It would cover injury or damage to premises while your employees are on your premises or another’s premises.  The E&O coverage kicks in when the arises out of the scope of your work, so in the alarm industry it covers burglary, fire and other losses where it’s claimed that the alarm equipment or services caused or contributed to the loss, and the loss does not have to involve personal injury, death or physical damage to property.  For example, it will cover loss of inventory taken in a burglary, if the alarm company is found liable [which it won’t if it uses the Standard Form Agreements, unless grossly and recklessly negligent].  
            Dealers don’t add a central station to just the GL or just the E&O coverage; the additional insured is for the entire policy.  The additional insured coverage generally kicks in when the claim emanates from the acts of the insured policyholder. [be careful because additional insured requirements could require that it cover any loss suffered by the additional insured].  In the context of the central station and dealer both are engaged in the monitoring business.  Why?  Because the dealer is contracting to perform the monitoring and then subcontracting it out.  If there is a loss the subscriber is likely to sue the dealer first, then the central station.  The central station will then seek indemnity from the dealer and it’s the dealer’s insurance policy that has to kick in.  The dealer doesn’t want any issues with the insurance coverage and the best way to ensure no issue is to name the central station as an additional insured.
            The broker is wrong thinking that the central station’s policy will cover if the central station is the one who made the mistake.  It’s always going to be the dealer’s carry because of the indemnity.  Of course if the dealer’s policy isn’t sufficient then the central station’s insurance will kick in.
            Both dealer and central station using the same carrier is a good idea, usually.  You’re putting all your eggs in one basket, but there hasn’t been a carrier for the alarm industry fail to honor its coverage in a very long time, ancient history. 
            Insurance brokers knowledgeable in the alarm industry can be very helpful, but keep in mind they are not lawyers [and lawyers aren’t insurance brokers !!]
Comment on Duplicate insurance from article on January 9, 2020
             Regarding the insurance and double coverage, I will just recommend work with somebody that knows the industry and most importantly you trust.  Too many business owners take their insurance for granted and want the cheapest cost until a claim situation arises.  Take the time to make sure you are working with an Insurance Advisor that understands your business and you can lean on for advice.  At the time of a claim will be too late to hope and pray your situation is going to be taken care of.  As a business owner myself I’m all for saving money but make sure it is an educated decision and correct for your organization.
            If your company is with a broker/carrier that is non-responsive or takes a long time to get back with you on basic service requests like COI’s what will happen in event of a claim when you actually need help through the process.  We are an independent broker that represents all of the key Insurance carriers in the Alarm space including SARRG which we have been successful placing business with recently.  I can’t stress the importance to work with a reputable Insurance Carrier and Broker that knows your industry, I’m glad you were able to find one!
 Jeff Schulz, CIC, CRM, Managing Director, Commercial Division
J. Krug

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
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