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Should agree to name your customer as additional insured to you get named on customer’s insurance?  

August 24,  2021
Should agree to name your customer as additional insured to you get named on customer’s insurance?
          The danger in adding your subscriber as an additionally insured from the quid pro quo negotiation. 
          Ken, you wrote in the article on August 17, 2021:
      “The Standard Form Agreements require your subscribers to obtain the insurance they deem appropriate to insure against 100% of their possible losses.  The subscriber is required to name you as an additional insured. In the above case there was no alarm system, and if there was, rest assured the alarm company would have been included in the law suit, at least for the burglary claim.”
          The contract requires the subscriber name the alarm company as an "additionally insured" for a specific reason; the insurance carrier cannot sue its own insured in a subrogation matter. The alarm company becomes the "additionally insured" when added or when required by contract to be listed as an "additionally insured" even if the subscriber does not carry through with the requirement.
          This provision IS NOT an invitation for negotiation for a cross endorsement against the alarm company policy. In my opinion it might be wiser to give up the provision that the subscriber name the alarm company for a simple reason, if the subscriber suffers a loss and the alarm company denies liability and refuses to submit the alleged loss to its carrier, the subscriber as a matter of right can go around the alarm company and file a claim directly on the alarm company policy, even over the alarm company objections the carrier has a good faith duty to process the claim.
          The real world example as to why it should be in the contract is a long drawn out and recent win by me as the claim manager and the attorneys at K&K.  
          Issue: alarm company installs a required fire alarm system in a high occupancy space. There is a loss in excess of 7 million above the coverage limits on the policy. Subrogation firm arrives two days later and makes notice of a claim. My first action was to ask for my insured "additional insured" status declaration. The subscriber did not follow up as required by the K&K contract and the subrogation attorney never filed the claim (they acknowledged the provision was properly drafted and included in the K&K Standard Fire All in One), rather just short of the three year Statute of Limitations the third party defendants did, file a suit. However this provision paid off again as did the indemnity provision and the subscriber's carrier accepted my tender to provide the defense.
          Alarm companies should be careful what they give in to or think that it's fair to give what you get from the K&K contracts, better yet join the Concierge Program so Ken can properly negotiate your contract changes and protect you.
Bart A. Didden, Executive Claims Manager
Security America Reassurance Group, Inc. - SARG
          I think you hit the bull’s eye with the warning about “cross endorsement” or “quid pro quo negotiation”.  The alarm contract is not written with mutuality in mind.  How could it be?  The alarm company’s interest is quite different than the customer’s interest; the allocation of risk has to be carefully defined and delineated. We all know that monitoring charges are not calculated based on the value of the building or content in the building, but on the complexity and cost of the equipment and providing the service.  Usually more expensive buildings and customers with more valuable content will seek more elaborate security and fire alarm protection, and that’s why they pay more, not because they have deeper pockets. 
          Alarm companies need contractual protection, which they get in the Standard Form Agreements.  The customer doesn’t need the same contractual protection and the alarm company doesn’t intend to provide more than what the alarm contract provides.  In particular, the alarm company does not intend to provide “protection” and “indemnity” in the event of loss; that’s the role of the customer’s insurance carrier.
          Too often customers will demand quid pro quo; you want it then you have to give it; equal treatment.  Well, you can’t always give in to that logic.  Sometimes you can, depending on what provision in the alarm contract we are negotiating.  Prevailing party in a dispute gets to recover it’s legal fees; sure we can agree to that.  Mutual indemnity?  No way.  Mutual limitation of liability?  Sure as long as you understand that you customer’s liability for its breach is going to be the limitation [I would not agree to that].  Mutual waiver of subrogation?  Definitely, since you are not likely to have a claim against your customer’s insurance carrier.  And the issue at hand, naming your customer as additional insured?  I don’t think so.  Alarm companies don’t do it, and for good reason.  You are not assuming a duty to indemnify your customer, so you don’t need the insurance coverage.  Your customer is indemnifying you, and it needs the insurance coverage for that.  It’s all about allocation of risk.  Your customer needs to understand it and more importantly, you need to understand it.  Or, as Bart wisely suggests, join the K&K Concierge Program, and then only I need to understand 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