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Will insurance cover all that you do
June 22, 2023
Will insurance cover all that you do?
          Will insurance cover all that you do?  It seems like a simple question and it’s possible that you have made a bunch of assumptions when dealing with your insurance broker or carrier that may not be accurate and you may not have coverage when you need it.
          You initiate your insurance coverage [and the focus of this article is your E&O coverage] by delivering a Application provided by the carrier.  In most cases your insurance broker fills it out, hopefully after getting information from you.  The information will include items that your broker simply isn’t and shouldn’t be familiar with, even if the broker has been servicing you for years because your business changes all the time [most of you].  The information typically will include number of employees, number of vehicles, your annual payroll, your revenue broken down by different categories if your business has different categories. Whether you’ve had any lawsuits or claims against you, any lawsuits pending, whether you’re properly licensed and if there are any license issues by the licensing agency.  If you’re in the alarm business [which makes sense if you’re reading this article] your carrier will also want to see the contract forms you typically use and know the subcontractors you typically engage. 
          The carrier will want to know what business activity you engage in and what categories and percentage of business for each category.  The carrier will want to know if you do fire, intrusion, medical alert or other alarm or security services.  It will want to know your mix of residential and commercial accounts.  It may want to know what equipment you use and what training your employees get.  In short, the carrier will want to know as much about your business operation it can find out in order to understand the risk it is agreeing to accept insuring you for your mistakes.
          The first thing you need to understand is that your carrier intends to insure you only for what it expressly agrees to cover.  Not all your operations may be included for a number of reasons, including your failure to list the activity or having listed it the carrier specifically excluded it from coverage and you decided to take the insurance anyway [assuming you know about the exclusion and understand it]. 
          You will find a few categories that should be obvious, such as commercial fire.  The Application will either ask if you do commercial fire or will ask you to list the activities you do and that may or may not include commercial fire.  A carrier may not want to insure you if you do commercial fire or if a certain percentage of your business and revenue is from commercial fire.  And, by the way, whether you do commercial fire should not be answered any way other than yes or no.  Maybe, just a few, not really many, nothing to speak of ….   That’s what I often hear when I am asked what contracts an alarm company needs.  I’ll ask “do you do commercial fire”.  If I get a response other than yes or no I ask another question that makes clear what response I am looking for: “are you pregnant?”  I don’t know that any response other than yes or no would be acceptable to that question.  Most of calls from guys, so most of them let me know they’re not pregnant.  Now that I think of it I don’t think I’ve asked a female caller that question. 
          But other categories of your operation may need disclosure too.  For example you may do home entertainment; security guards; environmental monitoring,
          Why do you need to be so concerned with properly identifying the work you do?  While you may have experience where your carrier has accepted coverage of a claim that had borderline coverage issues, you may find that as the size of the claim increases and the risk of liability and damages increases, the carrier is going to be less generous in its coverage evaluation, and it’s those claims that you really need the coverage.
          A final caveat, your broker, unless the broker is the carrier’s agent, is your agent.  His mistakes are your mistakes.  Make sure the Application is properly completed and all your operations identified.  You don’t want a Reservation of Rights letter or worse, Denial of Coverage letter when you’re facing a claim.

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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