By Jeffrey D. Zwirn · March 7, 2016
For a substantial period of time, I have told my students and the alarm and security industry to take the time to ensure that they read and understand the coverages and limitations of each of their insurance policies. The last thing that any alarm and/or security contractor wants to learn is that they do not have insurance coverage after they have been put on notice that a claim is being filed against them, and/or after they have been served with a lawsuit.
With that being said, new opportunities have been created for the alarm industry through the advent of legalized and/or medical marijuana businesses opening up across the country. Undeniably, security is mission critical for these businesses. Therefore, professional alarm contractors are in the best position to properly recommend, design, install, service, inspect, test and monitor security systems for these high-risk, high-burglary and robbery exposure premises.
Many in the security alarm industry believe that in the event of a loss (since they have insurance coverage), they would be covered and appropriately be able to file a claim and receive the coverages afforded to them under said policy. However, the sale, design, installation and monitoring of security alarm systems is specifically excluded for these particular types of businesses under many alarm contractors’ existing errors and omissions insurance policies that are — and continue to be — sold throughout the country to our industry. Consequently, or catastrophically, the alarm contractor is not covered and will have to self-fund their legal defense to a Plaintiffs claim. This is not only going to be extremely expensive, but it has the propensity to expose you, the contractor, and/or your company to the potential of an adverse legal judgment in an amount which exceeds the previously held value of your entire company and assets.
All concerns aside, it is my understanding that the Security America Risk Retention Group (SAAG) policy of insurance does provide coverage to its insureds even when they design, install and monitor security systems for legalized and/or medical marijuana businesses, in addition to the normal and customary coverages afforded by competing policies, and of course other policy limitations. It is notable that this program was specifically formed by the Electronic Security Association (ESA) in order to offer custom designs, professional errors & omissions and general liability insurance for its member companies. Hence, not only must all alarm companies make sure that they have the appropriate amounts of insurance in place, but they also must ensure that the security systems they provide to the public are covered under said policies in the event a claim made against them.
Remember, if you do not pay attention to having the right amounts and types of insurance when it comes to risk and liability, it will pay attention to you; to be self-insured, for the majority of us, is not something which is tenable. This is yet another significant reason why I strongly recommend that all alarm companies across the country become members of the ESA now, because we are stronger together then we are apart. The benefits of being an ESA member, as explained above, could be the difference between losing your company or being able to keep it, in the event your company is involved in litigation based on a burglary and/or fire loss where it is being alleged that for your actions and/or inactions the Plaintiff’s damages would have been significantly minimized or eliminated.
We also need to focus on the reality that property loss claims usually do not compare to the significant increase in liability against an alarm company and/or to a central monitoring station. This is in the event that the claim is based on damages sustained at a protected premises, whereby one or more persons have been seriously injured and/or killed, and the Plaintiff is claiming that the alarm company and/or the central station was a significant proximate cause of the loss.
(Note: This article is not intended in any way to replace getting advice and consultation from both legal and insurance professionals.)