This is the final article in the series on central station selection considerations. Insurance; errors and omissions specifically. Why should you care what insurance your central station carriers, or if in fact it carries any insurance at all? Well, the answer is rather simple, when both you and the central station get sued you are going to want to know that your central station has sufficient coverage to respond to the lawsuit and any damages that may be awarded.
Errors and omissions insurance provides coverage for losses arising from the operation of the business, in this case monitoring service, and is triggered by both an occurrence and damages within the scope of coverage. While the insurance policy may contain familiar language that an occurrence resulting in "property damage or loss" be sustained, in alarm and security insurance policies the occurrence is failure to detect or property respond to the intended incident for which the alarm system is intended to detect, and resulting loss to the property within the premises. Thus a burglar alarm system is designed to detect a break in and the loss of property is the items stolen [and not necessarily the damage to the building where the break in occurred].
When a loss within the context of security alarm systems occurs, unless the loss is easily reconstructed and the failure of the protection identified, the subscriber is likely to sue for negligent design of the system, installation, service and monitoring. Obviously the subscriber will be suing the central station and the dealer, both of whom are involved in one of more of the four elements of the system {design, installation, service, monitoring]. While you will certainly be responding to the first three elements the central station will have to account for the monitoring.
There is much to be said for using a centran station that has a policy from the same insurance carrier as you. If you both have the same carrier and the loss is within the policy limits of the policies then it is unlikely that the attorneys hired by the carrier will be looking to you, and your attorney looking to the central station. [the carrier may want to hire two attorneys, one for you and one for the central station, though I have counseled carriers that this practice is unnecessary in many situations, especially when I am the assigned counsel]. That sort of in fighting is only good for the plaintiff in the action who can sit back and wait for you and the central station to finish blaming each other and making the plaintiff's case for it.
One thing you can take comfort in is that your insurance carrier cannot sue you, and it won't even try. So if you and the central station have the same carrier that carrier will try and have a united front defending the lawsuit, which is the way it should be.
Some carrier's may be willing to give you a discount if you and the central station both have policies with it. That is something worth looking into.
Of course in the event of a catastrophic loss you want to be sure that the central station has sufficient insurance. In this industry there is never enough, but you know the type of accounts you have the potential for exposure.
Don't be shy about asking for insurance coverage information from the central station, and be sure to ask if it can arrange a discount for you if you use the same carrier.