KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Dealer wants to know what risk central station will assume
April 2, 2021
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Dealer wants to know what risk central station will assume
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Ken
We received the following letter from one of our dealers. Can you address this issue? Thanks
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Hi Jeff: So we have gone to the effort and expense of securing the needed coverage (GL and Professional insurance), per your company and you are listed as “Additional Insured”.
My question, before we begin, is what liability (and relative insurance) does AvantGuard carry when it comes to the monitoring service and our clients that we sign up for your service?
We do not want to be incurring all of the risk for your business, so what coverage do you provide for us? If we sign up our clients for the services you provide, what added risk is there for my company and what liability do you assume that does not immediately pass on to us?
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Ken,I look forward to your responses.
Thanks
Troy Iverson
VP of Sales and Marketing
Avantguard
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Response
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Well that question certainly hits the nail on the head. The question also displays a lack of understanding of the reality of the relationship between subscriber and dealer, and dealer and central station. So let's clear that up.
The dealer is not going to assume any liability risk for the subscriber. The subscriber is going to assume all risk and is going to indemnify the dealer against any claims. Also, the subscriber is going to be required to obtain insurance covering the risks that the alarm or security services are designed to detect, and name the dealer as an additional insured.
The central station is not assuming any liability for the dealer or subscriber. The allocation of risk as between subscriber and dealer is the same as for dealer and central station. The dealer is expected to assume all risk and indemnify the central station if the subscriber or anyone acting through the subscriber sues the central station. This indemnity should be backed up by insurance, naming the central station as an additional insured.
What the heck? You still don't get it? Try understanding it this way.
A dealer notifies a central station that it has an account to activate. The dealer already knows the rates charged by the central station for the monitoring service, whether it's for intrusion, medical alert, fire, environmental, open and closings, special reporting, etc. It's the service to be provided that dictates the charge. The central station doesn't ask, who are we monitoring; what's the building worth; who is going to occupy the building, what are the contents and what are they worth, are there guards 24/7, is there another system in the building, etc? In other words, the central station is not gauging its charge based on the potential risk of loss if the alarm or security doesn't work. Could be same charge for a barber shop or a jewelry store, or a warehouse full of paper towels or full of fine furniture and artwork.
As an aside, most central stations carry much more E&O coverage then the dealers for whom they provide monitoring services. But like the dealer's insurer, the central station's insurer hopes to avoid liability damages by relying on a properly drafted alarm contract.
A dealer must use proper contracts and any dealer that does will understand the reason for the central station's contract and insurance requirements.
So Mr. Dealer, if you can't understand this then, as Willie Nelson's song to the Music Executive goes, maybe you should monitor your own accounts.
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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
ken@kirschenbaumesq.com
www.KirschenbaumEsq.com
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