April 13, 2011
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Question
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Ken,
We utilize the services from many alarm companies across the USA.
My group is responsible for maintaining the upkeep of insurance and licensing for the alarm companies that perform work for us. We require E&O insurance as well as GL , WC & Auto. We find that many alarm companies do not carry E&O and many are unaware of what it is.
Sadly, many of the Insco’s that are providing coverage for these companies don’t see the need for them to carry it and many will not even offer it. I know this is not an insurance forum but you appear well versed in this area and may be able to shed some light on the subject for your alarm company readers and maybe a few Insco’s who receive your daily updates. I believe both parties could benefit from having a better understanding how E&O differs from GL and why it is important for Inco’s to offer it and alarm companies to carry it.
Regards,
Jim Simons
Vector Security Inc.
National Account Division
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Answer
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Alarm companies need E&O insurance. Simple as that. No matter how strong the alarm contract is [and if an alarm company doesn't have E&O insurance it's a good bet it doesn't have a contract either]. Even with a contract you are likely to get sued and the cost of defense can be staggering.
General Liability insurance is not enough. GL will not cover an alarm company for a loss suffered by the subscriber from a burglary, fire or other incident the alarm or security was designed to detect. I will leave it to the several expert alarm insurance brokers who contribute to this forum for a more comprehensive explanation.
Errors and Omissions insurance however will insure the alarm company from claims from subscribers alleging that the alarm company's alarm system didn't prevent the loss [an over simplification].
So GL insurance will cover you if you drop a hammer on a table. It won't cover you if your subscriber gets robbed and the alarm didn't go off or the response time was too long. E&O insurance will cover that claim.
But, why would a national company use subcontractors who did not have proper insurance protection? Instead of worrying about auto insurance it seems to me that subcontractors need E&O, which by the way, includes GL coverage.
E&O insurance is not expensive and is not on top of your GL policy, but instead of it. There are several expert brokers in this area and only a handful of insurance companies who write alarm E&O and sadly a fewer number who know how to handle claims properly.
Contact me for proper direction and referral for E&O insurance.