KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Carrier pays alarm claim and drops alarm co - don't let this happen to you
December 22, 2025
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Carrier pays alarm claim and drops alarm co - don't let this happen to you
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Ken
Here is something that just happened to us.
We have a customer that signed an Kirschenbaum contract with us about 7 years ago.
One item was a limit of liability, even for negligence was $ 250.00.
In the area of their home has little or no cell phone service; we tried to install a cell phone communicator and it would not be reliable. We installed an internet communicator; it worked fine. We have a record of a 24 hour test signal coming into our central station for
years and years, without a miss, up to the lightning event, then nothing.
Now for the question. Our customer was on vacation; the house was hit with lightning. The lightning came in on the overhead power lines. The circuit breaker panel was destroyed along with all electrical service and the modem was also destroyed. The house was underinsured. The homeowner did many modifications and never updated his home insurance.
The house caught on fire and the loss was major. The Nassau County fire marshal visited the site and confirmed a lightning strike was the cause of the fire.
We had installed a burglar and fire alarm system and the home owner contacted a lawyer because he said the fire alarm did not work. No one was home, when the neighbors saw the smoke and they contacted the fire department.
The reason the alarm did not notify was because there was no internet service at the residence due to the lightning strike! The homeowner's lawyer contacted us and asked for our insurance company and a copy of our Kirschenbaum contract; we supplied both.
Bottom line:
Even with our Kirschenbaum contract our liability insurer paid our customer $50,000 on our behalf. How did that happen even with our contract? Why did the insurer pay that much?
The carrier also dropped us; refused to continue the insurance. Now we are dropped from our insurance company, even though we have been in business for over 45 years without a loss; no claims; we are dropped!
When we apply for another liability insurance company they want a three year loss history report and that's the only way we found what the final outcome of the claim. Our carrier didn't even bother to let us know; just dropped up. We did find another carrier at a much higher premium.
In my option my liability insurance was nuts..... The carrier was Everest insurance company. We took your recommendation and we are now with Security America.
George Martin Sr
Martin Control Systems Inc
New York
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Response
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What's wrong with this scenario? So much I don't know where to begin. First of all the claim was completely defendable, provided your facts are accurate [and I am confident they are]. Second, even with some degree of negligence the contract will protect you from any liability.
Under the facts presented the carrier apparently decided that rather than incur expense defending the claim it would just settle. While the settlement payment appears to be more than reasonable defense cost, settling eliminates risk and original claims can escalate even after the case is commenced.
The problem a carrier creates by adopting this cost saving approach is that it encourages future claims, by this attorney, this subscriber and anyone and everyone they talk to.
I have two other issues for the carrier. First, why wasn't the alarm company, the insured, consulted on the settlement of the claim. I am actually surprised and wonder if some communication to the alarm company was simply missed. Resolving a claim without communicating to the insured seems odd to me, to say the least. Why the carrier decided to drop the alarm company is another matter. That I can see happening without any notice to the alarm company; carrier simply decided not to renew the policy. There could be various reasons for that and I won't get into them now.
What I do want to conclude with is, I've warned you. When you take out the insurance you are concerned with price; you give little thought on how a claim will be handled. Here, how the claim was handled turns out to be the most important factor, and consequence, of selecting this carrier in the first place. I have suggested in the most uncertain terms, be concerned with how claims are handled because they will turn out to be much more important than the premium.
By the way, it's not just whether the carrier made an early settlement, screwed up the case somehow, but also how much time were you, or will you, be required to spend trying to educate the defense attorney selected by the carrier, and yes, sometimes the carrier's claims rep, what the claim is about and how to handle it?
Your first stop for E&O coverage should be Security America. You contract them here: Crystal Jacobs or Rhett Butler, 866-315-3838 or info@securityamericains.com. It's that simple. They are alarm industry owned, they have a better understanding of what the alarm E&O program and insurance is about and they have a more expansive view of handling claims and a better track record engaging defense attorneys who know how to handle alarm defense cases. Full disclosure, K&K handles defense cases in New York and sometimes as consultant in other jurisdictions.
If Security America turns out to be a bad fit for you then look to The Alarm Exchange where you will find insurance brokers who have an idea about this industry and the carriers that offer coverage. But that's your second call. Third if you called me first. But that might be only once the claim comes.
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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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