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comment from broker on additional insureds
November 22, 2018
comment from broker on additional insureds from October 12, 2018 article
            You raised a good question in your October 12, 2018 email about what rights does an Additional Insured have, what kinds of Additional Insureds are there, and what type should I have my insurance issue for me. 
            The answers vary depending on the verbiage in the agreement the alarm company is being asked to sign, but it can range from no big deal… all the way up to providing MORE coverage for the Additional Insured than it does for the primary policy holder.  As you point out, the agreements from the alarm company’s customer that contain the Additional Insured requirement are all Risk Transfer efforts designed to move as much exposure as possible from that customer back over to its vendors. 
            A lot of our customers ask, “how much of that verbiage should I accept?” or “what’s reasonable?”  And those are tough questions to answer because the answer your legal counsel might give is likely to be very different from what the alarm company’s customer’s insurance compliance department will tell you is acceptable.
            Most standard General Liability policies will include a basic Blanket Additional Insured endorsement.  This basically says that anyone our insured has a contract with that requires they be Additionally Insured, is.  Basically, the idea is that if, while an alarm company is providing ongoing operations for the customer, the customer gets sued due to the alarm company’s negligence, then the alarm company’s insurance will indemnify the customer.  Standard stuff.  No extra cost, and the certificate confirming the status is quick to issue. 
            However that doesn’t address the extra clauses the customer’s agreement may contain, that are designed to transfer MORE risk, MORE burden back over to its vendors.
            Things like:
  *   Making the alarm company’s insurance primary (first to have to pay) even in cases where the customer is partially negligent or even completely negligent (“Primary and Non-Contributory wording”)
  *   Restricting the alarm company’s insurance from seeking reimbursement if it pays out first due to an agreement even when the customer is negligent (“Waiver of Subrogation”)
  *  Making the alarm company responsible for the customer’s premises it worked on AFTER all operations and services have ended (“Completed Operations”)
  *  Customer requiring 30 days written notice directly from the alarm company’s insurance company if any condition of their policy changes or cancels
  *  Customer requiring that alarm company’s insurance’s full policy limit is guaranteed to be fully available, even if other claims have already been paid that year (“Per Project Aggregate”)
            These clauses can be costly to get your insurance to comply with, because insurers know that compliance equals taking on whole lot more risk.
            We see these requests included on customer agreements all the time, but what’s interesting is that they’re not always enforced.  What we always encourage our insureds to do is to provide a certificate including whatever type of Additional Insured they already have included in their policy, and then see what kind of response their customer comes back with.  Many times we will see a much less onerous level of coverage accepted than what is spelled out in whatever boilerplate the alarm company’s customer may have used to create its agreement.
            Or, if you know you’re going to have a lot of customers that have onerous requirements like these, and they pay well enough to justify it, you can upgrade your policy to include all of that wording by default.  That’s an option too.
            So end the end, what’s reasonable is often defined by what’s accepted.  And it always behooves the alarm company to push back a bit when confronted with insurance requirements that are outside what they’ve already found to be commonly accepted.  We help our clients navigate this daily, and the relief usually starts just with the knowledge that they CAN push back and likely reach a compromise.
Larry St John, CIC, CRM
Eclipse Marketing & Insurance Services
707.469.6776 x102
            With all due respect, why would an alarm company seek legal advice from its insurance broker?  Why would the alarm company owner seek legal advice from its insurance company?
            A good rule of thumb is to stick to the terms of the Standard Form Agreement when it comes to insurance provisions and allocation of risk in the agreement.
            An insurance broker and an insurance company has no business offering legal advice, hard as it may be to refrain from doing so.  It's not that the broker and insurance company may not be very knowledgeable and very right, it's because their function and duty is much different than a lawyer for the alarm company.  A broker is loyal to the insurance company.  An insurance company has obvious self-interest to insulate itself from additional exposure and risk.  A lawyer owes loyalty to the client, period.
            Call a broker or insurance company and ask if you can indemnify, if you can add an additional insured, if you can waive subrogation.  The answer you get will very likely be different if the alarm company's lawyer is asked the same question.  
            Here is what you should be asking your broker:  "Here is the contract I am considering signing, can you get me the insurance required by this contract."
            If the broker wants to renegotiate the contract point out that you didn't ask for that advice or service.  If you can't get the insurance required by the contract then you can't sign the contract.  You can't sign the contract and hope that the subscriber won't enforce the insurance provisions.
            Larry isn't the only broker who provides the kind of assistance he describes above, and I certain he is very good at it.  But the practice should be curtailed, by all brokers.
            As far as advise from the insurance company?  That's almost funny [if it wasn't so sad].
            By the way, I didn't mean to pick on Larry.  He is very knowledgeable, knows his insurance issues and is a great asset to the alarm industry.  He is listed on The Alarm Exchange.

   I asked Larry to respond to my comment, and his reply is below:
    Ok, I see what you’re responding to, and it might be because I wasn’t being clear.  I don’t ever mean to offer my clients legal advice. 
    My customers ask me all the time, “can I comply with the insurance requirement in this contract”, and I tell usually have to tell them “no”.  BUT in those cases I then explain that the requirements are mis-worded, referencing insurance forms that have been out of circulation for decades, and/or reference liability limit requirements that are so high that only much larger companies can afford them.  However, I tell them they might still find out that the insurance they already have MIGHT be accepted if they just submit it and see what their customer says.
    Admittedly, acceptance of their insurance does not mean compliance with the contract, it just means they’ll get paid for the work they’re doing at present.  But I can’t comment about interpreting and responding to a legal document that might be poorly constructed , for that they’ll need your services.
    Ken, I’d be happy to add the above remarks to my original email if that makes it less contentious, I certainly didn’t mean to misdirect anyone.
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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
516 747 6700