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comment on increasing limitation of liability / certificates of insurance March 12, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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comment on increasing limitation of liability / certificates of insurance   
March 12, 2018
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comment on increasing limitation of liability from March 3, 2018 article
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Ken
    You did not discuss what happens if the alarm company, uses your form, takes the money and does not procure the additional insurance policy. Bankruptcy for sure, probably fraud or insurance fraud, and maybe the loss of the protective provisions of the corporate identity, which would lead to losing the personal assets.
    Additionally, did it ever cross your mind to say, what would an insurance company say or do if its insured increased the limitation of liability provision without approval from the carrier?
    In my role as a claims manager, I would be running to my Coverage Council looking to deny coverage because while investigating a claim that the claimant produced your "form" and demanded policy limits because it purchased up the limitation of liability clause to the policy limits.
    At SARRG we sell policies based on applicants signing that they have customers under contract and the contract they provided us during the quote process. There have been some who have made alterations to select applications and removed key sections to the standardized agreements, or "one-off's" as I call them, because they wanted the business. They never notified SARRG and choose to take the gamble. I settle these claims and then cancel or non-renewed the policies. They left with a nasty loss run and will pay through the nose to the next carrier, for five years, that is willing to gamble on them after being exposed.
Bart A. Didden,Executive Claims Manager
Security America Risk Retention Group - SARRG
Security America Risk Purchasing Group LLC - SARPG
877-872-1266
bdidden@securityamericarrg.com 
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Response
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    You are correct that I didn't address all of the consequences of increasing the limitation of liability provision.  I did convey the message that while the request to increase is common, actually agreeing on an increase is not common, especially beyond either a nominal amount or perhaps "amount paid under the contract".  Any significant increase would be cost prohibitive for the subscriber, unless of course the alarm company agreed to the increase without charging an additional fee.
    You observe that an alarm company may charge an increase sufficient to purchase insurance coverage for the risk, and then not buy the insurance.  Someone dumb enough to do that isn't reading these articles, so no point discussing that possibility.  
    I think your point about an alarm company agreeing to an increased limitation is well founded.  Since the alarm company believes that it's carrier will be the one footing the bill if there is a loss it makes sense that any increase should be approved by the carrier.  Of course it won't be and why should it.
Unless the carrier is getting additional premium based on the increased risk it shouldn't be willing to accept additional liability.
    You also correctly note that most E&O policies do not require, as a condition precedent to covering a claim, that an unaltered approved contract be produced.  It's a good idea for the insurance industry; not so much for the alarm industry.  So the E&O carrier will be stuck with the increased limitation of liability and will 1) try to avoid covering the claim, 2) cancel the insurance policy, though it will handle the claim, 3) terminate the policy, effective date of cancellation, 4) increase premium on renewal of the policy or refuse to renew the policy.  
    It's bad idea for an alarm company to significantly increase the limitation, and as I said in my prior article, if you stick to the 6 times monthly formula the increase is not likely to be significant.  
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certificates of insurance
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Ken,
    My question is regarding the certificates that we provide to our customers for insurance records/discounts.  Does the certificate need to be from the monitoring service or can that be something we can provide on our company letter head?  If we can provide, should include certain language for legality purposes?  Currently I have been requesting the monitoring service send me the certificate.
Regards,
John Fraschilla
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Response
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    You have contracted to provide monitoring services and you can issue the "certificate".  The form of the certificate can be one provided by the carrier requesting it, or something that you create.  The carrier wants to know what kind of alarm is installed and if it's being professionally monitored.  You can't go wrong by offering more rather than less information in your "certificate".  
    I have not created a form for the certificate.
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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
516 747 6700
www.KirschenbaumEsq.com