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Is general liability and E&O insurance needed for fire and security dealers
June 11, 2019
Is general liability and E&O insurance needed for fire and security dealers 
Ken - 
            We have dealers all across North America and a common question asked is why we (AvantGuard Monitoring Centers) require our Security, Fire and PERS dealers to have both General Liability AND Professional (E&O) Insurance.  Potential dealers are telling me that "other" central stations they are talking to do not require both GL & Professional insurance.  I would like to get your professional feedback on this question and I also hope you will post this on your daily email to help these "other" central stations understand they need to start requiring both insurance policies to protect their dealers and their companies.
            I also asked The Insurance Center who writes many of our dealers insurance policies all over the country if they recommend Security Dealers, Fire Dealers and PERS Dealers to have both General Liability And Professional (E&O) Insurance.  The Insurance Centers reply is below. 
Troy Iverson
AvantGuard Monitoring Centers
            Security, Fire and PERS dealers need general liability, professional liability (E&O) insurance as well as good contracts (Like Kirschenbaum'Contracts) .  All three are necessary for proper risk management and to protect the dealer and the monitoring company.  Is professional liability (E&O) important for the dealer to have in addition to General Liability insurance?  The answer is an emphatic, “YES!”
            General liability
 is going to protect the dealer against bodily injury and property damage arising out of premises, operations, products, and completed operations.  It also includes advertising and personal injury liability.   It does NOT cover the dealer in the event of an error or omission or a perceived error or omission.  I mention the “perceived” because the dealer could do everything correct with no mistakes or omissions, but that does not prevent a law suit from happening.  The end user can sue the dealer for something he/she feels was “bad advice” (or advice that should have been provided, but was not).  The general liability will not pay for the defense costs because there was not bodily injury or property damage.  The cost to defend oneself can be very expensive – hundreds of thousands of dollars.  We have seen the professional liability policy cover the defense costs where the general liability policy would not. 
            Professional liability (E&O) protects the dealer against liability for committing an error or omission and it will defend against a perceived E&O claim.  Generally, professional liability policies are designed to cover financial losses rather than liability for bodily injury or property damage which is covered under the general liability policy.  The professional liability language includes something like the following. “… arising out of the rendering or failure to render professional services as described shall be deemed to be caused by an occurrence”.  These professional services are excluded in a general liability policy.  or the policy language may include, “… damages as a result of an error or omission to which this insurance applies.  We will have the right and duty to defend the insured…”  The professional liability is similar to a doctor’s malpractice insurance policy.  An alarm dealer offers advice to the end user through its employees, marketing materials, installers, and  independent contractors.  On a side note, many policies will exclude independent contractors.  It is important if the dealer utilizes independent contractors, then they get an endorsement to include the contractors under the definition of an insured. 
            They both are important and necessary for all Security, Fire & PERS dealers.  The minimal expense costs for this type of insurance is well worth the risk.  All of the attorneys that are specific to the alarm industry talk of the importance of and the necessity of both professional and general liability insurance policies.  This is not something new.  We have been doing this for more than a decade.  All insurance agents that deal with Alarm & PERS dealers on a regular basis will also testify of requiring both professional and general liability.  It is an industry standard.  These policies can often be written under one packaged insurance policy. 
            The cost for professional liability is very affordable and is an industry standard.  If a dealer fails to have this type of policy, they run the risk of being sued and being exposed without coverage. If you are a dealer and have any questions about your insurance please call our office.
The Insurance Center
            Great question and thanks for also providing the answer through The Insurance Center. [The Insurance Center is listed on The Alarm Exchange in the Insurance category and you can contact Shawn Iversen at 877 422 2626].
            Central stations, like Avantguard [Avantguard is listed on The Alarm Exchange in the central station category] can serve a vital role in the alarm industry.  The best of the best central stations will not only provide the monitoring that dealers expect, but will serve as a source of information and business guidance, steering and encouraging the dealers to engage in best practices.  How?  By informing and insisting on proper licensing, contracts, insurance and other custom and practices. The central station is not a replacement for your lawyer [join the Concierge Program today], tax advice or other professional advice; in fact the central station should avoid over-stepping its role in the scheme of things.  
            And dealers need to be mindful that while the central station is there to facilitate your monitoring services, it has its own agenda, interests and goals.  It also has its own licensing, contract and issues, just like dealers.  
            A good central station will insist that you be properly licensed, insured, use proper contracts and conduct your business in an otherwise legal manner.  In fact, the central station has, in part, a selfish motive for insisting on these issues.  Why?
            On the licensing front, in some states a central station can be criminally prosecuted for aiding and abetting an unlicensed alarm company who contracts with customers for monitoring services, even when performed by the licensed central station. 
            Central stations rely on dealers to use proper contracts for the central station’s protection.  Central stations who offer monitoring contracts to their dealers are doing a disservice to the dealers.
            Most if not all central stations require the dealer to sign an agreement with the central station [an Installer Agreement or Dealer Agreement].  This agreement invariably requires the dealer to indemnify the central station in the event any of the dealer’s customers sue the central station.  A dealer who has agreed to provide indemnity would be just plain stupid not to back that indemnity up with insurance.  A central station who relies on that indemnity and hasn’t ensured that the dealer has obtained insurance to cover the indemnity would be just as stupid.  
            If you’re a dealer and your central station isn’t giving you great guidance, support and service, change central stations, especially if your central station isn’t listed on The Alarm Exchange.

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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