more on raising limitation of liability to your insurance coverage / Per call repair option consequences March 12, 2019

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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more on raising limitation of liability to your insurance coverage / Per call repair option consequences
March 12, 2019
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Notice:  I'll be at ISC West in April.  Call our Concierge Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304 to arrange a private meeting and consultation.  Meetings and consults will be No Charge during the ISC show.
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more on raising limitation of liability to your insurance coverage from article on February 25, 2019
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Ken
          I am responding to the question about raising limitation of liability to your insurance coverage.
          Generally speaking, there aren’t usually any exclusionary clauses in insurance policies that would preclude coverage based on the language within a contract or the lack of a contract being in place for that matter.  There is some language related to contractual liability that could potentially apply, but it is rare that it does.
          I think your insurance broker’s response is generally correct but I would caution you on some things.  When you complete your application (depending on the carrier) you are warranting the details of your business – If you state that 100% of your contracts have a limitation of liability no greater than, let’s say, $500, having a single contract that has a significantly higher amount changes you as a risk.  While your carrier would be hard pressed to rescind your policy on misrepresentation (thereby voiding your policy and giving you no coverage), they could certainly cancel you midterm for significant change in risk or non-renew you at renewal.  My recommendation is that you be open with your carrier and let them know what you are doing.  You are not asking them permission, necessarily, but you are putting them on notice that there will be an account that has a higher limitation of liability.  What you don’t want is for it to be a surprise to them at the time of a claim.  If you do, you will be dealing with not only the claim, but a carrier who “had no knowledge” that you had contracts out there with that high of a liability.  Remember what limitations of liability are for – limiting your liability, usually, to the cost of the contract itself.  Increasing it to your insuring limits is not advisable, in my opinion.  If they must have that amount, then perhaps some additional language that states “the amount of actual, proven damages or <<insert policy limits>>, whichever is less”.  Most importantly, you really need to look at the cost of the contract vs the liability affiliated with it.  In the event of a claim, not only will you have to pay your deductible, but you will have to deal with increased insurance costs.  If you have a $1M claim, it will be close to impossible to get coverage anywhere.  Is the risk worth the reward?  At Security America, these are concerns we help our insureds with every day.  We give them options, we talk through it and try to be a sounding board for our insureds. 
          Best Regards,
Crystal Jacobs, RPLU
usrisk@securityamericarpg.com
(866) 315-3838
SARP
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Response
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          Raising the Limitation of Liability provision limit to your insurance coverage is not something you should do, unless you tie that increase in with gross negligence.  The reason you can do that is because the clause won’t be enforced for gross negligence anyway and your insurance carrier will be on the hook.  Keep in mind that you E&O coverage probably doesn’t cover willful misconduct, and that is often the definition of gross negligence.  Watch for Reservation of Rights or outright denial of coverage [you should probably challenge a denial of coverage, and you should insist on the carrier appointing your designated counsel if there is a Reservation of Rights].
          Keep in mind that this discussion started with the broker who approved raising the limit to insurance coverage “because that’s what the insurance is for”.  Very bad advice and just don’t do it.
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Per call repair option consequences
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Ken,
           We had a client that has signed your All-in-One commercial contract. This client made a service repair to their system without our written authorization. For obvious reasons we don’t know what actual repairs they made and to what extent they made repairs to, panels, devices wiring, etc.   How should we proceed with this client? Should we cancel their service? Cancel all warranties? Release ourselves from any and all liability? Are we able to increase our hourly rates as they are not specifically stated in the physical contract?
 Thank you, 
Josh
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Response
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          The “per call” repair service option in the All in One permits the subscriber to call anyone it wants to perform service.  But there are consequences, and you have suggested one of them, loss of warranty to affected equipment if the repair was made during the warranty period.  
          The per call option does not require that the subscriber call you for repairs, but also does not require you to service unless you want to.  Since per call service doesn’t add RMR it doesn’t add equity to your company.  
          If the subscriber has a Service Plan, along with RMR, then it cannot call upon another alarm company to perform repairs unless it wishes to breach the contract.  If under the Service Plan the All in One does not permit the subscriber to call in another company.
          A subscriber who breaches an All in One risks not only a cancelation of warranty and future repairs, but a claim for breach of contract.  The balance of RMR is due, less 20%.  Or, you can ignore the breach and continue servicing the account.  It’s different when it’s per call because if the other alarm company failed to service properly you will be charging to make repairs.         
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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