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raising limitation of liability to your insurance coverage
February 25, 2019
raising limitation of liability to your insurance coverage
            Our subscriber wants to exclude gross negligence from the limitation of liability provision and also wants to change the Limitation of Liability provision to raise the limits to our insurance coverage.  You advised us that we could raise the limit but that we risked problems with our insurance carrier if they find out; that the carrier may cancel the policy, refuse to renew or significantly raise the premium.
            Our insurance broker told us that it would be “no problem, no treat to coverage and we pay the premium so the carrier can protect us”.  
            How does all this play out.  We use the All in One agreement, so you know the contract terminology. 
Name withheld
            The Limitation of Liability provision is one of the more potent provisions in the Standard Form Agreements.  It complements the other “protective provisions” to provide the most protection you can expect from your contract with the subscriber.  Naturally, this provisions receives scrutiny by subscribers followed by requests for modification or omission of the provision.
            Consistent with industry standards, the limitation of liability is $250.00 or 6 times the RMR at time of loss, whichever is greater.  If you don’t have a Kirschenbaum TM contract then you better check the provision out carefully because it’s really easy to screw it up so that it won’t be enforced.  As written the limit is nominal, also consistent with other protective provisions that clearly state there is to be no liability and no damages against the alarm company.  
            When your subscriber demands to modify the Limitation of Liability provision you should engage counsel, me if you got the contract from me [otherwise don’t bother calling].  There are a few changes that we can agree to.
            First of all, we may as well agree that we can exclude gross negligence and willful misconduct; that’s the law almost everywhere anyway.
            Second, the clause can be modified, if you really want the job, to accept the scope and kind of liability that any contractor would be expected to assume.  That would be damages caused by your employee’s negligence while your employees are actually working on the subscriber’s premises.
            There will be times you have to agree to omit or change the limitation of liability provision, or when you won’t even be getting your contract signed.  You want the work and it’s the only way to get the work.
            But there are very good reasons for resisting any modification to the provision, and I think your insurance broker has misadvised you.  You are not the only party relying on your contract and its protective provisions.  Your central station relies on that contract.  Other subcontractors hope to rely on it.  In most cases your insurance carry asked to see your contract before agreeing to write the insurance.  Why?  Because your carrier also depends on the contract to protect it from damages.  So your carrier probably decided to write the insurance because you use the contract it reviewed and it based your premium, at least partially, on the fact that you use the contract.  So taking the position that, hey, you pay the premium so the carrier will provide the insurance coverage.  Yep it will, until it finds out what you’re doing with your contracts, exposing the carrier to far more liability than it signed on for.  For years I use to say that the difference between insurance for alarm companies and insurance for others is that the carrier insuring the alarm company doesn’t expect to have to pay out on claims, and that’s because of the contract protection.  I think times have changed.  Most carriers have claim representative that think they know the alarm industry for defense purposes, but they don’t.  They end up paying more for defense cost and more for claims.  Who do you think is ultimately going to have to pay for that?   That’s right, you.  Your premiums are going to go up and that’s assuming the carrier is willing to continue insuring you.
            So raise the limit in the contract and let the carrier pay for it?  I don’t think that’s a good or sustainable practice.  Exposure to claims in the alarm – security – fire industry is too great.  You need to protect yourself, your central station, your subcontractors and your insurance carrier by using proper industry accepted contracts.  You get them here:   


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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