thinking about fire alarms and insurance
Do you install fire alarms? Think about it. I didn't ask if you install commercial fire alarms. I didn't ask if you install NFPA 72 residential fire alarms. Let me ask it this way, and let me know if your answer changed. Do you ever install [or repair] a smoke detector or other fire alarm detection device? If you do, then you do fire alarms.
I know I am approaching this in a challenging way, but I don't mean to. You are entitled to do fire alarm work if it's covered by your alarm license. Obviously if it's not covered by your license then you shouldn't be doing it. But even if you are properly licensed, what other considerations should you have?
Consider that the typical insurance policy carried by an alarm dealer is one million dollars. Some of you beef it up with an excess policy of 3 to 5 million. Larger companies can afford more coverage, and many do carry higher limits.
Under most circumstances your alarm industry E&O insurance is sufficient to protect you. Why? Historically, alarm industry insurance was a bit different that other kinds of liability insurance coverage because the insurance company didn't think it would have to pay out on claims; it expected to provide defense cost only, and then prevail on any claim because of the contract provisions with the alarm dealer and subscriber. I think that concept still holds, and works, but it's not without exceptions, plenty of them.
As alarm systems and services become more complex, more prevalent and aggressive advertising by alarm companies promoting safe homes and businesses, and promising better coverage almost to the point of guaranteeing no break-ins, no fire and no losses, we see more claims and lawsuits. Every loss is followed by an extensive investigation seeking to find flaws in the alarm system or alarm services. Alarm companies are becoming the first to look at, rather than a last resort. This of course affects the insurance companies who insure the alarm dealers. Once the insurance companies have the claims handled by a central claims department, rather than a specialized claims department who are better attuned to alarm industry issues, the carrier begins to handle the claim in the traditional way. Traditional for claims other than alarm claims, because alarm claims use to be approached from the prospective that the contract would exonerate the alarm company, and thus the insurance company. But traditional defense practices are more or less, what's the loss, did the insured contribute to it, what will it cost to defend and what chances do we have. Bottom line, what's cheapest way out for us [the carrier]. Adverse claim handling has the consequence of negative loss runs, which results in higher premiums and possible loss of coverage.
So how does this affect the alarm industry and impact on alarm services, fire or other services? When you do intrusion alarms you may have a fair idea of the potential risk, at least as to property loss. You know the value of the home or business and have idea of content; you adjust your system and pricing to accommodate the risk. By that I mean, you offer more equipment and services, not charge based on insurance company criteria. Of course there is possibility of personal injury and even death in an intrusion system or certainly other types of non-fire systems such as environmental systems. But I think the potential risk for personal injury and death is greater for fire systems [and that was the point of this article when I got started]. Not only is the potential for property damage greater in fire than intrusion, but the possibility of personal injury is greater in fire also.
If you are found liable on a fire claim what can you expect the damages to be? Will they be within your insurance coverage? Property damage should be straight forward, though cost of re-construction can be more than the fair market value of stolen property. Personal injury and death damages can vary greatly. Death claims can easily be within the 2 to 4 million dollar range. A survivor with serious injury could be entitled to much more depending a multiple factors. This potential exposure exceeds your insurance coverage, and that is the point of this article. If you do fire, any fire, be certain you use the best contractual protection, be certain that you are property licensed and trained and be certain that you carry more than the minimum insurance coverage.