Warning, check your E&O coverage today and switch if not positive about coverage September 11, 2025

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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Warning, check your E&O coverage today and switch if not positive about coverage
September 11, 2025
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Warning, check your E&O coverage today and switch if not positive about coverage
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Ken
   I’ve had the same insurance broker for many years, and despite having no losses, the price of coverage kept going up. Recently I decided to ask more detailed questions about my policy. As part of that process, I went to The Alarm Exchange and ended up calling Ralph at John Costa Agency. [Ralph A.Costa 973-835-8444 ralph@burglaralarminsurance.com]
   I sent Ralph my policy, and within 30 minutes he called me back and directed me to page 71. He pointed out that my policy includes an exclusion for alarm and security monitoring and dispatch operations. The wording says: “This exclusion applies regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others.”
   That was concerning to me, because our business is fully in the security industry and we’ve disclosed this on every application update. We are a dealer, so our contracts are sold while we do retain some in house monitored by the same dealer program that funds us but either way this gives us exposure to things that we thought paying all these years covered us for. Ironically, our carrier issues certificates to our monitoring station.
   We were first with West Bend and later switched to Cincinnati. I can’t say whether this exclusion has always been there or only appeared when the policy moved to Cincinnati, but either way I was not aware of it until Ralph brought it to my attention.
   Ralph also explained how payroll estimates work under the policy. If actual payroll ends up higher than the estimate, the carrier bills you for the difference. But if payroll is lower, there’s no refund — the carrier simply keeps the excess.
   I’m sharing this because it may help others. Insurance policies in our industry are often 100+ pages of dense legal language, and exclusions like this aren’t obvious. Don’t assume your carrier or broker has you fully covered. Have your policy reviewed — Ralph at John Costa Agency made things clear for me that I never thought to look through and would not have spotted on my own.
   I find my brokers actions appalling and uncontainable. I wrongly assumed they had a duty of care to act in my best interest.
   Thank you, Ken Kirschenbaum, for the valuable resources you provide for our industry. They make a real difference.
If you choose to publish this, please keep it anonymous and redact anything that could get me sued. LOL
anonymous

Response

   This is a serious issue. Most of you are alarm dealers, you don't perform central station monitoring services yourselves; you use Central Station Monitoring Centers, wholesale central stations that monitor for dealers, like you, and usually do not offer monitoring directly to alarm subscribers. It's not that unusual for alarm dealers to think they are not in the monitoring business. When filling out the insurance application they will respond that they are not performing monitoring services. That however is not accurate, not by a long shot.
   Most if not all of you offer monitoring services in your contract; you collect the RMR for monitoring. Yes, you don't perform the monitoring yourself, but you are contracting for the services; you are charging for the monitoring service and you collect money for the monitoring service. Many of you insert yourself into the monitoring service by doing data entry or getting notifications rather than just leave it all to the subscriber and central station. The level of your involvement aside, you all contract for the monitoring service. Simply put you are in the business of monitoring alarms.
   Some alarm E&O policies exclude monitoring, as anonymous found out [I have many articles on this topic]. This is a serious gap in your insurance protection. It's particularly dangerous because you indemnify your central station, even for its negligence. That indemnity is going to be hard to provide if you don't have insurance coverage. And, naming the central station as additional insured? Well, I don't think that's going to help much if the policy excludes monitoring service.
   Insurance brokers may point out that your policy has "contractual indemnify coverage", meaning that your policy will cover your contractual indemnity obligations. First, I don't think most E&O policies include Indemnity Coverage; it has to be added as an Endorsement to the policy. Even if it did include that I don't know that it will expand the policy coverage if it specifically excludes monitoring services.
   Why do you need this uncertainty? This excessive risk? Answer is you don't. Don't be lazy and don't be stupid. Check your policy; ask your broker. Keep in mind that there are a very limited number of carriers that offer E&O to the alarm industry. Your first call should be to Security America; contact Crystal Jacobs or Rhett Butler, 866-315-3838 or info@securityamericains.com. If your broker can't answer your question off the top of his [or her] head, then you need a new broker, one from The Alarm Exchange [and if they can't answer please let me know because they don't belong on The Alarm Exchange]. Here are the questions:
1. Does my E&O cover all the services I provide or contract for, including monitoring services?
2. Does my E&O policy cover my contractual indemnity obligations for services that I do not do myself or which may be excluded in my policy from coverage?
   I agree with anon, Ralph at John Costa Agency knows the industry and the insurance. He is a great choice for insurance broker. He is in NJ but I think he services most if not all states. Security America is available in all states.

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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
www.KirschenbaumEsq.com