Guarding Against Subscriber Lawsuits
Alarm companies are an identifiable target when a subscriber suffers a loss. When the investigators and damage control people arrive, they see lawn signs, window stickers, stickers on panels, and alarm equipment hanging on windows, doors and walls. The subscriber had a loss; the homeowner’s policy covers the loss, or not, and somebody has to pay. May as well be the alarm company. They figure, what the heck was the alarm for anyway?
The trouble with providing alarm services is you might end up being the target for a loss you certainly did not cause, and probably didn’t contribute to either. The loss could be the result of illegal activity, a fire caused intentionally or from an unknown source, breaking pipes, heat, cold, etc. Every cause other than a loss caused by faulty alarm equipment or wiring — that I’ve yet to encounter. So you get sued because your system or service failed to prevent a loss. You could and should have installed it better or responded faster.
A lot of alarm companies can go through an entire lifetime without any lawsuits. The problem is that it only takes one. Defending a lawsuit can cost anywhere from a few thousand to a few hundred-thousand dollars. If you get tagged with a judgment, the loss can be from a few hundred to a few million dollars. The average alarm company, even if it could afford the defense cost, doesn’t want to have to.
That’s why errors and omission insurance is so important. While I am on that kick, please check all of your insurance. Make sure your general liability includes errors and omission coverage and that it’s written by an insurance company that understands the alarm industry.
I just received a denial of coverage from a so-called insurance company with an alarm program. This provider had the audacity to deny coverage with a letter from its attorneys that was too complicated for me to understand, just an old country lawyer, but seemed to say that since there was no “bodily injury or property damage” there wasn’t any coverage. Well in alarm defense cases there’s often a burglary loss, and that’s not bodily injury or property damage. And, the alarm company expects coverage when sued for negligence and breach of contract. Check your coverage and make sure your carrier is going to be there when you need it, not dancing around figuring out how to get out of covering the claim.
There is little you can do to escape lawsuits other than having the proper alarm contracts and performing your services to the best of your ability. Being responsive to your subscriber’s requests for assistance, service and information is also helpful. If there is a loss, however, you should immediately report that potential claim to the carrier. Should you hear from the subscriber asking for information about the alarm, you should insist that your carrier engage counsel immediately to assist you with any response. You paid for insurance and you shouldn’t hesitate asking for coverage.
If the carrier assigns an attorney who doesn’t know the alarm industry, don’t be shy about demanding another attorney who does. You can ask for specific counsel, though the carrier does have the right to select counsel, but only if competent.
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