Potential alarm customers are increasingly demanding that you carry specific minimum insurance from carriers with certain ratings, that you insure the customer, and that you indemnify the customer from damages caused by you, your work, and your work product.
That could mean a burglary or fire loss after the system is installed, a risk you should not be prepared to accept. You don’t want to name the subscriber as additional insured, and you don’t want to indemnify the subscriber either.
Make Sure You Protect Yourself
If you do end up indemnifying the subscriber, you’d better also name the subscriber as an additional insured and try to limit your liability to the insurance coverage.
The additional insured and indemnity demand raises a few interesting issues. If you do entertain or agree to these demands, you will be agreeing to contract terms that are not found in the Kirschenbaum Contracts.
There is no requirement that you carry specific insurance in the Standard Form Agreements. If you agree to terms by signing a different contract, or even a rider to your Standard Form Agreement, then the contract needs to be reviewed by counsel so you know what you are getting yourself into.
If you agreed to insurance requirements, then you likely agreed to an indemnity, as well. That, indemnifying the subscriber, is also something not in the Standard Form Agreement. The indemnity and the insurance provisions need to be read together because you need to be sure that your insurance coverage, at the very least, covers your indemnity obligation.
If it doesn’t, then you’ve put your company at risk beyond your insurance protection.
Other Potential Risks
Failure to carry the subscriber’s requirement for your compulsory insurance has other risks. If you fail to carry the insurance, you are in breach of contract, and the subscriber can terminate your contract for cause and not pay you.
Once you are in a contract, hopefully with a Standard Form Agreement, you are not obliged to change that contract by adding indemnity or minimum insurance—or anything else for that matter.
If you do decide to change the terms of your contract, then you can impose whatever conditions you want, including an increase in price.
When first negotiating the Standard Form Agreements, it’s not uncommon for the subscriber to demand to know your insurance coverage.
This is especially the case when we agree to modify the contract terms, the exculpatory and limitation of liability provisions, to increase coverage for gross negligence and willful misconduct or damage caused by your negligence while you are working on the property, and you limit even those damages to your insurance coverage.
If you carry $1 million coverage, which most of you do, and an increase is required, the appropriate response is that the subscriber must pay for the additional premium cost for increased insurance. That often causes the subscriber to retract the demand.
Contract negotiations on this level are quite different from negotiating the design and cost of a system. The Concierge Program is designed to provide you with cost savings for legal fees to deal with these issues by offering a free half-hour each month for that legal service.
I suggest you avail yourself of the Concierge Program and take advantage of its benefits. Whether you think you need the services or not, rest assured that you do, especially if you went to law school and decided to go into the alarm business rather than practice law.
“Legal Briefing” columnist Ken Kirschenbaum has been a recognized counsel to the alarm industry for 35 years and is principal of Kirschenbaum & Kirschenbaum, P.C. His team of attorneys, which includes daughter Jennifer, specialize in transactional, defense litigation, regulatory compliance and collection matters.
