Security Sales & Integration May 2021 - 58

EXECUTIVE DECISIONS

Legal Briefing by Ken Kirschenbaum

How to Handle
Additional Insured
Demands
Recent
negotiations
have led me to
consider when
you should
depart from
the historical
position of " no
indemnity " and
" no additional
insured. "

Ken Kirschenbaum, an
SSI Industry Hall of Famer,
has been a recognized
counsel to the alarm industry for 45 years and is
principal of Kirschenbaum
& Kirschenbaum, P.C.
(kirschenbaumesq.com).
The opinions expressed in
this column are not necessarily those of SSI, and not
intended as legal advice.

▶ THE ADDITIONAL INSURED provision is
one of the more potent provisions used to allocate and shift liability. The traditional response
to a subscriber request to be named as an additional insured has historically, at least in the
alarm industry, been to reject the demand. Alarm
companies do not offer to cover their subscribers
on the alarm company's insurance policy.
Before discussing this policy in more detail,
let's first take a moment to understand what
naming your subscriber as an additional insured means and the consequences, because
there are many issues.
The first issue to arise is when you agree to
name an additional insured and you don't. That's
a breach of contract, and more than likely a noncurable breach, entitling the subscriber to terminate the contract and stop paying you. Failing
to obtain the insurance is also likely to expose
you to the liability that the policy might have
covered. In other words, you just became the insurance company.
You need to be careful what additional insured coverage you are being asked to provide.
When we think of additional insured we believe it means that your additional insured, the
subscriber, and whoever else you have named
as additional insured, will be covered by your
insurance policy to the extent that you are liable for the loss and covered by your insurance.
In other words, the additional insureds do not
have any more coverage or rights than you do as
the primary insured.
However, it doesn't always work out this
way because of how the demand for additional
insured is written. The demand for additional
insured coverage might require your policy to
be primary and noncontributory; it might demand that your policy be first in line to cover
a loss on the property even if you aren't the
cause of the loss and did nothing wrong. In
this case your policy becomes the primary in-

Security Sales & Integration MAY 2021

SS2105 pp58-59 Legal-Big Idea.indd 58

ken@kirschenbaumesq.com

surance for the subscriber no matter who is
to blame. This kind of coverage would not be
typical, but it's something you, your insurance
broker and carrier should be careful to avoid if
not reject out of hand.
Keep in mind that you may want to name
your subscriber and others as additional insured on your policy even if there is no request
to name them as such. In fact, you should
name any party as an additional insured if you
have agreed to indemnify them. Your insurance needs to back up your indemnity, and you
should seek to limit your indemnity to your insurance coverage.
Demand for additional insured status and for
indemnity is becoming more common. Naturally alarm companies don't want to lose business, but on the other hand they also don't want
to risk their entire company on a loss or risk loss
of insurance coverage or increased premiums.
There needs to be a balance.
Recent negotiations have led me to consider when you should depart from the historical
position of " no indemnity " and " no additional insured. " I've counseled clients that if the
scope of the job is installation only then they
can agree to the indemnity and additional insured requirement. Though they still have to
get approval from their insurance broker, who
may or may not have the authority to approve
additional insureds without consulting with
the carrier.
Post-installation services of any kind (e.g.
monitoring, repair service, inspection) have
much different exposure and you should not
sign any general contractor or owner or subscriber form agreement, and you should not
provide any indemnity or additional insured
coverage. Use your own form agreement (alarmcontracts.com) that requires the subscriber to
indemnity you and name you as an additional
insured on its policy.
If you have a subscriber who insists on indemnity and additional insured status for RMR
services (post-install services) I suggest you
counter with an offer to obtain a separate policy
for you and the subscriber. Limit your indemnity to that policy and require the subscriber
to pay your cost of the policy. Contract negotiations that involve legal issues, as opposed to
business issues, should be handled by lawyers,
not by you.
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4/16/21 3:49 PM

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Security Sales & Integration May 2021

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