The main reason you’re buying insurance for your alarm company is to make sure any claims by a customer against your company are adequately handled by the company issuing the insurance policy. For that reason you have to make sure of two things:
- You have eliminated any “coverage gaps” so that all aspects of your business are protected by insurance.
- That the company is legitimate and has the financial resources to pay said claims.
Because of the nature of your business, your exposure to loss is great and seldom justified by the actual cost of your products or services.
The Basis Of Paying For Claims
Lawsuits against alarm installation companies have been happening since the first alarm system was installed. Why? Because litigants say the alarm system is designed to prevent and so should have prevented any loss that occurred.
That means that to file a lawsuit, a burglar alarm, fire detector, sensor control, etc. had to have been present at the time a loss happened. Despite strong contract language including limits of liability designed to minimize legal activity related to these devices, lawsuits are filed nonetheless usually seeking recovery from any available pocket.
Insurance companies estimate their cost of insuring you based on contract language that insulates the alarm company from unanticipated exposures. The cost of restoring buildings, replacing business inventory or personal effects in a home is seldom factored into the cost of installing, monitoring and servicing an alarm. The cost of insurance would be too high if it was.
In addition, most courts in all states understand and enforce the contractual provisions in a properly worded alarm contract. They find them consistent with permitting alarm companies to offer their services at affordable rates.
Why Are Lawsuits Settled?
Insurance companies are concerned about the risks (the likelihood of a plaintiff winning and the size of a potential award should the plaintiff win) and the economics of providing a defense for the case. They are not as concerned about the impact of a settlement on future cases or the alarm industry.
If the facts are against the alarm company with the potential damages and cost of litigation being high, it may be in everyone’s best interest if the case is settled but only when the contractual protection cannot be enforced. But the mindset going in is that every case should be defended and any clauses, limitation of liability or other protective provisions be enforced.
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