INFORMATION ABOUT ELECTRICAL CONTRACTORS DOING ALARM WORK
The purpose of this article is to provide information to Electrical and Alarm Contractors to better understand some of the risk pertaining to general liability insurance. This agency and the insurance companies we represent understand that NJ licensed electrical contractors can install, service and repair alarm systems; fire, smoke, security, etc., however they do not like to provide coverage to the electrical contractor who exceeds 10% in the programming or any direct monitoring of alarm systems. When this amount is exceeded the policy should be written in another program which provides errors & omissions from the failure of an alarm to perform.
General liability policies provide bodily injury and property damage to others. It does NOT provide errors & omissions coverage. An alarm policy through Scottsdale DOES provide this coverage. To explain it … If you install an alarm and it does not activate and the building is burglarized or burns down, your customer may sue you for the failure of the alarm to perform. The “standard” electrical liability policy does not provide any protection, however an alarm policy will provide defense (lawyers) whether you are at fault or not (with limitations). Of course, this agency can provide this type of policy.
Below find examples to further explain coverage.
A light fixture was installed and the connection was not properly fastened, therefore the loose connection gets hot and causes a fire. During the fire someone is burned or injured. The “standard” general liability insurance policy will pay for both the injury and property damage.
A light fixture gets installed. The electrician finishes and goes home. Later that night the building owner turns on the switch and the light does not go on. (poor workmanship) There is NO coverage under the “standard” liability policy because there was no injury or property damage. It is the contractors responsibility to go back and correct the situation.
An alarm system gets installed. Two weeks later the building has a fire at the site of the furnace and property damage is done. The insurance company denies the claim because the alarm installer did not cause the fire, however the alarm installer gets sued because the alarm did not go off therefore the fire caused greater damage. The “standard” insurance company will defend the contractor to a point but will not defend because of the non-performance of the alarm. This is where the Scottsdale policy for alarm contractors comes into play. There is coverage for the defense of the contractor for the failure to perform. (limited not all inclusive coverage)
You can protect your business in ways other than insurance. This is called risk management. Please read below.
As a business owner, you should have a properly written contract between yourself and your client that should be executed (signed) prior to doing any work, especially if alarm work is involved.
In order to avoid a dispute concerning the work to be performed, a contract should be drawn up to specify the work to be done, materials installed, time of completion, etc. This contract MUST be signed by both the contractor and the customer. This contract protects both parties and brings an understanding to both parties as to what is expected, therefore avoiding a dispute and possible lawsuit. This is called risk management.
Alarm contractors in particular should have a contract that details the work to be performed with details about the performance and limitations of the alarm system. Areas that may cause an alarm failure should be detailed and an agreement clause stating that the alarm installer cannot guarantee for the alarm to perform. A “liquidated damages clause” should be included detailing the maximum liability of the contractor. Visit https://www.kirschenbaumesq.com/ I believe they are experts in creating contractors for alarm installers. They sell semi-custom contracts for a reasonable fee. Always seek council of an attorney.
Further questions? Give us a call.