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Obtaining the rating of the insurance company providing the coverage to the security agency from either Best's Key Rating Guide or Standard & Poor's is recommended. (This can usually be checked over the phone by calling your regular insurance agent.) Some policies look good on paper, but are written by offshore companies with underfunded reserves. In some cases, reserves might not completely cover even a single large award and the security firm and its client would be on their own for the balance. One of the most popular liability policies carried by many security firms a few years ago was written by an offshore company which went into bankruptcy, leaving many of its insureds on their own to negotiate settlements for past claims.
While it would not be the place of a prospective client to demand that a contract service under consideration change insurance companies, advising the service that the insurer appears risky might result in a change. Purchasing liability insurance, at best, is a confusing prospect to the uninitiated. Busy security company managers often just call an agent and accept the policy offered--or purchase the cheaper of two policies if there is a choice. Since the sole purpose of insurance is protection, many security companies would appreciate knowing their coverage appears to present risk previously unknown to them.
The client representative is strongly urged to review the bidder's policy per se and not just rely on an ACORD certification. Many policies held by security firms are, in this writer's opinion, not adequate protection for the agency or client. Some contain unacceptable exclusions.
And don't assume the state requires that security firms have insurance. Many don't. (It is likely that the security industry in states with insurance requirements experiences a higher rate of frivolous lawsuits than others. Unlike auto insurance geared for protecting others, it is often felt that insurance should be the concern solely of the contractor and the client and mandates can create their own problems as well as providing predatory attorneys with an attractive deep pockets target for frivolous litigation.. Several years ago, for instance in one state where liability insurance is required of private investigators, there was an extended period where no carrier would write the coverage. To stay in business, the industry was forced to band together and create a self funded risk pool.)
When looking over a liability policy, beware of the following:
Claims Made Policies: These are policies which provide no coverage after a set period beyond the expiration of the policy. Therefore, if a claim is filed after the deadline, the event will probably be uninsured.
Although in the casualty field both admitted and non admitted carriers may write coverage in some states, the consumer should verify that the contract service is covered by an admitted carrier. Non-admitted carriers, although they can legally write policies within a state, do not necessarily report reserves and a measure of control is lost. It is possible that a client firm could be held liable for claims in the unlikely event that a non admitted carrier failed due to insufficient reserves and the contract service's assets were insufficient to cover the loss. An insurance company rated high by Best's of Standard & Poor's, however, should present little exposure.
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