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Insurance for Alarm/Security Services Today and Tomorrow.

Return to The Michael J. Kelly Insurance Agency (MJK) Web Site Insurance Information Page.

This article appeared in the February issue of SDM Magazine.


"Video (2 Way) interconnection will do for the alarm dealer what HBO did for the Cable TV Industry."

The MJK Logo. By Michael J. Kelly Copyright - © 1998.
Founder 1978/Owner of Michael J. Kelly Insurance Agency

Web Site:
Toll Free Telephone: 800-329-5355.
Local Telephone: 805-682-0113.
FAX: 805-569-8864.
Address: 1174 Palomino Road,
Santa Barbara, CA 93105.
CA License Number 0582597.


A list of insurance for today's alarm operator could include the following insurance package:

Whether you are a corporation, partnership or individual, insurance for today's alarm operator has specific requirements that may not be found in your existing insurance coverages.

The following overview of today's insurance needs should provide information to complete a check list in order to find possible missing coverages. Such a list would include (but not be limited to) the following items.

Product Liability Coverage:

If you manufacture or put your label on equipment you install, repair or modify, you may require a product liability policy even though your existing General Liability policy has Errors and Omissions Liability.

Subcontractor Liability:

When using a subcontractor to monitor your alarm accounts, a guard company to respond to your alarm customers, or a contractor to install/service your alarm clients, your General Liability policy may not include liability to protect you from a law suit from your customer when your subcontractor is at fault.

Broadcasters Liability:

Use of radio transmitters for primary or secondary alarm signal response is increasing. If you either control or use a contractor for radio broadcasting response services to monitored alarms a Broadcasters Liability needs to be confirmed within your General Liability policy or separate coverage needs to be obtained to insure the following exposures:

  1. Insurance for transmitter interference with aircraft, telephone, cable T. V., police, fire, or any other communications facilities that you are found responsible for jamming.
  2. Confirm that coverage is included, either for unauthorized release of information transmitted over the air waves or information that was monitored from unauthorized personnel. This type of coverage should also include non bodily injury and property damage liability. This class of coverage should not be on a "Claims Made" policy. You need to confirm that an "Occurrence" policy is used.

"Stand Alone" Medical Monitoring Liability:

A medical emergency button sold and installed on a "stand alone" (by itself) basis, may be subject to a "grey area" of coverage within your General Liability policy depending on the service provided. This may include two (2) or more openings and closings, voice response variation, 3rd party (subcontractor) monitoring or response to medical emergency. Marketing (sales) of medical alarm devices sold without installation or monitoring is also an area of liability that may not be covered. A review of these exposures is necessary.

Environment Pollution (Sudden and Gradual) Liability:

The installation and monitoring of carbon monoxide (CO), radon, oil and propane tank (flow control), and natural gas sensors are a few of the "environmental risks" services offered today by some alarm operators. Growth in these services should bring insurance into review for conformation of liability coverages which are not normally found in a standard General Liability policy. Environmental liability coverage should extend to bodily injury as well as pollution defense and indemnification insurance.

Miscellaneous Professional Liability (Errors and Omissions):

Professional (services beyond the "normal") alarm dealer services in today's alarm industry would fall into the following (but not be limited to) categories:

  1. Bomb/Explosive detection;
  2. X-ray screening;
  3. Bullet resistive apparel;
  4. Anti-bugging/anti-wiretapping devices;
  5. Drug testing products;
  6. Eavesdropping microphone;
  7. Host security/microcomputer software;
  8. Data storage equipment;
  9. Video and data transmission wireless equipment;
  10. Polling computer equipment;
  11. Covert surveillance equipment;
  12. Voice scrambling equipment;
  13. Tape recording voice, video, data equipment;
  14. Security doors, bank vault products.

These and other services are best insured under a policy called "Professional Liability Errors and Omission coverage". Please don't confuse this coverage with the General Liability Errors & Omissions policy. There is a difference between these two (2) types of liability.

The insurance codes used for alarm installation/service (Code 91127) and alarm monitoring (Code 91130) make up the base coverages for your General Liability E & O policy. These insurance codes come from the Insurance Services Organization (ISO) manual which outlines the coverages within the above codes. The items listed under the "Professional Liability" are normally not intended to be covered under the above class codes. Therefore, a careful examination of each type of service is needed to determine professional exposure i.e.: consulting, design, copyright, trademark enforcement, personal privacy, testing of software, hardware products, with possible proprietary errors and omissions, consequential damage (loss of income) or loss to data or lack of security. These are a few coverages to confirm under the "Professional" class of liability.


Moving into tomorrow's alarm industry, we can look into the future with other services that have a high probability of providing additional income and greatly increasing alarm industry penetration levels upwards from today's 10% to tomorrow's 40% and beyond.


The next biggest coming event to affect the alarm industry will be "video dial tone", offered to homeowners or businesses via the phone, cable T.V., or power lines by telecommunication companies. The alarm industry itself also may be a provider of "video dial tone" possibly via a wireless entity between central stations and their clients. The latest government regulations look favorable in making possible legislation enabling the alarm industry to become a private carrier of this service.

In any event, as "video dial tone" services become available over the next three (3) years, the future services from the alarm industry will start. "Video (2 way) interconnection will do for the alarm dealer what HBO did for the cable T.V. companies."

Insurance, risk management and evaluations of liabilities for each type of new service will go hand in hand. The following is a review of future services and insurance for tomorrow's alarm dealer.


The senior citizen or "Baby Boomer" generation will be a big market. "Video Dial Tone", "2 Way" interconnection will enable a doctor and patient to look at each other with the doctor reading life signs information. Alarm dealers offering this interconnection service will work with health providers, doctors and "video dial tone" suppliers and install the video cameras, equipment and wiring for the home and office. Alarm monitoring companies will be able to intertie a 2 way video link to the doctor's or health provider's office. Video taping of this examination can also be done by the alarm monitoring company for future confirmation and/or comparison of records on an as needed basis for health providers.

As health care costs and medical services become a bigger issue in the future, the alarm industry of tomorrow will be able to offer the above medical and video interconnect services to bring the doctor and his patient closer together with cost savings during the examination and the monitoring of the health of patients.


3-D game shows or game shows that only "2 way video" can bring to the homeowner could become common place. Since the "video dial tone" is available to the alarm dealer why not provide other services over this channel which again is connected to the central station. Game shows that include player interaction will become both educational and entertaining.


Copyright release of movies and other entertainment features (including infomercials) made available to the alarm dealer could put the alarm industry into the "Pay For View" or entertainment business. Think about it, "The Alarm Channel" could be a "Virtual Reality" again over the same "video dial tone" intertie network.


"The false alarm issue will end for all time with video verification".

Verification of fire, smoke, theft, medical, I D access, gas leakage, C.C.T.V. surveillance, truant surveillance, babysitter monitoring and other verification of services can also be done over the "video dial tone" 2 way video intertie network.


The alarm dealer of tomorrow could be an Internet Provider for alarm customers. Data, voice, and video for 2 way communications can be made possible with software supplied from the alarm dealer to clients.

As an Internet Provider, the alarm industry could offer a "Web Page" of information to all police and fire departments nationwide. An internet connection, provided from the alarm industry to all governmental agencies would provide the following services to both, government and alarm customers:

  1. Missing Persons Pictures;
  2. Emergency Alert for Weather;
  3. Pictures of Bank or ATM Robbers;
  4. FBI, Federal, Police or Fire Department Alert Emergencies;
  5. Provide a 2 way interconnect between alarm clients nationwide or worldwide.


As the communications interconnecting of "wireless video dial tone" become available to the alarm industry, other personal and business services could be offered as listed below.

  1. Monitoring (tracking) of boats, aircraft, shipments of VIP goods, and inventory control. (Car theft tracking is a current service offered.)
  2. Medical monitoring of people who require 24 hour health needs would offer more freedom to the senior citizen.

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