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Friday, 07 September 2012 15:18

Insurance and Risk Management Issues - Affecting the Security Industry

Written by Matt Disparte
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Most states attempt to define a security guard’s role and responsibilities in the following manner:

1. A security guard’s role is to protect people and property of his employer or contracted clients.

2. A security guard’s responsibility before an incident has occurred is prevention.

3. A security guard’s responsibility during or after an incident or offense has occurred is to report.

 

In reality, the first role and responsibility of your security guard is to endeavor to protect people and property, primarily through prompt reporting and observation. An important difference! This “perceived” unrealistic duty of a security guard (they are not police officers) versus the actual duty is crucial, as the cost of your insurance is indirectly related to your state’s use and interpretation of the word protect. Equally important is your ability as a manager or owner to protect your company from unknowingly expanding or contracting the perceived duties of your guards through the contracts you sign.

SQUEEZE PLAY

In many of your contracts with clients, you will often see requests to indemnify and hold harmless the client. By doing this, you are agreeing to compensate your clients for damage and loss. However, you may also be agreeing to relieve your client from any responsibility or liability from damage or loss, regardless of who is responsible. By simply limiting your client’s contract language so that indemnity and hold harmless provisions apply only to losses arising from your guard companies’ direct negligent acts while they are performing agreed upon duties should result in lower claim costs.

COVERING YOUR BASES

We live in an increasingly complex world. Physical security firms are at the center of a perfect storm of expanding cultural unrest in the forms of terrorism, workplace and school violence and a seemingly unending string of extensive natural disasters. The role private security plays as a visual deterrent and frontline first responder has never been more important, yet the advent of emerging security technologies poses a hazard to the industry. Install a camera here and replace two security officers, install an access control card there and replace an additional officer. Sound familiar? It is happening every day. When any client is looking to downsize the number of security officers you have at a site, you should send a letter outlining the effectiveness of physical security officers as a visual deterrent. This letter should also include the following statement: See sample box

InsRiskMgtClip

PLAYING SMART

In today’s soft insurance market with decreasing rates and increased competition among insurance carriers, even security fi rms with risky operations and less then stellar loss histories have a reasonable chance to obtain insurance coverage at a premium comparable to fi rms with good loss ratios and low-risk exposures. These preferred rates, however, often come with a catch. Many times, an insurance carrier will use exclusions of coverage to minimize its risk. Be a smart consumer. Certainly a goal of yours when looking for coverage should be to obtain insurance at a reasonable premium, but it should be equally as vital to ensure that you are with a carrier that provides broad coverage for your company and not one that relies on exclusionary policies to maintain an underwriting prfit.

MANAGING THE GAME

Insurance carriers often use experience modification factors as a tool to compare against actual claims reports (experience modification factors are deviations from the fi led rates.) A “mod” is either a debit (above 1.0) or credit (below 1.0). Managing your experience rating is a competitive advantage for you. Security firms with credit mods generally have a better opportunity to achieve the lowest possible worker’s compensation costs.

CLOSING REMARKS

We hope these few paragraphs have served as an introduction to new ideas or as a reminder of some already known concepts.

Please remember that any action strategy you take with your business should be discussed with both legal counsel and trusted insurance experts before moving forward.

The physical security industry is continually expanding with opportunity for those who are committed to controlling business risks as they grow.

The Mechanic Group, Inc. is a leading insurance program manager and broker to the Security, Investigation and Electronic Security Industries. Known for delivering insurance plans with broad form coverage, they offer quality rates and service that combine a thorough understanding of your business with a commitment to availability and quick response.

Matt Disparte is vice president of the Mechanic Group, Inc., Pearl River, N.Y. He is a Chartered Property Casualty underwriter— recognized as the premier professional designation of the property and casualty insurance industry and has more than 10 years experience servicing the insurance and risk management needs of the security and alarm industry. Disparte joined the Mechanic Group in 2005 and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

Michael Lehner is principal of the Mechanic Group, Inc., Pearl River, N.Y. He has 18 years of experience exclusively servicing the physical security, investigation, electronic security and background screening industries and is a Broker representative to more than 15 of the 40 largest Physical security firms in the United States based on the Security Letter Report. Lehner can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..

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