A security company in West Palm Beach wins a contract to staff the lobby and parking garage of a downtown office tower. The property manager’s contract runs forty pages, and the insurance section alone fills two of them. It asks for general liability at a stated limit, assault and battery coverage, an umbrella, workers’ compensation, and auto liability. It also requires that the building owner, the management company and the lender be named as additional insureds on a primary and noncontributory basis, with a waiver of subrogation on every policy and thirty days’ notice of cancellation. The owner of the security company signs, sends over a certificate, and starts the post the following Monday. Two years later, after a visitor is injured in the garage, the building’s insurer asks to see the endorsements. Two of them were never issued.
Insurance requirements in security contracts have become longer and more specific, and the terms in them are often misunderstood by both sides. Knowing what each one means, and what has to happen on the policy to satisfy it, protects the company from claims it never expected to pay and from losing contracts it worked hard to win.
A Certificate Holder Is Not an Additional Insured
Being listed as a certificate holder simply means a party receives a copy of the certificate of insurance. It gives that party no rights under the policy. Being named as an additional insured is different. It extends coverage under the security company’s liability policy to the client for claims that arise out of the security company’s work, so the client can be defended and indemnified by the security company’s insurer.
Additional insured status requires an endorsement on the policy. Some policies include a blanket endorsement that automatically adds anyone the company has agreed in a written contract to name. Others require each additional insured to be scheduled by name. The wording of the endorsement matters as well. Some versions cover the additional insured only for ongoing operations, some include completed operations, and some limit coverage to claims caused in whole or in part by the security company’s acts. A client asking for additional insured status should be asking for the endorsement, and the security company should know which version its policy provides.
Waiver of Subrogation Limits Who Can Be Pursued
When an insurer pays a claim, it often has the right to recover that payment from whoever caused the loss. That right is called subrogation. A waiver of subrogation gives up that right against a specific party. In a security contract, the client usually wants the security company’s insurers to waive their right to pursue the client.
The waiver most often matters on workers’ compensation. If a guard is injured on the client’s property because of a condition the client created, the workers’ compensation carrier could otherwise seek reimbursement from the client after paying the guard’s benefits. The waiver prevents that. Like additional insured status, a waiver requires an endorsement, and some carriers charge for it. Promising a waiver in a contract without having it on the policy can leave the security company in breach.
Primary and Noncontributory Wording
When more than one policy might cover the same claim, the policies’ other-insurance clauses decide which pays first. A client that asks for primary and noncontributory coverage wants the security company’s policy to respond first, without asking the client’s own insurer to share the loss. That protects the client’s loss history and its own limits.
Primary and noncontributory status also requires specific policy wording, usually as part of the additional insured endorsement or a separate endorsement. Without it, the security company’s insurer may argue that the client’s policy should share the claim.
Indemnity and Hold-Harmless Clauses
Most security contracts include an indemnity clause in which the security company agrees to defend and hold the client harmless for certain claims. These clauses can be broad, sometimes reaching claims caused partly by the client’s own negligence. Whether the security company’s insurance will pay for obligations it takes on in an indemnity clause depends on the contractual liability coverage in its general liability policy and on Florida law governing how far those clauses can go. Reviewing the indemnity clause with the insurance section, rather than signing it as boilerplate, is one of the most useful things a security company can do before accepting a contract.
What a Certificate Shows and What It Does Not
A certificate of insurance is a summary. It is issued for information only, and it does not change the policy. The certificate may say that additional insured status and a waiver of subrogation apply, but if the endorsements are not actually on the policy, the certificate does not create them. Agents fill in certificates to reflect what the policy actually contains, and a careful agent will not show coverage the policy does not have. Clients are increasingly asking for copies of the endorsements themselves, and security companies should keep them ready.
When the Policy Cannot Meet the Contract
Sometimes a contract asks for something the security company’s current policy does not provide, such as an assault and battery limit above what the carrier will offer, completed operations coverage for additional insureds, or a cancellation notice the insurer will not commit to. The right response is to find out before signing. Options include negotiating the contract terms, adding an endorsement, raising a limit, adding an umbrella, or moving the account to a market that can meet the requirement. Our article on security company insurance requirements for apartment properties shows how these requirements look from the property owner’s side, and our security guard insurance page explains how the program fits together.
Worth Confirming With Your Agent
-
Whether your additional insured endorsement is blanket or scheduled, and what it covers
-
Whether completed operations coverage extends to additional insureds
-
Whether waivers of subrogation are on every policy the contract lists, including workers’ compensation
-
Whether your policy provides primary and noncontributory wording
-
Whether your contractual liability coverage fits the indemnity clauses you sign
-
Whether your assault and battery and umbrella limits meet each contract’s requirements
-
That you have copies of the endorsements, not only the certificate
This article is general information and is not legal advice.
Talk to Prestige Insurance Group
Prestige Insurance Group writes security guard companies across Florida and reviews client contracts with them before they sign. Send us the insurance section of your next contract along with your current policy, and we will tell you what it requires, what your policy already provides and what it would take to close any gaps.
Call the office nearest you. Se habla español.
Orlando: 407-993-2331
Miami: 305-969-8776
Stuart: 772-247-3788
Prestige Insurance Group, License L057894
