Security Company Liability – Don’t Shoot Yourself in the Foot
Gunshots! High speed chases! Long dramatic pursuits on foot! These are the kind of things that may come to mind when thinking of the daily life of a security guard. And accordingly these are the kinds of risks that many brokers will take care they insure the security company against. My colleagues at Camargue have certainly seen their share of claims from security companies. And while some have involved accidental shooting or other equally foreseeable risks, there is an increasing trend in a new kind of claim, one which many of these clients are not insured against.
When placing cover for security companies, brokers need to make sure that adequate General Liability cover is in place. There is also a growing awareness of the need to include the Errors and Omissions extensions onto the General Liability policy thereby ensuring that the Professional Indemnity exposure is also covered. However, there is an exclusion on the General Liability policy which must be considered when placing this kind of risk.
The General Liability policy does not typically cover employee theft or dishonesty. To explain how critical this exclusion is we will look at the following two seemingly similar scenarios:
Scenario A: Guard A is guarding a warehouse which contains R5,000,000 worth of stock. It is 2am and he just cannot keep his eyes open. Eventually he gives in and falls asleep while on duty. Some robbers catch wind of this and quietly break into the warehouse. By the time they leave the warehouse R3,000,000 worth of stock has been stolen. The good news is that the security company has a General Liability policy and so when the warehouse manager sues the security company, they can claim from their policy.
Scenario B: Guard B is guarding a warehouse which contains R5,000,000 worth of stock. It is 2am and he starts looking around. He sees that there is really nobody around and he knows exactly where the cameras are. He sneaks around the warehouse avoiding the cameras, and makes off with R3,000,000 worth of stock. Once again the security company is sued by the warehouse manager for the stolen goods. The owner of the security company tries to claim from his General Liability policy. Unfortunately while the scenarios seem very similar, in the latter case the claim will be repudiated due to the fact that the theft was as a result of employee dishonesty.
Fortunately there is another product which the security company can purchase to insure against the exact risk in Scenario B. That is the Commercial Crime policy which is designed to cover employee dishonesty. The importance of this policy in the context of security companies should therefore not be overlooked. For more information on this policy, please feel free to contact Justin Keevy (firstname.lastname@example.org).