A Practical Guide to Additional Insured Requests

In the alarm industry, it’s common for customers to request to be named as an additional insured on your insurance. Granting that status can help secure business and build trust, but it also opens the door to potential overexposure if not handled carefully. 

The real protection doesn’t come from the insurance endorsement itself — it comes from the contract language between you and your customer. That’s where liability, negligence, and indemnification are defined and limited. 

Here’s how to structure those provisions so you can accommodate client requests while keeping your exposure reasonable.

Make the Contract Control the Scope of Coverage

Your service agreement should clearly state when and how a customer’s additional insured status applies. Without this clarification, a customer may later argue that your insurance should respond to claims far outside your actual work.  The customer’s additional insured status applies only to claims arising from YOUR negligent acts or omissions — not for their own negligence or independent actions.  It’s not enough to simply say “negligence” though – you need to identify the negligence boundaries.  Your contract should ideally draw a firm line between: 

• Ordinary Negligence: Mistakes or oversights that might occur in the course of YOUR operations. YOU can accept responsibility for YOUR own negligence to a reasonable degree. 

• Contributory (or Comparative) Negligence: When both parties share some fault. The contract should state that each party remains responsible for its own share of negligence. 

• Gross Negligence or Willful Misconduct: Extreme disregard or intentional wrongdoing. The contract should explicitly exclude these from any indemnification or insurance obligations. 

This wording prevents your company from being dragged into claims where the customer’s own failure — such as ignoring an alarm, disabling a system, or not maintaining their property — played a role in the loss. 

Use Targeted Indemnification Language 

A well-drafted indemnification clause is your first line of defense. It should make clear that you agree to indemnify and hold harmless the customer only to the extent that damages arise from YOUR negligent acts, errors, or omissions in the performance of its work.  Further, it should state that the customer shall be responsible for any loss, damage, or injury resulting from THEIR own negligence, misuse of the system, or failure to follow the contractor’s instructions or recommendations. This mutual or proportional approach to indemnification helps ensure that your insurance only responds when you are actually at fault. 

Limit the Extent of Any Indemnity 

Even when you accept some indemnification responsibility, cap your exposure. Alarm contracts typically use limitation of liability clauses that restrict recovery to a specific dollar amount or a multiple of the service fee.  Courts have repeatedly upheld these clauses in alarm cases when they are clearly written and agreed to by both parties and not prohibited by state statute. 

Adding customers as additional insureds can be a routine business accommodation — but the protection should flow from your contract, not from an open-ended insurance promise. 

When you: 

• Tie coverage to your negligence only, 

• Exclude customer and gross negligence, 

• Use proportional indemnity, and 

• Enforce a limitation of liability clause, 

You honor the customer’s request while keeping your exposure fair and controllable. 

Alarm industry exposures are unique, and state laws vary on indemnification enforceability. Always have your contract reviewed by counsel familiar with alarm service agreements.  At Security America, Ken Kirschenbaum is our go-to for alarm contracts.  Customers that utilize Ken’s contracts even receive an additional discount on their Security America rates.  Your insurance may back the contract — but the contract should always set the limits. 

For more information on Security America Insurance programs, call 866-315-3838. And don’t forget to connect with the ESA Membership Team at membership@esaweb.org to learn about additional benefits—including significant savings on your insurance premiums through ESA membership, which more than pays for itself.