Insurance And Liability – How It Fits Together

By Antonia Moore.

Security is a complex issue and the topic of insurance and liability is one rarely or openly discussed, yet its importance
to the security industry and its consumers is widely recognised. Building a professional industry relies on improved
governance and education, and business vulnerability to insurance failures is the first of the issues to be discussed in this
series. The Insurance Council of Australia suggests that monitored alarm systems meet specific requirements in order for
insurers to provide appropriate coverage to business and private users. What the requirements are and how they fit in with
business operations is outlined in this article.
Consumers purchase security for a myriad of reasons. One benefit is a reduction on their insurance policy under
a burglary option. Conditions thereof are outlined in the respective insurers’ policy documents stating, generally, the
business has or is responsible for “operating and maintaining a burglar alarm for the purposes of the business” and
specifies the “alarm system must be tested and used in accordance with the manufacturers’ specifications” (AMP).
Furthermore, the burglar alarm must be operated during building vacancy and tested both on-site and to the monitoring
station. The reliance is on the consumer to prove their compliance to their insurers in the event of a claim. The consumer
would seek evidence from their security provider demonstrating the system was fully operational in such an instance.
Given this, concise records are vital and it is here that a lack of understanding of the liability the security company
has to its clients is seen. When monitoring a client’s alarm system, the security provider prepares information about its
client and submits this to the monitoring centre. This data is entered into the monitoring centre database, the system
commissioned following successful testing and monitoring commences as per the written specifications. The onus is on
the security provider to ensure information supplied is correct and the system is installed to code. Liability for the client
alarm system lies with the security provider, not the monitoring centre, and a contracted agreement is written between
these two parties. The monitoring centre, under associated Australian standards, monitors the system on behalf of the
security provider (bureau), and runs tests and notifications accordingly.
AS2201.1:2007 provides minimum requirements for design, installation, commissioning and maintenance of intruder
alarm systems as suitable for commercial, private and special premises. It further covers the operation of these systems
and provides guidance on contracts for maintenance of intruder systems. AS2201.5:2008 specifically covers alarm
transmission systems and AS2201.2 relates to monitoring centres; the existence of both clearly demonstrates a suite of
standards that need to be referenced by security providers before provision of service to their clients. Acknowledging that
not all security operators have the ability to purchase these standards, security industry association membership affords
the benefit of having access to particular areas for clarification when needed.
The monitoring centre control rooms test monitored alarm systems according to the schedule specified. If a test fails,
they contact the security provider and it is the provider’s responsibility to deal directly with the client to rectify the situation.
Once test signals resume, monitoring again commences under normal operational procedures. Should a system fault
not be resolved, the business is inadvertently failing to meet its insurance obligations. Obviously, if an incident occurs at
the client site during this time, liability concerns arise and may negatively affect the security provider as well as its client.

An alarm monitoring business needs procedures in place to maintain its clients’ systems properly, regularly check key holder information and ensure access restrictions continue to meet clients’ current needs. It is essential that communication between client and provider is clear and complete to avoid any misunderstanding with the operation of the system. For example, a client needs to know that a person’s user codes should be disabled when that person leaves the business, otherwise the business may be exposed to unauthorised access and potential loss. If the business is restricted from making this change personally, then it places the onus on the security provider to respond in a timely manner to avoid any business disruption and potential liability.
A security provider, as much as a client, must have adequate insurance for damage, loss or business interruption such as that found within professional indemnity, public liability, workplace, vehicle and contents insurance, to name the most common forms. More specific insurance may be required if a business works in the supply of security to particular industries with higher risk. Of these insurance types, most overlook professional indemnity insurance.
When a business engages a security provider to offer a solution to a particular concern with identifiable expected outcomes, the level of risk has increased to the provider. In an effort to protect against failures to meet these outcomes, it is prudent for the provider to have professional indemnity insurance. The cover provides indemnity for the company and its consultants, subcontractors or agents for any civil liberty claims, but not directly for the consultants, subcontractors or agents (Zurich). Similarly, it is necessary for third parties to have their own professional indemnity insurance for their direct involvement in any preceding claim.
The assessment of risk and suggestion of appropriate security protection is the unenviable task of any security business consultant in Australia today. As outlined in the ASPTF (Australasian Security Professionals Task Force) submission to the COAG (Council of Australian Governments) working paper on technical security, it is difficult to differentiate a security professional from a security advisor whilst there is an absence of nationally recognised quality endorsements in Australia. There is a need to further delineate the security equipment installers and technicians through implementation of national competency standards as certified through RTOs (registered training organisations) and TAFE (technical and further education) colleges and mandatory membership of industry associations. The blurred boundaries between security provider roles makes assigning insurance liability difficult and leads the industry to under or over insure businesses and individuals.
In the next issue of Security Solutions Magazine, discussion turns to the impact of training shortfalls on the provision of security services to the market and how improving the quality of the learning environment will positively reflect on the entire industry. As discussed in this publication recently, the need for quality assured security providers is gaining support and when certification is combined with a greater understanding of the industry dynamics, the security industry will have more ability to meet client expectations. Future discussion in this series will include panel selection and application, monitoring and response, end-user dissonance and a push or pull marketplace, all of which should give readers a rounded view of the cohesion that needs to exist in order for professionalism to prevail.
Antonia Moore, owner of Cairns-based AMM Security Solutions, assists business through the provision of long-term, effective surveillance and safety solutions. She has over 20 years experience within the private sector, holds an array of technical services qualifications along with a Bachelor of Business in Marketing and International Business, Project Management and IT accreditations and currently holds a voluntary position with ISE (Institute of Security Executives) and membership of a number of Cairns business and community organisations. Visit for contact details and more information.