Security guard insurance, where the license carries the policy

Most states license guard companies. Texas's is the rule worked through here, and it is a good one to know because the insurance sits inside the license. Occupations Code Chapter 1702 is administered by the Department of Public Safety (1702.005), which publishes the chapter and its rules together (DPS, Texas Private Security Statutes & Rules). A person may not act as a guard company, offer to, or engage in any business activity the chapter regulates without a security services contractor license (1702.102), which DPS's own pages label the Class B company license. A guard company is anyone who provides "a private watchman, guard, or street patrol service on a contractual basis" to prevent entry, theft, vandalism, fire, or trespass, to observe or detect unauthorized activity, to control the movement of the public for property protection, or to protect individuals from bodily harm (1702.108). The applicant, or the company representative, must be at least 21, have three years' experience in the field, and have a year in a managerial or supervisory position (37 TAC 35.122).

The insurance requirement. An applicant "is not eligible for a company license" without a certificate of insurance for a general liability policy countersigned by a Texas-licensed agent, or a surplus lines certificate through a Texas surplus lines agent. The policy "must contain minimum limits of: (1) $100,000 for each occurrence for bodily injury and property damage; (2) $50,000 for each occurrence for personal injury; and (3) a total aggregate amount of $200,000 for all occurrences" (1702.124(a), (c)). Note the split: personal injury, the detention and the accusation, carries its own line. Two more sentences do more work than the figures. Subsection (f) requires the license holder to keep evidence of insurance "sufficient to cover all of the business activities of the applicant or company license holder related to private security," and knowingly failing to is a Class A misdemeanor under 1702.3841. And DPS's rule tells the agent what the certificate has to show: "That the insurance is applicable to the conduct for which the licensee is licensed," the "exclusions or endorsements specific to the activity for which the licensee is licensed, or that there are no such exclusions or endorsements," and the statutory minimums "specifically distinguishing" each of the three limits (37 TAC 35.27(a), in the DPS publication above). Failure to keep current evidence on file "will result in immediate suspension of the license." A guard company's certificate, in other words, is a disclosure document as much as a proof of coverage, and the next two sections are about what it discloses. Texas is also where "bonded and insured" gets asked of guard companies; the chapter carries a bond provision alongside the insurance one, and our bonded and insured guide explains why the two are not the same instrument. How the state handles the rest of its licensed trades is on the Texas contractor insurance hub. For other states, read the licensing agency's rule before assuming it looks like this one.

The statute's words are commissioned and noncommissioned; the trade's words, and the search terms, are armed and unarmed. Section 1702.161 makes them the same split in three sentences: an individual "may not accept employment as a security officer to carry a firearm" without a security officer commission, "may not knowingly carry a firearm" on duty without one, and a person "may not hire or employ an individual as a security officer to carry a firearm" unless the individual holds one (1702.161). The commission is earned. The applicant must complete the basic training course at a department-approved school, a course the statute sets at a minimum of 30 hours with classroom instruction on handgun proficiency and self-defense tactics and range instruction; must achieve the department's required score on the handgun proficiency examination; must demonstrate "minimum marksmanship competency with a handgun" to the firearm instructor; and must provide the results of the Minnesota Multiphasic Personality Inventory test (1702.163, 1702.1675). An unarmed guard holds an individual license as a noncommissioned security officer under 1702.221. DPS's rule stacks the training: Level II is completed by every applicant for either credential, and Level III, taught only by an approved school and instructor, by every applicant for a commission (37 TAC 35.141).

An underwriter asks the question the statute asks, because a firearm changes what a bodily injury loss can look like and what the accusation after it will say. Expect to be asked how many commissioned officers you field, on which posts, what the company's use-of-force policy says, and how the firearms are stored between shifts. A company that runs both kinds of posts is priced on the blend, and describing the blend accurately is the lever you hold. The one place the split does not appear is workers compensation, which is the section after next.

A guard's job is to confront people, and the liability form knows it. Policies written for guard companies can carry an assault and battery exclusion, and the clearest record of what that means is a court's. In December 1993 two women were assaulted and raped at a Houston-area apartment complex and sued the company that provided its security, alleging it "negligently failed to provide proper security." The company's carrier went to court for a declaration that it owed no defense and no payment "because of the liability policy's Assault and Battery Exclusion." The women argued the exclusion was void because the Texas private security licensing statute required the company to hold a policy covering all sums it became obligated to pay for bodily injury, property damage, or personal injury in the licensed business, the same conditioning language 1702.124 carries today. The Fifth Circuit disagreed: "The Texas statute is regulatory in nature and does not affirmatively establish a public policy of the state that would override the parties' agreement," so the exclusion stood, and the false imprisonment counts fell with it because they rested on the same alleged negligence. The carrier's certificate to the licensing board, the court noted, "expressly stated that the certification did not expand the policy's coverage in any way" (Scottsdale Insurance Co. v. Texas Security Concepts, No. 98-20034 (5th Cir. 1999)). The opinion is unpublished and says it is not precedent. It is one court's reading of one policy, which is enough to make the point.

The point is that the license floor does not rewrite the policy. That is why DPS's rule now requires the certificate to show the "exclusions or endorsements specific to the activity for which the licensee is licensed," and why a guard company should read its own certificate the way the department does. Ask three questions of any form you are offered, and get the answers in writing: is assault and battery excluded; if so, is it written back by endorsement; and if it is written back, at what limit, since a write-back can carry a limit of its own that is lower than the policy's. No published source says what is typical, and the answer is on your form.

Nearly all states require an employer to carry workers compensation, in the NAIC's words (NAIC), and for a guard company, whose whole product is payroll, it is a large line. Premium starts with payroll sorted into classifications, a rate per $100 of payroll for each class, and an experience modifier for the employer's own loss history; that is the Texas Department of Insurance's description of its system (TDI, workers compensation rate guide). Guard companies have their own class. In NCCI's scopes manual, code 7720, whose phraseology is police officers and drivers, "also is assigned to private security services, protective or patrol corps, protective agencies," armored car companies, and "businesses engaged in providing watch guard services for others," and the manual adds the sentence this page is built around: "There is no distinction made as to whether these employees are armed or unarmed, or whether or not they have the official authority or power to arrest" (NCCI, scopes, code 7720). Some states rate guard companies separately as 7723; New York's rating board gives that code to "employers engaged in providing armored car service, watchmen, guards or patrol officers to safeguard property owned by others," where "Guards may or may not be armed" (NYCIRB, class 7723). So the armed question lives in the liability underwriting and the licensing, not here. The rate is filed by the rating organization and set by the carrier in each state.

The guard paid as a contractor. Filling a post with a 1099 guard does not survive the IRS's test: an employee works at the control and direction of another, and the right to control is what counts, whether or not it is exercised (IRS Publication 4902). A guard on your schedule, at your client's post, in your uniform, is working under your direction, and Texas's chapter assumes as much when it requires a noncommissioned officer to be employed by a licensed company. The one state that lets a private employer decline coverage is Texas, where the Department of Insurance says workers compensation "is not required in most cases" (TDI, employer resources); the filing a non-subscriber makes and the defenses it gives up are on the Texas hub. The same certificate rhythm and the same contract-services buyer are on the janitorial insurance page, and the same class-code logic on the tree service insurance page.

The NAIC's list of what a general liability form does not cover includes professional errors and omissions (NAIC), and for a guard company that is the second kind of suit. The first kind says the guard did harm; the second says the guard failed to do the job. The patrol that was logged and not walked, the alarm response that arrived late, the access control that let the wrong person through, the client's loss that the contract said your service would prevent: each is an allegation about the service itself, and it belongs to professional liability, sometimes written for this trade as errors and omissions or as a combined form with the general liability. The Houston case above began as exactly this allegation, a negligent failure to provide proper security, before the exclusion decided it. Ask whether the form you are offered answers the failure-to-perform suit at all, and whether it does so on the same policy as the bodily injury one or a separate one.

Commercial auto, and hired and non-owned. A business that owns or leases vehicles needs commercial auto; personal policies may exclude business use, and commercial forms can reach rented and non-owned vehicles, including employees' own cars driven on company business (NAIC). For a guard company that second clause is the whole question. Marked patrol vehicles belong on the schedule with their use described, and the guard who drives their own car between three posts on a night shift, or to a mobile alarm response, is driving for you. Hired and non-owned auto liability is the line that answers for that car, and a company that fields no patrol vehicles of its own still has this exposure.

Property that travels. Business property coverage can extend to equipment whether owned or leased (NAIC), and a guard company's is at the posts: radios, body cameras, the light bar and the mounted equipment on the patrol vehicle, the guard shack's screens. Ask how equipment issued to a guard and lost off site is treated, since that is the loss this trade sees.

What an underwriter weighs on a guard account, rather than a price. Payroll and headcount lead, because the workers compensation line is built on payroll in this class. Then the mix of posts: armed and unarmed, which is the licensing split and the liability underwriter's first question; residential, retail, event, industrial, and mobile patrol each read differently; and any post that involves crowds, alcohol, or nightlife reads differently again. Whether assault and battery is excluded, written back, and at what limit. The company's use-of-force policy, its training beyond the state minimum, and its supervision. The vehicles on the schedule and the miles driven between posts. Loss history, which reaches the workers compensation premium through the experience modifier and the liability premium through the underwriter's file. Your state, its license conditions, and whether workers compensation is elective there. "Security" on an application is priced for the worst night the class has had. The posts you actually staff, the officers who hold commissions, and a written use-of-force policy are what narrow it.