Insurance for Private Patrol Operators and Private Investigators

The Truth about Insurance Policies

Attention: California Private Patrol Operators and Private Investigators

The Law

Effective January 1, 2015, all California private patrol operators and armed private investigators must have a commercial general liability insurance policy which provide minimum limits of one million dollars ($1,000,000) for any one loss or occurrence due to bodily injury, including death, OR property damage.

PPO applicants that do not submit this proof of insurance with their application will likely have their application rejected by BSIS. Those who have a PPO, will have their license SUSPENDED.

Previously, the law only required liability insurance when employing armed personnel.

Sundahl & Associates' Endorsement

Effective immediately, Shaun Sundahl of Sundahl & Associates has chosen to personally endorse Cyber Insurance Services (a Newport Beach, CA based insurance broker) to service all California Private Patrol Operators (PPOs) and California Private Investigators (PIs). Cyber Insurance Services is distinguished from other insurance companies because it is owned and operated by people who have a California Private Investigator license and a PPO Qualified Manager certificate. Because of their field experience in the investigations and private security industry, Cyber Insurance Services knows the liabilities that you are exposed to on a daily basis.

What is a "skeleton policy?"

A "skeleton policy" is an insurance policy for PPOs or PIs that appears on its face to offer adequate coverage, but buried deep in the policy are a long list of exclusions.  It's like going on a "hot date," but your date tells you "no kissing, no touching, no looking at me, no talking."

Cyber Insurance Services brought to our attention that if a PPO/PI insurance company offers you a $600 or $700 policy for $1 million dollars of coverage that might sounds like a "steal," but you must read the list of exclusions.

Of course, being private investigators, we were initially skeptical on what Cyber Insurance Services told us about the skeleton policy issue. So we received a few "cheap" insurance policies issued to several of our colleagues.

In summary, this is what we found: Several insurance companies who cater to PIs and private patrol operators offered a $1 million dollar policy for a bargain price, HOWEVER deep in the policy we found this exclusion:

"This insurance does not apply to "bodily injury" or "property damage" arising out of the ongoing operations described in the Schedule of this endorsement, regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others."

What made this policy "legitimate" is the California PPO/PI insurance carrier used a "boiler plate" or standard ISO policy (ISO is a national provider that sells insurance forms to insurance company) and DEEP in the policy, was an exclusion for bodily injury or property damage. This policy was ultimately "legitimate" because the insured signed for it—yes, an insurance policy that covers almost nothing!

The policy we examined was tailored for an armed private investigator. So the next question to this insurance carrier would be "what would happen if I get into a shooting—does my policy cover any liabilities?"  We would sarcastically think the insurance carrier's response would be: "yes, if you got into a shooting, your policy would cover the emotional distress experienced by the person who just tried to take your life away, but if you shoot him, you are not covered by your policy."

Another policy we examined was a "cheap" policy that had an exclusion for using online databases for private patrol operators and private investigators. The exclusion was "drowned" somewhere in the long policy list of exclusions. This is a problem especially for the PI who needs an online database to help him/her find a missing person or a debtor.

What are the warning signs I am getting a "skeleton policy?"

  • The policy is very long. When a policy is long to read, make sure the insurance carrier isn't excluding liability exposures current in our industry by making them "disappear" in the text. This can easily be done because most people don't read "the fine print."
  • The policy premium is extremely cheap. Why would an insurance company want to cover you for $1 million dollars if all you're paying is $500 or $600?
  • The policy is lengthy and confusing to read.

When is a skeleton policy good to have?

Those who have or intend on getting a skeleton policy do so in order to meet the "nominal" requirements of a client. Before doing business, the client might want you to get an insurance policy on "paper." Yes, on its face, a skeleton policy appears promising—of course it isn't too promising when you get into a real lawsuit.

Isn't it fraud or false representation to offer a skeleton policy?

Not really. If it is fraud, it is difficult to prove in court. With insurance policies, when you sign for your policy, you acknowledge that you read the policy and agree to all of its terms. Even if the insurance agent told you that "everything is covered," the written policy contradicts the agent's verbal representation. In the end, the courts tend to look at what is written in the policy, not the verbal representation. 


Contact Information:

The following is contact information for Cyber Insurance Services (please let them know Shaun Sundahl referred you for Sundahl & Associates' special pricing):

Cyber Insurance Services

20051 SW Birch Street, Suite 204

Newport Beach, California 92660


Dept. of Insurance License # OC10847

How much will a policy cost?

You might be able to call a few insurance companies and they will give you a quote over the phone. You have to be very careful because in many instances, the insurance agent might be recommending a "skeleton policy" based on a "one size fits all approach." It is also unreasonable for an insurance company to give you an instant quote because they don't know what the exact risks are (i.e. bounty hunting vs. guarding a construction site.) If you want an accurate quote, you will have to complete a Cyber Insurance Services application.

Admitted versus Non Admitted Insurance Carriers

Because private investigator or private patrol operator insurance is a small niche in the insurance industry, it is rare to find an insurance carrier who is "admitted" in California. In fact, we do not know of any admitted PI/PPO insurance carriers in California. All being admitted means is that the insurance carrier is authorized by the Department of Insurance to perform business in California. Admitted insurance carriers are backed by a government guaranty sort of like how the FDIC will insure your bank account just in case your bank goes bankrupt or insolvent.

Non-admitted carriers (A.K.A. "Surplus carriers") are established in a state other than California and they must only adhere to their mother state's rules/regulations, however they are authorized by law to operate in California. There is no government guaranty in the event you have a claim pending and the carrier becomes insolvent.

When an insurance company offers you insurance through a surplus carrier you should investigate their financial status: in other words, in the event a large judgment is placed against you, does the insurance company have the financial backing to fill the judgment? If not, YOU are financially responsible.

To see how an insurance company is financially supported, look at the Best's Financial Strength Rating Report at The report will show the broker's financial strength and ability to meet financial obligations. A rating of A+ to F is provided on the report. One of the brokers/carriers that Cyber Insurance Services uses has an A+ rating.

We actually found that one insurance company who offers insurance to California private investigators and private security company businesses, has only about $600,000 in assets yet they offer insurance policies from $1 million to $5 million. In the event of a lawsuit, the private investigator or private patrol operator could remain liable for the amount the insurance company couldn't cover (due to their insolvency).

Worker's Compensation

A PI or PPO insurance policy will not cover any work-related injuries; therefore you will need a worker's compensation policy. The moment you hire one or more employee(s), California law requires you to have a worker's compensation policy in place. Cyber Insurance Services offers this type of policy.

Not having a worker's compensation policy is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of at least $10,000.00, or by both that imprisonment and fine. Notice you can be fined PER employee without a policy.

We encourage PPOs (and PIs) to have a worker's compensation policy in place even if they don’t have any contracts. The reason is that if the policy's carrier is State Fund, a policy can take 2-3 weeks to get since the State is working a backlog. This is a problem when a prospective client says she needs security guard services or investigative work "tomorrow."

Employment Practices Liability

A PI or PPO insurance policy does not cover any employee-employer related issues (wrongful termination, discrimination, etc…). For these reasons, we recommend this type of coverage. Cyber Insurance Services can help you.

Vehicle Insurance

Keep in mind that a PI/PPO policy does not cover any act when you or your employees are using a vehicle in furtherance of the business. In that case, you need "Business Auto Insurance."  Here are some solid examples of when a regular auto insurance policy will not cover an accident:

  • You or your employee used your/his/her vehicle for "business purposes."
  • You were on your way to serving some papers.
  • You were performing a surveillance.
  • You or your employees were on their way to a "business" meeting and the accident occurred during employment hours.You or your employees were using their/your car to patrol a property.

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