HVAC and Mechanical Contractors are faced with a unique challenge in today's insurance market. While they are traditional contracting risks, they have become the focus of growing pollution and mold related claims over the last several years. Exacerbating the problem is the trend of holding these contractors to a higher standard than many other trades, in effect giving them a "professional" liability exposure. These firms are now being expected to not only install the equipment properly, but to consult on its design and identify potential problems with another's design as well. While flattering, it creates a coverage issue for many of these risks. HVAC and Mechanical Contractors have two primary areas of concern: contracting services creating environmental problems and growing professional exposures.
Contracting services can create environmental problems in the following ways:
Installation leads to hazardous indoor air quality.
One of the biggest environmental concerns faced by Mechanical / HVAC professionals is the allegation that their work has led to an unhealthy indoor environment. This can manifest itself in many ways, including odors, ill employees, or staining and damage to walls and fixtures. When these allegations lead to Bodily Injury, Property Damage, or Business Interruption, the claims can become sizeable. If the basis of the claims is the toxic nature of the contaminant, pollution exclusions are often cited.
Installation leads directly to mold growth.
Mold growth is generally caused where moisture, a food source, and an acceptably warm environment meet. One of the unfortunate drawbacks to installation problems with HVAC systems can often be excessive moisture, either in the form of condensation or actual leaks. This moisture, matched with wood or wall board and warmth, leads to mold. Most mold claims are excluded from CGL policies.
Job site pollution caused by the contractor disturbing existing conditions.
Many claims faced by Mechanical / HVAC contractors stem from disturbing asbestos, lead, or existing mold within the structure while work is being performed. This can take the form of asbestos wrap on piping, lead paint on windows and doors, or mold growth that existed prior to the work. Making these conditions worse by spreading the contamination can lead to significant liability on the part of the contractor.
Job site pollution caused by contaminants the contractor brings to the site.
Many Mechanical / HVAC contractors use equipment powered by generators, requiring fueling. They also regularly use solvents, acids, glues, and other toxic substances at the job. The release of these materials, or their improper disposal, can lead to pollution claims.
The operations of subcontractors for which the contractor is responsible.
When Mechanical / HVAC contractors hire subcontractors to do work such as electrical, plumbing, or remodeling and construction, they run the risk of being held responsible for pollution conditions stemming from the subcontractors' work. Obviously the contractor will require the sub to carry his own insurance, and name the contractor as an additional inured. If the subcontractor causes a pollution condition, and his environmental coverage is inadequate, the Mechanical / HVAC contractor may have to defend himself against claims relating to work for which they were responsible due to hiring of the sub.
HVAC firms have growing professional exposures. Many firms provide true design services as part of their corporate profiles. This can range from doing all of the design work for the project, doing some design work relative to an aspect of the HVAC system, or simply having a perceived responsibility to comment on design aspects they know to be poorly developed. The last element is the most difficult to control and manage for HVAC firms. HVAC contractors are also often presented with installations that do not work exactly as planned. In these situations, contractors will often tweak the specs while at the jobsite to make the system work. Malfunctions arising from these changes create a direct professional responsibility for the contractor.
Additionally, the proper selection and supervision of subcontractors is a professional exposure most contractors share that is generally excluded from CGL and basic CPL policies. For contractors that may need to outsource certain parts of a job, the exposure can be significant.
It is important to remember that while addressing Contractors Pollution and Professional Liability are important, the key for this class of business is to address Mold at the same time. There are very few products that combine all three elements, so knowing how to get the appropriate coverage for your insureds and covering all bases is crucial to keeping them protected.