Industry Overview – HVAC Contractors
One of Knauf Maxwell Insurance Services’ specialties are HVAC contractors. Heating, ventilation, and air conditioning (HVAC) contractors are trained professionals who perform various operations related to installing, maintaining, repairing, and replacing HVAC systems. Every HVAC contractor is different in the types of jobs they take on. Most work in a variety of settings, such as their own office spaces, residential buildings, and commercial buildings. Common tasks among HVAC contractors include installing HVAC systems and their associated electrical components and wiring; inspecting and testing systems for potential issues; communicating system damages or malfunctions to customers; repairing or replacing defective system elements; cleaning and maintaining systems; providing maintenance guidance to customers to help enhance system performance and longevity; and keeping detailed records of all work performed.
Insuring HVAC contractors takes subject matter expertise that not every insurance agency has. They have several risks to consider, including immense property exposure, employee safety issues that warrant a higher-than-usual worker’s comp rate, and liability exposures. Therefore, it’s crucial to properly protect both themselves and their operations against possible losses by securing proper insurance.
Common Exposures
Here’s a breakdown of key exposures HVAC contractors may face in their operations:
- Property—HVAC contractors often leverage several types of tools and equipment (e.g., hand tools, portable power tools, ladders, flashlights, headlamps, multimeters, psychrometers, leak detectors, thermal imaging equipment and nitrogen regulators) to perform their services. These professionals also tend to have office spaces and storage areas where they carry out general business activities and keep important job materials. However, a range of unexpected occurrences—including theft, vandalism, accidents, fires, windstorms, and other types of inclement weather—may result in property becoming damaged, stolen, or destroyed, potentially leaving HVAC contractors with significant recovery expenses. In addition to repairing and replacing their affected property, these professionals may experience business interruptions (e.g., lost productivity, temporary closures, and delayed projects) amid the recovery process, compounding related losses. It is crucial that this part of any insurance policy is written correctly.
- Auto—Like other contractors, HVAC professionals use vehicles to travel between job sites. Whether they depend on their own personal vehicle, or a large fleet, owning and operating vehicles carries a variety of exposures. After all, it only takes one accident on the road to cause a major loss. Following auto accidents, HVAC contractors could encounter substantial expenses stemming from damaged vehicle and bodily injuries caused by their negligence.
- Employee safety/worker’s comp—Even if HVAC contractors take proper precautions to protect their employees and work to decrease workplace accidents, job-related injuries and illnesses will still happen. Common occupational ailments in the HVAC sector include injuries due to repetitive tasks; cuts, scrapes and puncture wounds stemming from the use of certain tools and equipment; illnesses or injuries caused by exposure to hazardous materials (e.g., refrigerants, dangerous chemicals, toxic sealants and insulation); lifting injuries; burns due to contact with heated system components; hearing loss from prolonged exposure to loud equipment; slips and falls; sometimes severe injuries from working at heights; and electric shock or electrocution from handling system wiring. If employees get injured or become ill on the job, HVAC contractors could be held responsible for costs stemming from their workers’ hospital bills, treatment expenses and lost wages. It will also adversely affect your worker’s compensation experience-modification (ex-mod) score for four years.
- Liability—If any third parties (e.g., customers, suppliers or passersby) experience injuries or damages on HVAC contractors’ premises or as a result of their operations, these professionals could be held liable for the losses. For example, a supplier may file a lawsuit against an HVAC contractor if they slip and fall when visiting the contractor’s storage area. Furthermore, HVAC contractors could face completed operations losses if customers allege any finished services or projects injured them or damaged their property.
- Cyber—Perhaps the mostly likely exposure to lead to a claim for any insured in today’s dynamic world is cyber liability. Many HVAC contractors have begun relying on digital systems and software to store customers’ personal and financial data, such as their names, phone numbers, addresses, credit card numbers and bank information. Even a website and use of an email address opens you up to a variety of cyber-attacks. Following such incidents, HVAC contractors could encounter many costs related to notifying impacted individuals, recovering lost or damaged data and technology, handling associated legal ramifications and reputational losses, and implementing additional cybersecurity measures to prevent future incidents. This is the number one gap we find when reviewing existing policies for prospects.
Coverage Considerations
To help address their exposures and stay protected amid potential losses, HVAC contractors should consider the following forms of coverage:
- Commercial property insurance—This coverage will help pay for the repair or replacement costs if an HVAC contractor’s commercial property—such as their office area, storage space, tools and equipment—gets damaged, stolen or destroyed due to a covered event.
- Commercial auto coverage—If any vehicles in an HVAC contractor’s fleet end up in an accident on the road, this type of insurance can assist with the associated vehicle repair and bodily injury expenses. A different coverage is required if any employees use their personal automobiles in the course of their work.
- Inland marine/installation floater insurance—Such coverage can help pay for losses stemming from an HVAC contractor’s materials, tools and equipment getting lost, stolen or damaged while in transit.
- Workers’ compensation coverage—If an HVAC contractor’s employees get injured or become ill on the job, this coverage can help pay those workers’ hospital bills, treatment costs and lost wages. This is an especially tricky coverage for HVAC contractors and is most of the time, the most expensive coverage. For each dollar spent on worker’s comp claims, the contractor will pay four or five dollars over the course of five years.
- General liability insurance—This coverage can assist if an HVAC contractor is held legally or financially liable for injuries, harm or damage to another party or their property.
- Completed operations coverage—If a customer holds an HVAC contractor responsible for injuries or property damage that occurred due to the faulty completion of a project, this type of insurance can help pay the related costs.
- Cyber liability insurance—Cyber coverage will assist with a variety of first- and third-party expenses that may result from an HVAC contractor experiencing a data breach or other cyber incident. This is the most likely claim to occur both in terms of volume and severity.
- Errors and omissions (E&O) coverage—If a customer claims that an HVAC contractor provided negligent services, didn’t uphold contractual promises, incomplete or substandard work, or made other professional mistakes or omissions, E&O insurance can help pay the resulting expenses.
- Employment practices liability (EPL) insurance—In the event that an HVAC contractor is faced with employee lawsuits alleging workplace discrimination or harassment, wrongful termination or discipline, or failure to employ or promote, EPL coverage will assist with the associated defense costs.
- Umbrella and excess coverage—If an HVAC contractor’s claim costs exceed the limits for their primary liability policies (e.g., commercial auto and general liability insurance), this coverage can increase those limits. Additionally, umbrella policies can help broaden existing policy coverage.
For additional risk management guidance and insurance solutions, contact us today for a Gap Analysis.
*This document is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.
