BE CAREFUL WHAT YOU WRITE……..
IT MIGHT COME BACK AND BITE YOU LATER
By: Andy McGinty
After 20 years of handling pest control claims, litigation
as well as reviewing countless number of contracts and other
pest/termite documents, it is amazing what comes through our office
when reviewing file materials received from our insureds and other
PMPs.
There have been plenty of articles from many qualified
attorneys and other respected authors going over what should be in
your contracts whether it is pest, termite, fumigation, wildlife…or
whatever services you render to your clients. It could
surround clauses ranging from chemical sensitivity, binding
arbitration (debatable), severability, limits of liability and the
list can go on and on.
This is not what this article is about. We will be
going "outside the box" in this article and giving examples of what
should NOT be in your contracts, renewal notices, WDI/O inspection
reports and other documents you provide your customers.
Let's start at the basics. Many of you reading this
article spent many hours and dollars putting together what you felt
are solid contracts and other documents to protect your
company. Many have succeeded and kudos to you. I am
sure you have read or heard "Do not do anything to take away
from the wording in the contract." Smart advice and it
is advice that should be taken very seriously.
The problem we have seen over the years is the PMP adding
wording to forms or documents that come back and bite the PMP when
a claim or suit is made by the customer. Wording the PMP
thinks helps protect their company, helps the real estate agent,
might produce more business or other reasons the pest professional
can only explain. I do want to state that even
though some of these examples might be humorous to some they are
all serious and the intent is to learn from these mistakes.
In the last 20 years the pest industry has been very cognizant in
improving the way they do business to reduce their exposures.
I hope this information helps as well.
With that said let's look at some examples of what I am
referring to and hopefully you will get an idea of what should be
avoided when altering your documents.
The following are examples of extra wording on documents
LIPCA as received over the years:
THESE ARE EXAMPLES OF WORDING ADDED AS EXTRA TO TERMITE
CONTRACTS:
- "Work as specified" - I am not sure what that really
means.
- "Issue warranty" - No matter what you think your contract
allows, it is now what the customer thinks it allows and I can bet
you both don't have the same "understanding"
- "Termite proof residence" - No termites again forever?
They showed up later.
- "Booster treatment" - Yes it became a minimum spec problem and
regulatory issue.
- "Treat as per graph"- Yes the insured did not treat as per the
graph and paid the claim.
THESE ARE EXAMPLES OF WORDING ADDED OR CREATED ON ANNUAL
RENEWALS
- "In order for us to take care of damage to your property, the
corrections or repairs need to be done. This is to insure that you
have full coverage……." - The ironic issue here was this contract
was supposed to be a retreatment contract only. Also the word
"coverage" should NEVER but used in any pest/termite
contract. That is an insurance term for policy
language. PMPs do not issue policies; they issue
contracts. Don't let the customer, and eventually the courts,
be confused between the two.
- "Annual Service Renewal Inspection Warranty"- This was the
title of the annual renewal inspection document given to the
customer. The issue here is the word "warranty". The
case was about as perfect case you can have to go to trial.
Retreat only contract, state inspector cleared our insured of any
violations, had an expert also involved and the plaintiff basically
had no case. The plaintiff attorney showed the "Annual
Service Renewal Inspection Warranty" to his client. Asked about the
word warranty and the judge then jumped in the conversation. This
really never happens but unfortunately this judge decided to get in
his two cents. The judge simply asked the plaintiff what he
thought the word "warranty" meant and of course the plaintiff
stated that he thought he had full protection from damages, repair
warranty, etc. 25 minutes later the plaintiff wins due to an
ambiguous word. The insured didn't realize this could come
back and bite him but learned an expensive lesson.
- MY FAVORITE. "Our responsibility for repairing new
termite damage will be governed by the terms and conditions as
stated in the State Contract. There will be times and/or conditions
under which we are not legally responsible to repair new damage,
but we will do so because we are morally responsible. In
these cases we will be the one to decide." - Morally
responsible? Now I know this insured pretty well and his
heart was definitely in the right place when he decided to add this
to his annual inspection document. He just did not realize
the ramifications of this wording. Another definite issue is that I
can assure you the PMP will NOT be the one to decide, the courts
will. Yes this is in suit right now so next year I hope to
let you know what happened. Not sure Vegas will give odds on this
outcome.
- "Perfect Pest Control and LIPCA Insurance are responsible for
all damages." Ok it is safe to assume that this is a BIG NO
NO! This is a serious coverage problem under the terms of
most insurance policies. An insured cannot make a promise to
pay or reimburse on behalf of the insurer without the permission of
the carrier first. Read the GENERAL CONDITIONS in your GL
policy. Pretty standard language. "All damages?"
Wow.
THESE ARE EXAMPLES OF WORDING ADDED OR CREATED FOR WDI/O
(real estate) INSPECTIONS.
- "Evidence of termites was minor not causing any damage."
Want to bet?
- "Termite damage does not need to be repaired at this
time." When is a good time?
- "There were no termites found in the house." Guess
what? Termites were found later.
- "This is a clean house." I am sure the housekeeper
appreciates the kind words but the courts did not think so.
- "I would never buy this house." Needless to say the
seller of the home was not pleased.
We stress to our insureds that before they decide to
write something extra on their documents to please a customer, real
estate agent or some other interested party that they contact our
office to get a second opinion. On most occasions our
insureds decide not to write anything extra which is the smart
move. GET A SECOND OPINION FROM A TRUSTWORTHY SOURCE!
As stated above, these examples might seem humorous to
some but any extra wording can and will come back and bite the PMP
with needless claims, lost deductibles, affected loss ratios and
possible higher premiums. Please be careful.
3200 North Central Avenue
. Phoenix . Arizona