HVACR Insurance: 5 Questions to Ensure You’re Covered
Opportunities abound in HVAC wholesaling and distribution. Like any evolving sector, however, there are risks and liabilities to keep in check. Are you adequately covered? Consider the following questions:
1. Are my limits adequate?
Wholesalers typically carry a certain amount of insurance based on their contractual relationships. There is value in reviewing your contractual relationships to make doubly sure your company is compliant with the stated requirements. Following that, it’s worth taking stock of where your current customers reside.
"Different countries have different exposures," says Joshua Pillsbury, Managing Partner with Summit Commercial Solutions. "If you're a wholesaler selling equipment domestically in Canada, and 100% of your revenues are generated within Canada, you probably don't have quite as much exposure as someone who's like selling internationally or down into the US, and may require carrying a higher limit of insurance."
2. Am I asking my sub-contractors to carry commercial general liability insurance? Do I require proof before they start work?
It's good practice to ensure any retailer selling your products has proper insurance in place to limit the potential loss that might occur. For example, Pillsbury offers, "It really depends on the claim, as every claim is different. If the manufacturer doesn't have adequate insurance and something happens, litigation may focus on the wholesaler because they know that's their highest chance of getting a return."
It's the same reason HVAC companies require their subcontractors to have insurance. In both cases, Pillsbury adds, it's important to check that insurance is in place before moving ahead with the partnership: "While it may seem tedious, verifying your sub-contractors carry appropriate insurance could save you hundreds of thousands, if not millions, in the future in a potential claim scenario. It is easy to get dragged into a lawsuit from a subcontractor’s faulty actions, as you are vicariously liable for their work."
3. Is my insurance provider a good fit?
Does your broker or agent understand your business? Do they know your specific risks? Are they sourcing the right solutions that fit your particular operations? Not all insurers are created equal, so it pays to ask your broker about the company you are currently insured to get a sense of their reputation and history regarding things like claims resolutions and handling. You may also want to review your insurer's financial rating as it is a testament to the overall financial strength of their organization.
4. Do I have pollution / environmental liability coverage?
This question applies to wholesalers who offer installations as part of their services and have contractors acting as subcontractors. It is important to ask as most standard commercial general liability policies will only provide limited coverage for pollution, if any at all.
“Getting an environmental liability policy may be much more affordable than you think and provide significant coverage if you are held liable for a pollution or environmental claim,” says Pillsbury. For example, he continues, “Say you just had new equipment installed but the work created an oil leak which ended up spreading throughout the neighbourhood. As the wholesaler or distributor who organized the installation, you could be hit with those cleanup costs and remediation.”
5. Am I reviewing our insurance coverage annually?
It’s a busy industry, so it’s understandable that HVAC wholesalers and distributors may not have time to do their due diligence when renewing their insurance. Doing so, however, risks overlooking critical gaps in coverage.
"A wholesaler or distributor is typically going to have a physical premise, so you want to make sure they have a broker who's actually taking the time to make sure those values are accurate," Pillsbury advises. "Because when it comes to a claim, fairly significant penalties get applied and affect the payout if those values are incorrect."
Certainly, it pays to have someone run the numbers to verify that property and equipment values are accurate. And while some clients may be hesitant to share insurance information, Pillsbury notes that keeping that information close to the chest isn't beneficial: "We might not know you have massive deficiencies in your existing policy.".
All told, it’s important to work with a broker you trust to conduct a proper audit of your coverages and advise you on what coverages you should be carrying.
With any opportunity comes a degree of risk. And in the world of HVAC, falling short on insurance can leave one open to significant financial and reputational harm. Here's where understanding your risk exposure, knowing what questions to ask, and working with insurance partners you can trust will keep you protected and moving ahead with confidence.
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