Contract and warranties
There are several things the average person can do to determine whether or not the existing warranties are in conflict with their general liability insurance policy.Review policy exclusions
In your policy of insurance commercial general liability coverage form the Insuring Agreement in Section 1 - Coverage followed by exclusions are the most important sections of your policy when reviewing warranty language. In general policies exclude, "the assumption of liability in a contract or agreement." However coverage is "given back" or provided with policy language that neutralizes the exclusion such as, "This exclusion does not apply to liability for damages: ... (2) Assumed in a contract or agreement." Similar policy language can be found throughout most commercial insurance policies.
So what does it mean to your warranty language? Make sure your warranty includes an existing damage clause that clearly states your company is not responsible for existing damage or hidden damage, and make sure your technicians are well trained in identifying existing damages during WDO Inspection and are not competent in completing WDO Inspection report forms. (See related links on the site or visit the NPMA website.)Understand policy duties
There is a section of all Commercial General Liability policies titled: Duties in the Event of Occurrence, Offense, Claim or Suit. The first duty mentioned usually states the following, "You must see to it that we are notified as soon as practicable of an 'occurrence' or an offense which may result in a claim." It is prudent for all producers of Pest Control Operator insurance to inform all policyholders of this duty when the policy is delivered. This obligation to report claims or potential claims, when not met, is a common policy defense used by insurance companies. The reason for this clause is to allow the insurance company the opportunity to investigate the claim and potentially reduce the damages to be paid to the claimant.
Damage Warranties should include a notification clause requiring that a customer notify the company in writing so that the company will have an easier time meeting their notification duties with the insurance company. A related potential pitfall of warranty agreements is failing to state in the agreement the need for notification in writing. Customers can claim they verbally notified the company and if the warranty damage agreement does not specifically require written notice there could be some lingering coverage problems that result from untimely notice issues.Conclusion
If you are new in business or are creating a new damage warranty agreement it is a good idea to utilize the services of a contract attorney. Cost savings may be able to obtain if you first purchase a standardized industry contract and have your attorney review it. Some attorneys will compare your insurance coverage with your damage warranty to make sure they are compatible.
To properly address ALL the subject matter of contracts and warranties would require much more time and space than is allotted. The situations discussed above are commonly seen in the claims office. Hopefully by reading about these pitfalls pest control operators can take action to avoid costly contract errors and omissions.
*Markel Specialty is a business division of Markel Service, Incorporated, the underwriting manager for the Markel affiliated insurance companies.
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