The Good, the Bad and the Ugly of Insurance Claims
by Kari Dybdahl
Have you ever wondered what kind of claims have been handled by general liability and pollution liability insurance? Some of you may have your own personal experience with covered claims from your insurance company and some of you have never had to use it. Those are the lucky ones!
Let’s have some fun with real-life examples that we have come across while insuring cleaning and restoration contractors for more than 13 years.
Small leak costs more than $250,000
A drying contractor responded to a call where a homeowner’s dishwasher supply line broke and flooded their kitchen. The house was built prior to 1978 so, before tearing up the floor to dry it, the contractor sent in a section of the floor for testing. The test came back negative for asbestos in the section tested and the contractor proceeded with tearing up the floor. The contractor followed IICRC guidelines and went along with the job until he was notified by the homeowner that his airmover blew asbestos fibers throughout the home. As a result, the asbestos would need to be remediated.
The homeowner’s claims adjuster kicked the contractor off the job and had a new restoration contractor called in to abate the asbestos as well as finish what our insured started… all on our contractors tab. When the job was done, the bill from the other contractor was over $260,000.
Luckily, the contractor purchased contractor’s environmental liability coverage and his insurance company paid the defense costs as well as the indemnity to the homeowner. After talking to our contractor we believe the new restoration contractor inflated the cost of the remediation and rebuild. If our contractor had not purchased the contractors’ environmental liability coverage he would be out of business.
Homeowner bulldozes home after a flood
Our restoration contractor responded to a house where there had been a flood. He started the job and accidentally blew asbestos fibers throughout the home. The homeowner found the asbestos fibers in the children’s clothing and panicked. The husband immediately called his claims adjustor who mentioned to the husband he would come out to look at the condition of the home and assess the damages.
Three days later the homeowner could not wait any longer and hired a demolition contractor to demolish their home as they thought their house was a total loss due to the asbestos fibers. Within a couple days the house was gone.
Our restoration contractor was sued for blowing asbestos fibers throughout the house, resulting in the need to demolish the home and rebuild. The claim was more than $900,000. The contractor did purchase contractor’s environmental liability coverage where the carrier stepped in to defend the contractor and pay the indemnity to the claimant. The contractor was able to keep his doors open and continue his operations.
Criminal homeowner creates drama
A longtime client of ours called one day letting us know they had a very unhappy customer and nothing they did seemed to make the homeowner happy. Sound familiar? The homeowner was claiming poor workmanship done by our contractor on the rebuild work. The homeowner was saying the drywall wasn’t installed properly and the framing was incorrect along with many other little low-cost fixes.
The contractor fixed the small low costs issues the homeowner was having, but nothing seemed to be going right. Eventually, the homeowner completely kicked the contractor’s crew out of his house. The homeowner stopped answering phone calls and when they would show up he wouldn’t let them inside.
The homeowner threatened to sue the contractor unless the contractor provided the homeowner with a certificate/proof of insurance. Never in my many years of brokering cleaning and restoration insurance have I ever heard of a homeowner asking for a certificate of insurance from the contractor. We let the contractor know this; however, the contractor didn’t want to be sued. We provided the certificate of insurance to the homeowner and a couple days later we get a call from homeowner directly wanting to file a claim on behalf of our contractor’s insurance policy. At that point it was turned over to our insured’s carrier who stepped in a defended our contractor of the seemingly frivolous claim.
After investigation of the claim they uncovered the homeowner was just released from a corrections facility due to committing insurance fraud as an insurance agent. The claim against our contractor indeed ended up being frivolous; however, the contractor, the insurance broker and the carrier spent many hours having to deal with this. Thankfully the carrier was there to step in to investigate and defend the claim.
We are just getting to the good stuff now…
Interfering husband injured… spawns lawsuit
A contractor responded to a job where a roof had been leaking and there was mold growth throughout the attic. The contractor performed their routine mold growth attic job which included tearing up the sub floor of the attic, leaving no floor and only floor beams exposed. When the contractors left for the night they put up caution signage as well as blocked off the door to the attic. They also instructed the homeowners that the attic was very dangerous and to not go up there.
Later that night, the husband decided to ignore the warning and look at the work done by the contractors. While in the attic, the husband slipped and fell catching himself between his legs on a floor beam. He was rushed to the hospital where he needed emergency surgery. The homeowner happened to be a surgeon. He sued the contractor for an unsafe job site resulting in his inability to perform surgery as he couldn’t stand long enough to continue his work. The wife then sued the contractor for loss of consortium.
Both claims from the husband and wife were picked up by the insurance carrier and were defended and indemnified. Even though the contractor put in cautionary measures, they were still held liable by law. The couple was suing the contractor for more than $1.5 million.
Police tape drama and the resulting lawsuit
A drying contractor responded to a job where there was a leak on the first floor of a house. To get to where the leak was, the contractor had to cut about a four-foot hole in the sub floor, which exposed the unfinished basement from the first floor bedroom.
As the contractors were leaving for the night, they closed the bedroom door, put up cautionary signs and instructed the homeowners to not go in the bedroom. When they returned the next morning, there was police tape around the house. The contractors were able to get into the house to continue their drying job. The police at the time did not disclose to the drying crew what had happened. That was until the owner of the company received a lawsuit from the homeowner claiming an unsafe job site resulting in the wife falling through the hole in the floor and landing on the concrete floor in the basement.
The contractor filed the claim with their insurance carrier, who defended the claim. There was speculation from law enforcement that the husband and wife were in a dispute the night before, resulting in the wife falling into the hole. With the help of the contractor’s insurance carrier, the claim was settled outside of court. The contractor was able to move on with operations and keep his business doors open. The contractor was being sued for more than $70,000.
Killing the family cat — Not good
A restoration contractor responded to a call where there had been a fire in a townhouse. A fairly new crew of contractors went to the job to start repairing the townhouse. The power was not working and the contractor needed to use their gas generator in order to operate their equipment. A new employee started up the gas generator in the condo and left for the day.
Later came a lawsuit to the owner of the restoration company claiming that his technicians ran a gas generator in the house, making the family sick, the shared wall neighbors sick and contributed to the premature death of their family cat.
The contractor filed the claim with his insurance carrier. After investigation of the claim it was uncovered that a gas generator was used and ran within the structure of the building. Due to the emissions from the generator, it caused bodily injury to the family, neighbors and the family cat. The carrier stepped in to defend and indemnify the claimants and the restoration contractor implemented more extensive training of their technicians. They claim payout was $48,000.
Carpet cleaning sickens occupants
On a Friday afternoon, one of our carpet cleaner clients called us letting us know that the cleaning solution they used to clean the carpet of the corporate headquarters of the largest amusement park did not work the way it should have.
They have been using the same carpet cleaning solution for many years, which contained a citrus scent. When they cleaned the carpet the citrus scent did not dissipate. After several failed attempts of cleaning the carpet to extract the potent citrus scent, the cleaner started to receive complaints from the corporate headquarter employees of bodily injury due to the release of the citrus scent within the carpet. They claimed they had to miss work as they were developing asthma.
Due to the general liability pollution exclusion, the bodily injury complaints were excluded. Luckily, the carpet cleaner purchased contractors environmental liability insurance. We filed a claim with the contractor’s environmental liability carrier who stepped in to defend and indemnify any bodily injury claims due to the citrus scent. The claim ended up being over $150,000.
Be careful — ensure you have proper coverage
The above claim summaries are actual claims we have assisted with. They have not been exaggerated.
Situations happen even when you have taken every precautionary measure to reduce the risk on your business. Specially designed environmental insurance is absolutely needed for cleaning and restoration contractors. You could easily find yourself in one of the above situations.
If you are not purchasing specially designed liability insurance for cleaning and restoration contractors, an uncovered claim and closing the doors of your business is very likely.
Kari Dybdahl, BA, has over nine years of experience in the environmental insurance industry assisting clients from carpet cleaners to municipalities. Dybdahl recently was named number three in Insurance Business America’s Top Insurance Producers list, along with being recognized with Elite Women in Business, Young Gun in Insurance and Hot 100 awards. Her true passion is assisting carpet cleaners and restoration contractors place comprehensive insurance to protect the longevity of their businesses for years to come. Dybdahl’s daily tasks include placing compliant insurance for Crawford Contractor Connection members, ICRA members, Alacrity members, various third-party network members, independent contractors and several more. She also designs memberand franchise-specific insurance programs alongside Dave Dybdahl. Reach Dybdahl’s team at (608) 824-1192 or reach her directly at [email protected].