10 Ways Contractors Can Lawsuit-Proof Their HVAC Businesses
HVACR contractors are not insulated from business problems, angry customers, or lawsuits. Although being sued isn’t as commonplace as the 1-800 TV lawyers would like viewers to think, there is still an issue of both merited and frivolous lawsuits being filed, even in the HVACR industry. Once a company is on its way to court, it’s recommended that the owners contact their insurance provider as well as a lawyer. However, there are steps contractors can take to address customer complaints before they reach the courthouse doors.
1. DO IT RIGHT
There are rules that contractors must follow, both in construction and HVACR. Be they local, regional, or federal requirements, these stipulations protect the customer and the contractor from unsafe situations. When working in a home or at a commercial site, technicians may run into asbestos or lead. Asbestos cannot be handled unless licensed, and there are required lead renovator certifications that need to be obtained for the proper handling of lead situations. Violating these restrictions sets contractors up for a lawsuit.
Another problem contractors run into that could put them into the legal system is working without pulling the proper permits. Ignorance of the law is not a defense in this case, and it is up to the contractor to understand and abide by local and federal laws.
A contractor in Colorado, for example, installed almost 1,000 furnaces, hot water heaters, and a/c units without pulling the proper permits. He was ordered by a judge to temporarily stop operating in 2017 while an investigation of the company’s business practices occurred. In August 2018, the business was closed permanently, and the contractor is no longer allowed to sell or install furnaces, boilers, hot water heaters, a/c units, or any other kind of HVAC equipment. The owner was also fined $1.5 million in civil penalties and over $205,000 in restitution and state attorney fees.
2. HANDLE COMPLAINTS QUICKLY
Following the law requires perfection, but when it comes to installations, maintenance, and repair, mistakes do happen.
“The best way to protect yourself from lawsuits is to focus your work on what you are good at,” said Scott Merritt, CEO of Fire & Ice Heating and Air Conditioning Inc., Columbus, Ohio. “If we have complaints about quality — and it’s true — we own up to it. I can tell you that no company is perfect. How a company handles their mistakes is how you determine whether or not they are a good company.”
According to Merritt, it is important that a company behaves in an honorable manner. From honoring warranty issues to fixing the complaint quickly, he explained that these are the moves that surprise customers who, at this point, are often expecting a battle.
3. SOLVE THE PROBLEM
Owning up to a mistake quickly will likely take the sting out of a customer conflict. What the contractor does after that, however, can have a hand in determining if the legal system gets involved. Leaving the problem unresolved is almost a surefire way to end up in small claims court, civil court, or going through the process of alternative dispute resolution. Either way, this lack of solution is damaging to both the customer and the contractor. Finding a solution and fixing the issue is one of the best ways to keep a contractor out of court for a job that had mistakes.
4. STAY CALM
In the midst of fixing a mistake, it is imperative that contractors and technicians remain calm. That can be easier said than done, especially when a customer yells in anger over the service they received. It’s a natural reaction to yell back or say things without thinking. But that just adds fuel to the fire.
“Let them be angry, let them vent,” said Merritt. “Apologize if needed, be honorable, and don’t get angry back at them. This is how you avoid lawsuits and how you grow a good reputation.”
Dave Yates, president of F.W. Behler Inc. in York, Pennsylvania, pointed out that in these situations, contractors and technicians need to listen carefully and refrain from arguing.
“Only respond as needed,” he said. “More often than not, allowing a customer to blow off steam while you remain calm and polite tends to defuse the situation.”
5. MAKE AMENDS
Once a customer has been heard, they are often ready to listen. Apologizing at this point can be beneficial. It is not necessary for contractors to fall on their sword and grovel, but a sincere apology for the mistake — or whatever the issue may be — can further defuse the situation. Once the apology is accepted, offer an appeasement as a token of the company’s gratitude for the customer’s business. This doesn’t mean knock off an hour of labor or pay for a part that should have been paid for in the first place. An appeasement is a gesture that goes above and beyond to show that not only is the company saddened by the customer’s experience, but that it also values the customer and their future business enough to go the extra mile.
“In almost every case I’ve seen or witnessed, there was a point when the conflict could have been resolved without the need to go to court,” noted Yates.
6. MANAGE CUSTOMER PERCEPTION
As a customer service-based business, HVACR contractors and technicians are constantly working to manage customers’ perceptions of a situation.
“It’s all about what the customer thinks,” said Martin Hoover, president of Empire Heating and Air Conditioning in Decatur, Georgia. “It doesn’t really have to be factual; if someone believes they have been wronged, they will take action. We have been very fortunate and feel that our quick reaction time has helped reduce incidents.”
7. CARRY INSURANCE
Despite a contractor’s best efforts not to get sued, there are times when it happens. This is when having good insurance can save a business.
“Not only do we do good work and treat people right, but we also stay very well insured for general liability,” said Hoover. “We also carry a separate umbrella policy, just in case.”
8. GET TRAINED AND CERTIFIED
Being trained and certified in the fields and processes that are served by a business can protect a contractor from becoming sued or provide a solid defense if they are sued.
Yates said that training and certification provides increased trust and credibility if a contractor must defend the company’s work in a courtroom.
“Do a thorough heat loss/gain calculation,” he said. “I have seen contractors lose cases who have not done a heat loss/gain calculation. They missed the mark by a substantial degree, and that is not good in a lawsuit.”
Yates’ company subcontracts asbestos situations to a licensed asbestos abatement firm and is lead renovator certified. All of those dealing with lead in his company are trained to follow the guidelines.
“We use safe work practices,” he said. “Get OSHA [Occupational Safety and Health Administration] certified and have the required safety equipment necessary to make each job safe.”
Communication is a complex piece of the lawsuit-proof puzzle. It has multiple levels that contractors must address, but the effort can provide an improved safety net against lawsuits. The first piece of communication is with employees.
“Create and maintain a manual that governs employee conduct: sets hours, vacation [days], and holidays,” instructed Yates. “Have employees read and sign the form. Also have background checks on all employees and keep up with random drug and alcohol testing. Document everything.”
Along with these steps, contractors must communicate in writing, with signed acknowledgement, what is expected of employees in terms of work and customer interactions.
Defining clear expectations and training employees to follow them helps installers and technicians to clearly set expectations for customers. These clear expectations provide the customer with the company’s intentions of providing exemplary service. If something is delayed or must change, managing those expectations with truth and another round of clear communication before an incident occurs can protect the customer’s perception, despite things not going as planned.
10. WATCH FOR OTHER LAWSUIT SOURCES
Disgruntled customers can be a primary source of lawsuits for contractors, but there are also other factors from which a lawsuit can originate.
Hoover, for example, has had multiple lawsuits filed relating to automobile accident issues.
“Seems every accident is a lawsuit these days,” he said. “I’ve had to appear once for a case that actually went to trial. The final result was about what the insurance company offered as a settlement.”
Hoover further noted that the lawsuit had no basis, even though it was seeking millions of dollars. Things like good insurance and licensed drivers with clean driving records helped his company in court.
Another lawsuit source is other contractors on the site during the course of construction.
Yates cautioned contractors that when he said document everything, he meant everything. According to Yates, many years ago, his company installed an HVAC system in a mall pizza shop.
“Our contract stated the general contractor would back charge any subcontractor who failed to clean up after themselves,” he said. “We did, others did not, so we documented that and had the general contractor’s site supervisor sign off on our worksheets.”
That move saved his company greatly when another one of the subcontractors was hurt on the job due to a scaffolding wheel getting caught on debris and falling over, permanently disabling the worker. A year later, Yates was served notice that the injured worker was suing all contractors who had worked on the pizza store.
“We copied our documents that clearly showed we had cleaned up our debris daily and stowed away all materials and sent that to his lawyers,” Yates said. “We were dropped from the suit because we had great records that documented the daily cleanup. Our cost to defend was just a few hours of time, plus copies and postage.”
Publication date: 12/24/2018