[Business Issues] Reducing Insurance Claims

General liability. Commercial automotive. Workers’ compensation. Companies in any industry have to deal with insurance in at least one of these categories at some time. But in the pest management industry, companies are dealing with all three categories on a regular basis.

With technicians often spending almost as much time driving company vehicles as they do performing service, working in the customers’ facility or residence, and transporting and using potentially hazardous materials against property-damaging pests — pest management companies have the potential of insurance claims pending around every corner.

With all this potential, though, there are, according to industry insurance representatives, a relatively few number of causes behind most industry insurance claims, and, as a result, the keys to reducing claims come back to a few key solutions:
• Adequate training
• Good hiring
• Customer communication
• Documentation
The top claims in the industry within each of the three segments are general liability, commercial auto and workers’ compensation.

GENERAL LIABILITY. “You’re never going to avoid all claims,” said John Culotta, program manager, The Brownyard Group, Bay Shore, N.Y., “that’s why we have insurance.” But you can cut down on claims and exposure by focusing on your people, techniques and training. “I think a big, big portion really comes down to the people you have in the field doing the work,” he said. Companies should ensure that all technicians are certified and that they always follow all label directions

In addition, George Olden, Warner-Lane Co., Ronkonkoma, N.Y., said he sees the majority of claims centered around a single type of service. “Most of the claims are generally from the termite area,” he said. And this claim “comes mostly from inadequate inspection procedures and methods as well as over-extending warranties on termite renewals.”

Inspection. “Adequate time is required to complete an inspection from the examination of the property in question to complete documentation of the inspection,” Olden said.

“The inspection goes a long way toward reducing claims,” Culotta affirmed.

When inspecting, a technician should always:
• Ensure that all areas of the structure have been inspected.
• Take notes — and retain all notes — relating to the inspection.
• Document any areas that were inaccessible, all prior damage and any conducive conditions.
• Include a chart or graph of the areas inspected, indicating all damages.
• Communicate the information to the manager/homeowner.

 “Always make the homeowner (or manager) aware of everything you are doing,” Culotta said. If they understand the findings of the inspection, the service to be conducted, and the results to expect, it would cut down on a number of claims, he explained.

“By the time a claim becomes a legal matter, attorneys are more concerned about proper documentation than anything else,” said Michael Weisburger, president, Weisburger Insurance Brokerage, White Plains, N.Y. Forms, pictures, written reports, diagrams, notes, phone calls, records — all are important to ensuring the PCO has a chance of winning, or even fighting, a filed claim.

“A large claim can result from a botched inspection for termites,” said Christopher J. Geoghan, president, Walter P. Geoghan Agency, Bayport, N.Y. When a person is buying a home, the bank or mortgage company will require a termite inspection before granting the mortgage.

“If the pest control operator gave a complete OK on the inspection and the bank grants the mortgage, then three months later, the new homeowners discover the home is infested with termites, you know where they’re going for restitution.” Restitution, Geoghan added, can be as substantial as the complete rebuilding of the home in question.

Warranties. Another cause from which Olden sees a number of claims result is “over-extending a warranty to include structural damage to a new home buyer from an existing PCO client without an additional inspection,” he said. When a home is sold, Olden explained, the PCO needs to do an all-around inspection and treatment for the new owner, not just roll over the contract. The inspection paid by the previous owner is often conducted by a third party; this inspection should never be the basis for a PCO contract extension. Rather, the PCO should conduct an additional one himself.

Warranty claims also result from “automatic” annual warranty extensions. This can happen when a customer sends payment to cover an extension, without the technician having done an actual inspection, generally because he was unable to coordinate a time with the homeowner. “Once you cash the check, you’re on the hook,” Olden said. To avoid this, companies need to ensure that the inspection was conducted, and any necessary service noted or performed, before the check is cashed.

There are also claims that a pest management company ends up paying for itself because a promise has been made for more than the insurance policy covers. “If you say we will pay for any termite damage that is found, regardless of the cause, you may have to pay that yourself,” Weisburger said. “Your policy covers your negligence only. Never say (or think) that both you and your customer are covered for everything.” Remember, Weisburger advised, risk policies cover everything except that which is excluded.

Other. Other general liability claims can result from:
• Small incidents, such as the staining of a rug or woodwork resulting from a technician spilling product or over-treating an area.
• Failure to fulfill a contract, then not responding to a customer’s problem.
• The risks involved with the transportation of chemicals, for which most PCOs also carry pollution liability insurance.

COMMERCIAL AUTO. Three types of collision top the list of causes in auto claims, said Linda Midyett, manager of loss prevention, PestSure, Dallas, Texas, with the three causes making up 86 percent of all auto claims:
• Rear-end collision (45 percent)
• Intersection collision (27 percent)
• Backing/rolling back (14 percent)
The key to prevention in all cases, Midyett said, is training. PestSure bases its training on the EOS SAFE Drive Improvement System, in which the SAFE acronym denotes the four core principles:
• See the road.
• Adjust to what you see.
• Focus by moving your eyes.
• Escape with a plan.

Within these four principles, the training focuses on collision prevention and protection from the mistakes of others, through such practices as “keeping your bubble,” that is, keeping adequate spacing in traffic. PestSure training goes beyond the standard three-second following rule to recommend that drivers maintain a four-second following distance in good conditions, and more when conditions are compromised, she said. In addition, drivers are trained to be fully and constantly aware of all six sides of the vehicle — the front, back, left, right, top and bottom — and what is happening on each. “If you are focusing on this,” Midyett said, “you are keeping your focus on driving.”
Cell phones have become a hot topic of discussion for companies because of the high number of pest industry workers who are issued the devices.

Hands-free or not, Midyett said, a driver using a cell phone while driving is four times more likely to be involved in a collision than one who is not. Some companies have asked if they should write policies banning cell phone use during driving. While this may seem like a good idea, Midyett said, do they really want to issue such a policy when it is likely the manager who will be calling? Instead, she explained, drivers should be given guidelines about, and educated on, appropriate use of the cell phones.

Many companies like to hire new technicians without previous industry experience, so that they can train them in pest management without having to “untrain” old habits and techniques, she said. “Wouldn’t it be great if we could find technicians who didn’t know how to drive, then train them on these principles?” she asked.

While Midyett’s hiring recommendation may be a bit tongue-in-cheek, hiring practices can have an effect on automotive claims. George Olden said he finds poor hiring practices to be a primary cause of such claims. “I really think it starts from the hiring process,” he said. Prior to hiring any new employee who may be entrusted with a company vehicle, companies should acquire background information through reference checks, motor vehicle reports, drug testing and criminal background checks, he explained. “As the old adage goes, once all the Is have been dotted and the Ts have been crossed, only then can we expect the reporting of claims to be reduced.”

Olden also recommends the use of GPS systems in vehicles as a method of real-time tracking. Such systems will let a manager know if a driver is doing 50 mph in a 30-mph zone — and if he or she is actually on his or her route, he said.

With industry drivers going stop to stop every day, talking on cell phones and looking at maps, “proper training of drivers has a dramatic effect on claims,” Weisburger said. He recommends reducing auto claims by not allowing company cars be taken home at night, not allowing family members to drive company vehicles, increasing the deductibles and even self insuring for physical damage to the cars. “Our clients who self insure usually save money (certainly on premiums) by contracting with one repair shop for all of their repairs and following up for payments on damages that were caused by someone else.”

WORKERS’ COMPENSATION. In tracking claims in the area of workers’ compensation, PestSure notes three top causes of loss:
• same-level slips, trips and falls (16 percent)
• struck by and against (an object) (14 percent)
• motor vehicle injury (13 percent)

A technician has little to no control over the conditions of the locations in which he or she works, Linda Midyett said. The area may be cluttered or slippery, it may have hidden sprinkler heads, unexpected landscaping curbs, or wet sidewalks or lawns. To prevent slips, trips and falls in such cases, Midyett said, technicians should conduct field hazard assessments every time they arrive at a location. “Each time they go to an account, even if they visit it often, they should assess the hazards when they arrive,” she said.

In addition, new technicians need to be trained on this during the initial on-the-job field training. “This is not a classroom training, this needs to happen on the job,” she said, both by example and through explanation. “Let’s take a look around,” the trainer should recommend, then tell some of his own “war stories” about things that have happened. “Don’t let them go through the school of hard knocks learning things,” she said.

In all areas of claim and loss prevention, training is essential. She has worked in safety for 13 years and in pest management for a year and a half. One of the things she has noticed as unique to this industry is the amount of in-field supervisory time required for certification. “From a safety training perspective,” Midyett said, “I do not think we are taking great and full advantage of that wonderful OJT time we have with those people.”

CONCLUSION. Training, hiring, communication and documentation are all essential to reducing claims — the key being reducing. Accidents will happen and companies need to be prepared. “Insurance is designed to protect you from financial disaster,” Weisburger said. “The benefit to PMPs that carry proper insurance is that they are, in effect, renting the bank account of the insurance company in the event of need.” You will never eliminate all claims, but prevention and insurance will help reduce company loss.

The author is a frequent contributor to PCT magazine. She can be reached at llupo@giemedia.com.