BACKTALK

RETREAT-ONLY WARRANTIES
As an insurance provider to the pest control industry in 50 states, with hundreds of PCO customers on the “front lines” of the battle against Formosan termites in 11 states that are affected, I am compelled to respond to George Rambo’s comments on termite damage repair warranties featured in the State of the Industry Report (PCT October). While Rambo holds impeccable credentials and is certainly a recognized expert on termite control, his “...concern about the high percentage of retreat-only warranties still offered by pest control companies” deserves commentary.

Termite control is as much of an art as it is a science. The re-appearance of termites in a structure is not necessarily a failure by the PCO. Unknowable building construction conditions, uncooperative or uninformed customers, hostile litigious climates, high local termite pressures and the modes of action of new termite control products can allow termites to return to a structure, at no fault of the pest control professional. Assuming liability for damage repair due to termites in these situations, as well as the implied liability of termite damage existing on the structure prior to treatment (commonly referred to as “old damage”), would be unfair to the PCO.

Universally applied, damage repair contracts will substantially elevate the statistical loss experience for the entire industry, which would most likely increase the insurance rates for individual companies, regardless of their respective claims or lawsuits. Given the recent hardening of the insurance market, and the anticipated rate increases in the wake of the Sept. 11 tragedy, the pest control industry should strive to present a favorable portrait of its potential loss exposure.

In these times of changing insurance markets, PCOs should ask their insurance providers about the status of coverage for “contractual liability” that damage repair contracts invoke. At the very least, PCOs willing to offer damage repair should include binding arbitration in their contracts. Arbitration, recognized by federal law and by most states’ statutes, provides a fair and objective means of settling disputes and avoids costly litigation in court.

Retreatment-only contracts allow consumers cost-effective alternatives for protecting their homes. The marketplace will decide what consumers want and need, given the local conditions listed above. Offering retreatment-only contracts is in no way a reflection of a lack of concern, professionalism or competence on the part of pest control professionals.

Allen Fugler
Vice President of Marketing
LIPCA Insurance Group
Baton Rouge, La.

RAMBO’S RESPONSE
Let’s start by saying that whenever this subject is brought up there are some wide-ranging views on what is said and what is reality. The reality is that we spend a lot of time discussing warranties and termite control. It is the No. 1 litigation area and the No. 1 problem for regulatory and insurance agencies.
Our training and concerns surrounding this area are predicated on problem solving. Everyone wants better inspectors, better control and no liability. In some cases there are times when we feel nothing short of divine intervention may be needed to resolve a termite problem, but we have to remember we are just mortal men and women striving to keep everyone happy.

So, I appreciate the stance that Allen Fugler has taken in his letter. I agree, for the most part, with his synopsis of the insurance situation. My comment concerning retreatment-only contracts was part of a larger article discussing termite warranties. My reason for stating this was very simple: my experience is that pest management professionals feel a retreatment-only warranty excludes them from any claims for damages caused after the treatment was performed. My experience is that courts do not agree with that position and many pest management professionals pay out their deductible to avoid lawsuits.

I have reviewed many contracts of clients and others over the years (as I am sure Fugler has as well). The contracts are clearly worded, for the most part, concerning the many situations in which termites can enter or gain entrance without the pest management professional’s knowledge. And the contracts usually address the issue of hidden damage well. I do not believe that these are the issues. The issue is that we understand the principles of termite infestation and control (an art or science?) but the homeowner does not. When we have retreatment-only contracts, we have to do a better job of explaining them to the customer. I would be spending far less time in court and performing insurance inspections if we did.

Fugler makes some interesting statements. First, I wholeheartedly agree that arbitration is a great way to deal with these cases. As for the marketplace deciding what the consumer wants, well, we aren’t selling perfume here! Since when does the consumer understand what we provide in termite control…unless we tell them? And, what do they want when we offer them treatment? They want to be rid of their termites. The phrase “cost-effective alternatives” is another way of saying, “It’s going to cost you.” When it does, the homeowner usually looks for someone else to pay the price.

Better education + a few more minutes of explanation = less problems.

George Rambo
GR Consulting Services
Herndon, Va.

Readers with comments are invited to write to PCT Letters, 4012 Bridge Ave., Cleveland OH 44113. Letters also can be e-mailed to jdorsch@pctonline.com or faxed to 216/961-0364. Letters may be edited for space or clarity.