HVAC Insurance: Five Policies for Your Business

HVAC contractors face a unique set of risks, from equipment malfunctions to on-site accidents. Whether you’re installing a new system, performing routine maintenance, or responding to emergency repairs, proper insurance coverage is not just a smart decision—it’s a necessity.

This article will explore common claims and the types of HVAC insurance you need to protect your business. Thomas McMillan, commercial lines staff underwriter at Central Insurance, also shares insights into how different coverages provide peace of mind in the event of a loss or claim.

Common HVAC Insurance Claims

Before diving into essential HVAC insurance coverages, it’s important to understand common risks HVAC contractors face.

General Liability

During a routine installation of a new HVAC system in a residential home, the technician accidentally punctured a water pipe behind a wall while drilling causing significant water damage to the wall, floor, and adjacent rooms. The damage required extensive repairs, including replacing sections of the wall and flooring, drying out the affected areas to prevent mold growth, and repainting. The total cost of repairs amounted to several thousand dollars.

Auto

An HVAC technician was driving the company van to a job site when he became distracted by his GPS and ran a red light, colliding with another vehicle. The collision caused significant damage to both vehicles and injured the other driver.

Workers’ Compensation

An HVAC technician was working on a rooftop unit in a commercial building. He lost his footing while maneuvering heavy equipment and fell several feet, injuring his back. The fall required immediate medical attention, including surgery and physical therapy, resulting in several months of recovery time. The technician could not work during his recovery, leading to a loss of personal income.

Inland Marine

An HVAC technician parked his van at a residential job site overnight. The vehicle contained expensive tools and equipment required for the ongoing project. When he returned the next morning, he discovered someone had broken into the van, and stolen several essential tools.

Umbrella

During the installation of a new heating system, a critical error occured due to a miscommunication between the HVAC contractor crew and the building’s electrical contractor. This error resulted in a significant electrical fire, causing extensive property damage to the building and adjacent properties. The building owner and neighbors filed negligence lawsuits against the HVAC contractor, seeking $1.5 million in damages. The contractor’s general liability had a $1 million limit.

Now let’s explore the types of HVAC insurance that provide essential protection in each scenario.

General Liability Insurance: The Foundation of HVAC Insurance

General liability is the core of HVAC insurance and provides coverage for third-party bodily injury, property damage, and personal injury claims. Since HVAC contracting involves working in clients’ homes or businesses, technicians often work on expensive and complex systems within residential and commercial properties. Mistakes or accidents can lead to significant damage, which could be financially crippling without adequate coverage. General liability provides the necessary protection to cover repairs, replacements, and medical costs.

Pollutants are an additional liability consideration for HVAC contractors. HVAC systems can harbor and circulate contaminants, including mold, dust, and chemical residues, which pose health risks to contractors and building occupants. Pollutants can also originate from the materials and chemicals used in HVAC systems, such as refrigerants, cleaning agents, and insulation materials. Improper handling or accidental release of these substances can lead to environmental contamination and health hazards.

Learn More: Do Contractors Need Pollution Liability Insurance?

McMillan notes that while many general liability policies exclude coverage for HVAC pollutants, Central provides limited coverage for third-party fungi or bacteria claims. For example, if a contractor’s work causes a mold condition in a home or commercial building, they would have coverage in place to help with the remediation cost.

Commercial Auto Insurance: Coverage for On-the-Road Risks

Reliable transportation is paramount for HVAC technicians traveling between jobs. Ensuring company vehicles are adequately insured is a matter of compliance and a critical part of risk management. With constant travel required to service clients, the risk of accidents and vehicle-related incidents is significantly higher for HVAC contractors. Commercial auto insurance safeguards you against these increased risks, providing essential coverage that protects your business and employees while on the road.

Auto also provides coverage for: 

Theft and Property Loss
Technicians frequently drive company vehicles loaded with expensive tools and equipment, making them vulnerable to accidents, theft, and other risks. Without adequate auto insurance, the financial burden of repairing or replacing these assets can be substantial.

Liability
In an accident where a company vehicle is at fault, the business could be held liable for property damage and bodily injuries. Auto insurance helps cover these costs, protecting the company’s financial stability and reputation.

Uninsured and Underinsured Motorists
Auto insurance can offer coverage for uninsured or underinsured motorists. If an HVAC company’s vehicle is involved in an accident with a driver who lacks sufficient insurance, the business could face significant financial losses. This coverage ensures that the company is protected even when the other party is inadequately insured.

Workers’ Compensation: Protecting Your People

Given the physically demanding and potentially hazardous nature of HVAC work, the likelihood of accidents is higher than many other professions. According to the National Safety Council, the number of overall preventable work deaths rose five percent in 2022, with nearly 5 million work-related injuries requiring medical attention. The construction industry represents the highest number of preventable workplace fatalities.

Workers’ Comp ensures that if an employee is injured on the job, their medical expenses and a portion of their lost wages are covered, reducing the financial burden on the employee and preventing potential lawsuits.

Other Workers’ Comp benefits include:

Quicker Return to Work Time: Workers’ Compensation coverage ensures employees receive medical care and compensation for lost wages if injured on the job. This protection helps workers recover without the added stress of financial burdens and promotes a quicker return to work, benefiting both the employee and the employer.

Lower Overall Costs: Investing in Workers’ Compensation insurance can lower your company’s overall costs. Providing timely medical treatment and financial support can prevent minor injuries from becoming major issues, reducing long-term costs associated with prolonged employee absences and decreased productivity.

Fulfills Legal Requirements: Workers’ Compensation coverage is often a legal requirement for HVAC companies. Compliance with state laws helps avoid hefty fines and legal complications. It also demonstrates a commitment to employee welfare, which can enhance the company’s reputation and employee morale.

“HVAC can be fairly hazardous on the Workers’ Comp side of things. Working in attics, basements, and other cramped environments increases the risk of back injuries and strains,” McMillan says. “They may even do welding, which poses a burn risk. HVAC units are heavy to haul around, and you also have fall potential when working on roofs.”

While some of these hazards can be prevented with tenure and experience, McMillan shares a personal story about an HVAC contractor who came to repair his air conditioner.

“A contractor came to work on the air conditioning unit in our previous home. He was close to retirement age, so this wasn’t the first attic space he’d worked in. You can imagine my surprise when he stepped through the ceiling of our dining room. Thankfully, he was uninjured, but this is just one example of how accidents will happen. There are always risks, even with seasoned professionals.”

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Inland Marine Insurance: Protection On the Move

Inland Marine is another beneficial coverage for HVAC companies. Unlike standard property insurance, which typically covers assets at a fixed location, Inland Marine insurance ensures valuables are covered while in transit or temporarily stored at various locations. This coverage is particularly important for HVAC contractors who may need to store expensive units, parts, or tools at job sites overnight or for an extended period of time.

Inland Marine also provides protection for:

Expensive and specialized equipment, such as HVAC units, diagnostic tools, and installation machinery when traveling between work sites

Accidental equipment damage due to due to weather conditions, mishandling, or other unforeseen incidents

Damage to ductwork, piping, and other essential components when transporting between job sites

Umbrella Coverage: Building a Tower of Protection

For HVAC contractors, the scope and severity of potential risks can go far beyond the coverage provided by a standard general liability policy. While general liability typically covers up to $1,000,000 per occurrence and $2,000,000 in aggregate, an umbrella policy extends these limits significantly, often reaching $2,000,000 to $5,000,000 or more. This additional coverage is crucial due to the range of severe exposures HVAC contractors face.

Imagine a scenario where an HVAC contractor improperly services a unit, leading to a catastrophic event like extensive flooding. The contractor could be sued for the damages caused by their operations. Without proper coverage, the financial impact could be devastating to their business.

The risks extend beyond property damage to include severe bodily injury or life safety issues, especially for those working on commercial or industrial HVAC systems. For instance, if a contractor is working on an HVAC system in an apartment building and their work causes a fire, the resulting injuries or fatalities could lead to lawsuits far exceeding the limits of standard general liability coverage.

In these high-risk scenarios, an umbrella policy acts as a safety net, providing additional protection and peace of mind. Building a tower of limits above the standard coverage ensures you’re prepared for and protected from the most severe and costly claims.

The Central Difference

Proper HVAC insurance coverage is a strategic investment in your business’ success. It protects your financial health and enhances your reputation as a reliable service provider and responsible employer.

In addition to providing robust coverage for your HVAC business, Central is committed to helping you prevent losses before they happen. Our policyholders have access to a robust loss prevention library full of resources designed to protect your employees, reputation, and business. By proactively identifying and mitigating potential risks, you can significantly reduce the likelihood of accidents, damages, and costly claims with confidence we’ve got your back. 

Connect with an agent to learn more about Central’s HVAC insurance options and how we can better protect your business.

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