What an Insurance Pro Says about Protecting HVAC Systems
It makes sense that Matt Livingston knows a lot about protecting HVAC systems. After all, part of his job is to train insurance adjusters to assess those that are damaged.
Livingston is the Director of Customer Education and Vendor Programs for HVAC Investigators, an organization that inspects HVAC and refrigeration systems for insurance companies being asked to pay a claim.
Livingston says that the work the firm does is similarly structured to auto insurance. If there is a claim of hail damaged to a rooftop system, for instance, HVACI assessors must determine the extent of the damage, whether the unit has to be fully or partly replaced and if the damage likely was caused in the manner described by building management. HVACI purposely doesn’t know the specific terms of a client’s insurance policy. That knowledge, Livingston said, could cloud the company’s objectivity.
Livingston says that his firm assesses about the same number of residential and commercial claims. What advice does he offer to building owners and the people who work for them?
The first idea is to get a second opinion. HVAC systems are modular. Damage to one part doesn’t necessarily mean that the system needs to be fully replaced. Livingston says that vendors often say that entire systems must be replaced – and this isn’t always true. “It happens frequently,” he said. “It is not always something nefarious. Sometimes it’s just easier from [the vendor’s] perspective to replace the unit than attempt to repair it. I [also] think sometimes there may be more margin in that transaction.”
The second piece of advice is to keep HVAC and other systems in good working order. It’s obviously a benefit from a number of perspectives. Insurance is one that often is not mentioned. “If the average useful life of a system is 15 years and the system is not serviced annually — or twice a year, as some people advocate – you will accelerate the death of that system. In the insurance world age-related issues are not covered causes of loss. If do not do this right, you are not doing yourself any favors.”
Related to that is the need to keep good records. An insurance adjustor assesses the condition of an HVAC system on the day he or she inspects it, of course. A building that keeps poor records is more likely to end up in a conflictual situation with the insurance company once a claim is made. “Certainly documenting on a regular basis the health and well-being of the HVAC system is the smart thing to do, whether that entails taking pictures of verifying that everything is working as it was designed.”
Livingston adds that in his experience insurance companies are willing – even eager – to pay legitimate claims. On one level, it simply is the right thing to do. It also holds a competitive benefit as well: No insurance company wants to become known as one that tries to avoid paying out claims that should be claimed.
Finally, Livingston suggests that companies consider adding a mechanical breakdown rider to their policy. These riders, which offer virtually complete coverage, are becoming common. “More and more policy holders are embracing this,” he said. “They are protected against huge capex event that they are not anticipating. It takes a lot of pressure off the policy holder and the carrier. It relieves some of that potential contention back and forth if mechanical breakdown is included. Very little short of intentional damage is not covered.”
HVAC and other structural elements are insured in the building’s property and casualty policy. The Insurance Information Institute says that the top five companies in this sector assessed by premiums written are State Farm Mutual Automobile Insurance, Liberty Mutual, Allstate, Berkshire Hathaway and Travelers. State Farm dominates with more than double (10.3 percent) the portion of policies written than the next two companies – Liberty Mutual and Allstate – which both have 5.1 percent of the market.
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