Controlling Auto Insurance Costs for Plumbers and HVAC Contractors

Author, Matt Gorham, Account Executive, Rancho Mesa Insurance Services, Inc.

Like most businesses, vehicles are an essential part of a plumbing or HVAC contractor’s operations. Whether the focus of their business is service and repair, tenant improvements, installation, or new construction, company leaders depend on trucks, vans, and cars to get their people, equipment, and materials safely to the jobsite.

Unfortunately, the cost to insure those vehicles has increased dramatically over recent years and there appears to be no imminent sign that trend will change.

According to AM Best, the U.S. commercial auto insurance segment sustained a $5 billion net loss in 2023. While it is still too early to know how the auto segment performed in 2024, early indications from the first half of the year showed further deterioration, marking the 12th straight year of net underwriting losses for auto insurers.

There are multiple reasons for the increase in auto losses. Distracted driving is contributing to an increase in the frequency of automobile accidents, while social inflation and third party litigation funding are amplifying the severity of associated losses. As all of these causes will continue to negatively affect the auto insurance marketplace broadly, avoiding auto accidents becomes increasingly more important for individual companies in controlling auto insurance costs.

While there are many factors that can lead to an auto accident, businesses can benefit from focusing on those within their control. Implementing or enhancing a fleet safety program with clear, actionable policies will better equip drivers to avoid accidents. Consider how your fleet safety program handles the following:

• Driver selection, qualification, and performance management. Establish clear written guidelines on who is eligible to drive and how their driving performance is evaluated. This may include policies such as requiring an applicant to provide their motor vehicle record as part of the interview or hiring process, participation in the Employer DMV Pull Notice program, incentives for safe driving, and responses to unsafe driving practices, near misses, tickets, or at fault accidents.

• Safety rules, vehicle use, and operating procedures. Define how and when drivers are allowed to operate vehicles. This should include policies that address use of cell phones and hands-free devices, impaired driving, personal use of company vehicles, company use of personal vehicles, passengers, seatbelt use, and speeding, among others.

• Driver training. Provide ongoing training for employees to understand their responsibilities as drivers and the risks that are present on the road. This could include in-person or video trainings that discuss topics like defensive driving, distracted driving, safe following distance, and driving in inclement weather. Having potential drivers successfully complete an in-person driving test in a controlled environment before getting on the road, as well as annual driving tests can also help reduce the likelihood of an accident.

  Learning management systems like Rancho Mesa’s proprietary SafetyOne™ platform can offer effective and convenient online trainings to ensure your drivers are knowledgeable and well equipped to drive for your company.

• Vehicle maintenance and inspection. Schedule and document routine maintenance tasks like oil changes, tire rotations, and brake inspections to help keep vehicles running smoothly. Implementing a daily vehicle inspection for items like active turn signals, working headlights and brake lights, and tire pressure reinforces the importance of safety to your drivers, while also proactively minimizing the risk of a dangerous maintenance issue that could lead to an accident.

Providing an easy way for your drivers to document and report their daily vehicle inspections and maintenance issues can increase the likelihood of compliance. Try one of our QR code-enabled Driver Vehicle Inspection Report (DVIR) to see just how simple it can be to document and report mechanical or safety issues with your fleet.

In addition to a robust fleet safety program, there are other tools and strategies that can be leveraged to provide savings in a challenging insurance marketplace, without sacrificing coverage.

To discuss these tools and strategies or for a complimentary review of your current fleet safety program and insurance program, contact me at (619) 486-6554 or mgorham@ranchomesa.com.

Five Tips to Protect Your HVAC and Plumbing Vehicles from Break-Ins

Author, Matt Gorham, Account Executive, Rancho Mesa Insurance Services, Inc.

Contractors’ vehicles have long been a preferred target for thieves. Due to their distinct shapes and often eye catching branding, contractors’ vehicles are generally easy to identify, and they often contain thousands of dollars’ worth of tools, equipment, and materials.

Heating, ventilation, air conditioning (HVAC) and plumbing business owners that allow their employees to drive their work vehicles home face an especially difficult challenge to keep their tools and equipment safe. And, the cost of a vehicle break in goes far beyond the financial cost of replacing what has been stolen.

Being the victim of a vehicle break-in will lead to delays in your operations, it can cause frustrated customers, and the affected employees can suffer psychologically, especially if they have had their own personal tools stolen.

Here are the top 5 tips to help navigate the risk of vehicle break-in’s at an employee’s home:

1. Have clearly defined policies and discuss them with your employees.
Before allowing employees to drive their vehicle home, ensure that they understand what is expected of them. Having policies to avoid or minimize losses are only effective if the driver is held responsible for actually following them.

And drivers are more likely to follow the policies if they:

• Are aware of them

• Clearly understand them

• Are accountable for implementing them

2. Leave expensive equipment, tools, and materials at the shop.
While it may be inconvenient for your techs to unload their trucks at the end of the day, creating and reinforcing a habit of securely storing expensive equipment at the shop is much more likely to prevent theft of that equipment.

If taking the equipment home is unavoidable or impractical, discuss with them if it is preferred to bring the equipment inside their home overnight.

Capreece Serna, Senior Safety Services Consultant with Sentry Insurance, offers an important reminder: Anything that is kept in the truck should be placed out of sight from the outside, and do not leave the keys in the ignition, on the seat, or tucked in the visor. Leaving electronics, keys, garage door openers, security badges, wallets, purses, or expensive tools in plain sight to potential criminals can encourage them to break into the vehicle.

It is also important that your techs know what is on their trucks. Having them conduct a quick inventory check at the start and end of their shift can help increase security of your tools and equipment, as well as theirs.

In the event that you ultimately experience a vehicle break-in, having an inventory of what was on the truck will help expedite the process of getting tools and equipment replaced.

3. Lock your vehicles and set your alarms.
This may sound basic, but locks are one of the most effective ways of securing your vehicle. Keep in mind that many technicians are getting in and out of their trucks repeatedly throughout the day, often times without locking their vehicles. This can lead to a false sense of security and unconscious habit of leaving a vehicle unlocked overnight. Having security bars or grates on the interior of the windows or doors will provide little security if the doors themselves are unlocked.

It is also important to recognize that there are different types of locks available. While not fail safe, aftermarket locks can provide an added layer of security on either the exterior or interior of a vehicle. As an example, puck locks are commonly found on the exterior, while cable locks or chain locks can be used in the interior to secure tools, tool cases, or equipment to mounted shelving.

Having an alarm system installed on each vehicle that gets driven home can be another effective deterrent. Would-be thieves are much less likely to target a vehicle with an alarm. However, if they are undeterred, the attention that an alarm system attracts in the event of a break-in can substantially reduce the amount of time they have to find and take anything.

4. Be aware of and monitor surroundings.
There are a number of environmental factors that employees can leverage or put in place to increase the security of the company vehicle. Serna offers the following suggestions whenever possible:

• Parking inside the employee’s garage or behind a security gate,

• If in the driveway, backing up to the garage door to prevent the vehicle doors from opening fully,

• If in the street, parking in a well-lit area or using a physical obstacle to limit door access,

• Making use of motion activated lights or cameras pointed at the vehicle,

• Placing a camera inside the vehicle facing tools and equipment.

5. Review coverage for tools, equipment, materials, and employees’ tools with your insurance broker.
Each of the above tips will help reduce the risk and severity of break-ins. However, eliminating the risk of a break-in altogether is impossible.

Serna points out, “When thieves decide to commit their crime, they are looking for the biggest payoff with the lowest potential for getting caught. The focus of your practices should be to minimize the appeal of your vehicles to thieves, which will also minimize the loss to your business.”

Talk with your insurance broker to develop a coverage strategy that aligns with your appetite for risk and have the carrier take on the remaining risk.

A unique advantage for Rancho Mesa clients is their access to the SafetyOne™ mobile app. Within it, business owners are able to make their vehicle policies available to their employees digitally, as well as provide security checklists through a QR code, while also being able to take pictures of their parked vehicle at the end of the work day, helping to reinforce safe practices, accountability, and employee implementation.

For a complimentary review of your current tool and equipment coverages, as well as your safety practices, you can contact me at (619) 486-6554 or mgorham@ranchomesa.com.

Protecting Your HVAC and Plumbing Business with Proper Classifications

Author, Matt Gorham, Account Executive, Rancho Mesa Insurance Services, Inc.

Within the construction industry, it is common for questions to arise about how to categorize work that a contractor performs. While organizations like the Insurance Service Office (ISO), Workers’ Compensation Insurance Rating Bureau (WCIRB), and the National Council on Compensation Insurance (NCCI) have created classification systems, nuances in worksite demands can lead to confusion about which class code to use for a given business’s operations.

Even though many types of work have similarities, mistakes in classification can lead to:

1. Problematic coverage exclusions

2. Surprise audit bills

3. Overpaying insurance premiums

General liability class codes differ between types of work, such as commercial/industrial plumbing and residential plumbing, or heating and air conditioning with or without liquefied petroleum gas.

Problems can arise for businesses when their coverage fails to match the work being performed, especially when certain endorsements are included within their policies. When a loss happens in this situation, a carrier may deny coverage, leaving the business to respond to the damage or injury on its own.

We recently started working with an HVAC contractor that had previously found themselves on the wrong end of this scenario, having incurred over $350,000 in property damage costs because they were held responsible for flooding an apartment while moving a water line. Their previous carrier denied the claim because of a coverage limitation endorsement, which specifically limited coverage only to the classification codes listed on their policy.

In severe cases, a carrier may also choose to cancel or non-renew coverage for the business if they learn that the business’s operations are heavier or significantly different than what was previously represented.

Like general liability, workers’ compensation class codes can also cause challenges for contractors.

Consider the example of an HVAC contractor. Their workers’ compensation payrolls could easily be categorized into either 5183/5187 or 5538/5542. There is a subtle difference that separates whether payroll should be classified within the plumbing class codes or the sheet metal class codes. However, there can be a substantial difference in the corresponding premium a company would pay for workers’ compensation, especially when you consider that these classifications are subject to different dual wage thresholds.

An HVAC company with a technician getting paid $32 per hour whose payroll is classified as 5187 could expect to pay premiums from a $4 to $5 base rate per $100. Another HVAC company with a technician getting paid the same, but categorized as 5538 could expect to pay premiums from a $10 to $12 base rate per $100. While the lower rate may at first be appealing, if payroll is improperly classified throughout the policy term, an audit could lead to a substantial additional premium, so it is best that you classify your work correctly from the start so that your premium properly reflects the risk of the work being done.

Plumbers often encounter a similar classification challenge. Should they be categorizing payroll under the plumbing class code only? Do they have any sewer or excavation exposure? That depends on some key details in their operations and will directly influence which carriers are willing to partner with them and how aggressively they price their coverage.

Rancho Mesa recognizes the importance of proactively working with accurate, complete information. To better serve the needs of our clients, we have developed a comprehensive submission and renewal process, which includes:

• Pre-renewal meetings 90 to 120 days before the renewal date to understand any changes in the business

• Industry specific supplemental applications to gather more thorough and relevant information

• Open, honest communication with carrier partners that fosters trust and transparency

• Policy reviews and audits to identify potential coverage issues

To request a policy audit, and ensure that the coverage and pricing for your insurance program properly aligns with your industry, contact me at (619) 486-6554 or mgorham@ranchomesa.com.