How General Liability and Property Damage Claims Are Handled for HVAC Jobs

When HVAC work goes wrong — a ruptured refrigerant line floods a ceiling, a furnace install causes a fire, or a rooftop unit falls and damages a neighboring property — general liability (GL) and property damage claims can threaten both client relationships and a contractor’s financial stability. This article explains, step-by-step, how claims are handled for HVAC jobs in the United States, what contractors should document, how insurers respond, and what the likely cost and premium implications are in major markets like Los Angeles, Houston, and Miami.

Quick definitions (what we mean by terms)

• Commercial General Liability (CGL): Covers third‑party bodily injury and property damage arising from business operations (usually written as $1M per occurrence / $2M aggregate).
• Property damage claim: A claim alleging physical damage to a third party’s property (home, commercial building, car).
• First‑party property: The insured contractor’s own tools/equipment — typically covered under a separate inland marine or tools policy, not CGL.

How a typical GL / property damage claim unfolds (step-by-step)

1. Immediate notification

   • The customer notifies the contractor or files a claim directly with the customer’s insurer.
   • Contractors must notify their insurer promptly per policy terms.

2. Initial triage by insurer

   • The insurer assigns a claims adjuster and opens a claim file.
   • The adjuster assesses whether the claim falls within CGL coverage (occurrence, bodily injury, property damage).

3. Evidence collection

   • Photos, work orders, signed change orders, invoices, employee statements, and subcontractor info are gathered.
   • Contractors should preserve all physical evidence and refrain from unnecessary admission of fault.

4. Investigation & proof of causation

   • Adjuster verifies timeline, causation, and whether an excluded peril is involved (e.g., professional services, pollution).
   • For complex losses the insurer may hire engineers or HVAC specialists.

5. Liability determination

   • Insurer accepts, denies, or reserves rights (accepts responsibility for some aspects but denies others).

6. Damage estimate and settlement

   • If covered, insurer negotiates settlement with the claimant or pays for repairs/replacement up to policy limits.
   • If defense is required (the claim becomes a lawsuit), the insurer typically provides counsel under a duty-to-defend clause.

7. Subrogation

   • If another party is at fault (defective part manufacturer), the insurer may pursue recovery after paying the claim.

What HVAC contractors must document (evidence that matters)

• Signed contracts and scope-of-work with clear exclusions.
• Permits and inspection records.
• Pre- and post‑work photos (wide-angle and detail shots).
• Work orders, change orders, and RFIs.
• Employee & subcontractor timecards and qualifications.
• Maintenance & handoff instructions provided to the client.

Common CGL exclusions HVAC contractors must watch

• Professional services errors (design, load calculations) — may require a Professional Liability/Errors & Omissions policy.
• Pollution (refrigerant releases) — often excluded or limited unless endorsed.
• Damage to work performed — “your work” exclusions can bar coverage for faulty workmanship unless the damage extends to other property.

See more on typical exclusions in: CGL Exclusions HVAC Contractors Must Know: Pollution, Professional Services and More.

Cost impacts: what a paid claim does to your business

• Paid claims can increase renewal premiums for multiple years.
• Large claims that exhaust limits may expose the contractor’s assets to lawsuits.
• Insurer may add higher premiums, restrict underwriting, or nonrenew.

For guidance on defending claims, review: How to Defend a CGL Claim: Steps HVAC Contractors Should Take When Sued.

Typical premium ranges and example carriers (U.S. market)

Annual CGL premium ranges for HVAC contractors vary by revenue, payroll, claims history, and location. Typical market ranges for a $1M/$2M CGL policy:

• These figures are illustrative ranges based on typical small-to-mid-size HVAC contractors. Actual quotes depend on payroll, revenue, job mix, claims history, and contract requirements. (Sources: Next Insurance, Hiscox, The Hartford, Insureon.)

Regional pricing examples — city-specific considerations

Insurance premiums vary by jurisdiction due to local litigation environment, repair costs, and weather-related risks.

• Los Angeles, CA: Higher litigation and construction costs — typical annual CGL for a small HVAC firm: $700–$1,800.
• Houston, TX: Hurricane/roof exposure and high claim frequency in the region — typical range: $600–$1,500.
• Miami, FL: Coastal exposure, elevated property values, and hurricane risk push premiums — typical range: $800–$2,000.

These ranges are consistent with national carrier pricing differentials and marketplace data (see Insureon averages and provider rate pages above).

How claims are defended — insurer’s role vs. contractor’s role

• Insurer provides defense counsel if the claim triggers a duty to defend; the insurer controls defense strategy but must act in good faith.
• Contractor must cooperate with investigation, provide documents and access, and avoid independent settlements without insurer consent (most policies require consent).
• Reservation of rights letters may be issued where coverage is unclear — contractors should seek counsel if this happens.

For deeper risk scenarios and prevention, consult: Top 10 General Liability Claim Scenarios for HVAC Contractors — And How to Prevent Them.

Practical steps HVAC contractors should take right now

• Include clear scope-of-work, hold-harmless clauses where appropriate, and require additional insured endorsements from GC clients.
• Maintain a robust photo and documentation practice for every job.
• Buy adequate CGL limits (many commercial contracts demand $1M/$2M or higher); consider umbrella/excess coverage for larger projects.
• Add pollution and professional liability endorsements where exposure exists.
• Shop the market annually and use marketplaces (like Insureon or Next) to compare quotes from multiple carriers.

Example endorsements and contract tips

• Additional Insured endorsement (CG 20 10 / CG 20 26) — commonly required by GCs and property managers.
• Waiver of Subrogation — be cautious: insurers may charge more or refuse if routinely required.
• Pollution endorsement — add when refrigerant handling poses exposure.

See related guidance on structuring limits: How to Structure General Liability Limits for HVAC Contractors: Choosing 1M/2M vs Higher.

Final checklist after a property damage incident

• Stop work if unsafe, secure the site.
• Photograph everything immediately.
• Notify your insurer in writing (include date/time, client contact, and summary).
• Provide customers with temporary mitigation measures (e.g., tarps, pumps) and document costs.
• Preserve receipts and invoices for mitigation/repairs.
• Avoid statements of fault; let adjuster and counsel manage legal admissions.

Sources

• Next Insurance — General Liability overview: https://www.nextinsurance.com/insurance/general-liability-insurance/
• Insureon — How much does general liability insurance cost?: https://www.insureon.com/general-liability-insurance/cost
• The Hartford — General liability insurance cost guide: https://www.thehartford.com/business-insurance/general-liability/cost

Related reading

• General Liability for HVAC Contractors: What Commercial General Liability (CGL) Actually Covers
• Top 10 General Liability Claim Scenarios for HVAC Contractors — And How to Prevent Them
• How to Defend a CGL Claim: Steps HVAC Contractors Should Take When Sued