[Termite Control] Avoiding the ‘Chlordane Mentality’

In my years of handling pest control claims, I’ve seen different trends with the type of claims that are reported by our insureds. Going back to the early 1990s, most of the claims surrounded termite treatment/contract damage exposures. In the aftermath of chlordane being removed from the market (and the treatments that were being made soon after), we saw more homes being infested with termites turning into property damage claims. I became involved in the industry after chlordane, so I still did not handle that many situations for our insureds in which there were barrier breaches from termites into the structure using that product. This included Formosan termites, which started to become a serious issue for the pest management professional.

CHLORDANE: A LOOK BACK. When I first started in pest control in 1991, many of my "teachers" at that time told me the wonders of using chlordane. It was cheap to use and if you did a good treatment very few problems occurred.

When a claim did occur on a chlordane-treated structure, one thing that occurred to me, especially thinking back now, was the issue of annual inspections. As I call it, the "chlordane mentality" of the insured during that time was that the product was so good that annual inspections were more of a duty than a responsibility. The way the industry performed annual inspections back then pales in comparison to what was learned throughout the late 1990s and the 2000s. (More on that later.)

Now I am not here to talk about the products used after chlordane. There are plenty of studies from across the country to demonstrate the efficacy of those products. What I have noticed is that many of the products used during that time are no longer on the market. Enough said.

THE GOOD NEWS. Being a "glass half full" person, the best thing that came out of termite treatments in the ’90s was the way the industry had to learn about documentation and the way it performed annual inspections. With the increased amount of callbacks, claims and complaints by customers to regulators, pest professionals had to wise up and change the way they did business. They had to change from the chlordane mentality they were so used to and basically get ready for the 21st century.

In educational seminars across the country, we (the LIPCA Insurance staff), stressed the importance of documentation and decisions by the PMP on whether certain customers needed to be renewed or not. Year after year we saw vast improvements not only with documentation and customer relations but also with the products used, including baits and non-repellents. The latter is what is important to remember here. Since we handle our claims in-house, we have good information to track claims and, again, trends of causation. Across the board, claims are down. I can’t speak about all insurers, but our loss ratios across the country are the best we have ever had. WDIRs and termite treatment claims are still the vast majority of what is reported but, again, the loss numbers are way down.

A TROUBLING TREND. With that good news one trend that we have noticed the last two years or so surrounds the issue of annual inspections on termite treatment contracts. As previously stated, the products that were introduced and have been in use since around 2000 have been a life-saver for the pest professional who does termite work. I hear about the reduction of termite callbacks, complaints by customers and, of course, the reduction of claims.

The problems we are seeing are that some PMPs are going back to depending too much on the product and not performing good annual inspections. Also, some customers that should not be renewed (due to their structure having conducive conditions) are allowed to stay under contract. I hear PMPs say, "The product is too good and I thought it would take care of any infestations." The renewal inspection notices or forms are not being completed thoroughly and lawyers are using the incomplete information against the insured.

This is a trend that needs to be reversed and quality control measures and training sessions are the perfect remedies.

It is important to remember as a pest control company owner to:

1. Follow up by doing quality control re-inspections on structures recently inspected by technicians. Was the original treatment up to label or state specifications?
2. Review and make sure the graphs are up to date. We are a firm believer that a copy of the graph should be with the inspector on every annual renewal inspection. New landscaping and additions are the key issues here.
3. Are the renewal forms you use adequate? Is there enough or too little information on the document that is sufficient for the way you want to inform your customer?
4. Does the current contract need to be updated? Did you do a pretreatment in the ’90s and is it time to retreat and issue an updated contract? Is the old contract vague on damages? What about an arbitration clause? Is there chemical sensitivity wording?
5. Do you have a threshold or a limit of what is acceptable as far as renewing a contract due to conducive conditions, alterations to the structure or other reasons? Did you warn the customer about potential problems leading to termite infestations and they refuse to make corrections year after year? Courts now hold a hard line against the PMP for renewing contracts and accepting renewal payments but are not allowing a defense stating they are not responsible for damages due to conducive conditions.

FINAL THOUGHTS. These are just some of the questions and issues you need to ask yourself when dealing with annual inspections. Again, the industry has come very far in the way it documents its files and overall quality control. What the pest professional has learned in the last decade, I truly believe, is the most detailed and concise in the history of the industry. Put these procedures into your company training sessions and you will be helping yourself when a problem occurs. Please do not fall back to annually inspecting by using "chlordane mentality" methods.

The author is executive vice president and chief operating officer or LIPCA Insurance and can be contacted a amcginty@giemedia.com.