Water Softening and Conditioning Contracts—What You Need to Know
By Don Cleveland
We always urge insureds and others in the water conditioning and water filtration business to do business through a written agreement. We have been asked repeatedly to provide some model language for use in such agreements. Model language for an agreement is part of this risk management article. It is not for everyone, because multiple exposures are included in the water conditioning and filtration businesses. Over the years, we have identified several areas of liability exposure for these businesses. These areas are as follows:
1. There is an attempt to hold water conditioning and filtration businesses responsible for leaks (after installation) that come from latent defects in plumbing that were in the system prior to the water treatment specialist undertaking new installation or service.
2. Customers fail to undertake proper maintenance of systems once installed and blame the installer or service company for a bad result or failure of the system.
3. Customers sometimes blame the water conditioning or filtration company for failure of the system after changing usage or source of the water supply without conferring with the installer or servicing company.
4. Customers or legal advisors try to shift the blame for failures after the initial installer or service company has lost the account for reasons other than performance (mainly due to price). Failures or issues can result. Putting blame on the previous water conditioning or servicer for failure is an easy out.
5. Leaks can be a big problem. Many times leaks happen as a result of post-installation work done by another contractor, but because it’s water, the conditioner or the servicer gets blamed.
6. Water conditioning and filtration servicers at times rely on outside labs to do water analysis for their customers’ water. The labs might (rarely) provide inaccurate results or conclusions, causing the water treatment, conditioning or servicing company to make adjustments that lead to failures in treatment or system installation. The customer and the lab will blame the conditioning or servicing company for any problem, because it’s an easy way out.
Now, with increasing discovery of major water problems in US water systems, conditioning and filtration companies need to be more on guard and review their promises about how effectively their processes alter or control POU water. What chemicals and bacteria are removed from the water can be a broad promise, which leads to high-demand negligence allegations. While the fundamentals of water conditioning and filtration may remain the same, the tendency for finger-pointing and attempts to pass on liabilities will continue to accelerate.
The Model Service Agreement that accompanies this article is directed at the water treatment, conditioner or servicer/customer relationship, but it is important to remember that the they may have other important relationships on which the conditioner or servicer relies (e.g., contracts with big-box operations, drop-ship contracts for salt and charcoal and even supply-chain and warranty issues, if they manufacture some of their own products). So, it’s crucial for the conditioning and service companies to have written agreements with those firms, as well, assuming the defense and liabilities that arise from inaccurate information, poor quality and performance of materials, and supplier product failures.
Also, make sure you provide these suppliers with the proper information about the systems for which you are asking them to provide products or services. Withholding information or providing false information can be detrimental to both of you. Some general guidance includes:
1. Take pictures of the job site(s) before and after.
2. Make sure you conduct an inspection of the plumbing and structures that you will use to support your installation or system and write up any observations of problem areas and inform the customer.
3. Keep all your records for at least 10 years or until the statute of limitations has tolled, especially service reports and special analysis reports. This is important in the event of any claim.
4. Make sure in your service reports you define everything that you observed, even if it is outside the direct area of your conditioning or filtration service.
This Draft Model Agreement is only a starting point and is a simple sample contract; it may well be the subject of negotiation between you and your customer. It is ultimately up to you and your legal advisors to determine the contractual relationship with your customers and what works best for you. Remember, however, that a written service agreement defining what you are providing and the responsibilities of the client is always the best way to protect you from liability. Your conditioning or service contract should always be the first thing you offer when you are ready to take the first payment.
About the author
Don Cleveland is part owner and President of WaterColor Management and has held that position since 2012. He served as the reinsurance consultant to the company starting in 2006. Cleveland helped change the status of the operation from an offshore captive and positioned the agency and book of business with an A.M. Best A-rated US-based carrier. He has been active in the insurance and risk-management business since 1980 and during that time served for a period of nine years as the Director of Risk Management for the largest public construction authority in the US.
About the company
WaterColor Management was originally organized in 1986 as a response to the insurance industry reaction to the Love Canal, NY and Bhopal, India tragedies. Any operation treating water was seen by the industry as dangerous, even if it only used salt as a chemical to treat water. As a result, a group of water treatment business owners and the prior owner of the WaterColor agency decided to form an offshore insurance company to cover the exposures of water treatment businesses. In 2010, the insurance operations were moved to a US-based insurance company and have remained that way ever since. WaterColor Management is licensed to do business in all states of the continental United States and its headquarters are located in Decatur, Alabama. www.watercolormanagement.com