Contractors

HVAC and Mechanical

HVAC and mechanical contractors face significant environmental exposures. Improper design, installation, maintenance, and repair of systems can promote the growth of biological contaminants, like mold and legionella, or distribute contaminants from inside or outside the building, contributing to unhealthy indoor air quality and impacting building occupants. Various chemicals, sealants, and cleaners are used on HVAC systems that can emit fumes or gases that could be hazardous to third parties. Storage, transportation, and disposal of these materials create additional environmental liability. HVAC and mechanical contractors may also be involved in some or all of the system design, or they may modify design specs, which creates exposure to professional liability exposure.

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Environmental Exposures May Include:

Mold Growth Resulting from System Failures
Legionella Bacteria Development in Water Systems
Sick Building Syndrome and Indoor Air Quality
Hazardous Release of Refrigerant Chemicals
Risks of Disturbing Asbestos, Lead, and Mold
Fumes and Spills from Maintenance Materials
Chemical Spill and Storage Hazards
Waste Disposal Liability
Professional Liability from Design Services
Design Modifications
Subcontractor Selection and Supervision Risk

Mold Growth Resulting from System Failures

Improper design, installation, maintenance, balancing, and testing of HVAC systems can allow excessive moisture to overflow, leak, condense, or pool, resulting in mold growth. Mold can disperse through the system into other building areas or be absorbed by insulation and other building materials. Mold can lead to claims of severe bodily injury or significant remediation costs.

Legionella Bacteria Development in Water Systems

Legionella is a bacterium that causes a form of potentially fatal pneumonia. It thrives in large central air-conditioning systems, cooling towers, and other locations associated with the HVAC system, where bacteria can accumulate in warm, stagnant, pooled, or infrequently drained water. Errors in design/assembly, failure to eliminate water collection areas, poorly maintained ductwork, and inadequate sanitizing of parts and surfaces can support growth. Exposure of third parties to legionella-contaminated mists or vapors can result in severe health issues like Legionnaires’ disease.

Sick Building Syndrome and Indoor Air Quality

Sick Building Syndrome occurs when unhealthy indoor air quality causes building inhabitants to suffer health problems while in a building. It is often attributed to poor design, maintenance, filtration, or ventilation in a building’s HVAC system. Exposures contributing to unhealthy indoor air include biological contaminants such as bacteria and mold inside or outside the building that enter the HVAC system, including chemical or gaseous pollutants, volatile organic compounds, or carbon monoxide.

Hazardous Release of Refrigerant Chemicals

Air conditioning system refrigerators include ammonia, hydrofluorocarbons (HFCs), or chlorofluorocarbons (CFCs). Improper repair, installation, or maintenance of systems can result in a hazardous release of these chemicals. Exposure to third parties may result in serious health effects or even death.

Risks of Disturbing Asbestos, Lead, and Mold

Installation or repair work can disturb existing asbestos, lead-based paint, or mold. Asbestos can be found in areas such as ceiling tiles, insulation, and around wiring. Mold-contaminated materials can be disturbed where water intrusion has occurred. Improper identification and inadvertent disturbance of these materials may cause a hazardous release, leading to third-party bodily injury claims and remedial and disposal liabilities.

Fumes and Spills from Maintenance Materials

Materials used during the construction, repair, and maintenance of systems may include chemicals, sealants, coatings, coil cleaners, surfactants, degreasers, deodorizers, and antimicrobials which can release hazardous and irritating fumes to occupants during application, curing, or drying. Improper application, chemical residuals, and failure to properly ventilate the area or shut down the HVAC system could result in third-party liability. Spills on the jobsite or discharging these materials down drains or into storm sewer systems can create additional environmental liability.

Chemical Spill and Storage Hazards

Spills and leaks of chemicals, solvents, and cleaners at the storage location during transportation or loading and unloading may cause third-party and cleanup liability. Combinations of incompatible chemicals can react violently or produce toxic byproducts/gases when stored together or mixed. Some products are flammable and may result in a fire that spreads and releases other contained materials and produces hazardous vapors.

Waste Disposal Liability

Contractors are responsible for determining if their wastes, such as spent solvents or refrigerants from air conditioning units, are subject to hazardous waste disposal requirements. Improper disposal can lead to environmental tort liability and cleanup costs.

Professional Liability from Design Services

Companies may provide in-house design services that can result in professional liability. This may include performing all the design work, performing some work relative to an aspect of the HVAC system, or providing professional opinions on design aspects. Design exposures can include equipment selection, drains’ slope, location of outdoor air intakes and exhaust, ventilation controls, and moisture controls.

Design Modifications

Contractors may make modifications to design specs while at the jobsite. Malfunctions arising from these changes create a direct professional responsibility for the contractor.

Subcontractor Selection and Supervision Risk

Proper selection and supervision of subcontractors can be professional exposure for the contractor responsible. Contractors may be required to defend themselves against claims relating to work for which they were responsible due to the hiring of the sub.

Contractors Pollution Liability Can Provide Coverage For

Contracting operations completed “by or on behalf of” the insured

Contracting operations performed at a jobsite

Third-party claims for bodily injury and property damage

Third-party claims for cleanup

First-party emergency response cost

Mold, legionella, bacteria, fungi, lead, asbestos, and more

Sudden and accidental coverage for owned/leased locations

First and third-party transportation pollution liability

Loading and unloading

Professional liability

Mitigation/rectification

Excess/contingent design

Defense of third-party claims

Non-owned disposal site liability

Claims Scenarios & Examples

Fifteen students and teachers suffered physical injuries when a faulty HVAC system circulated carbon monoxide and fireproofing chemicals in their school over an extended period. Although some only experienced temporary respiratory illnesses, at least one student will likely require a lung transplant and have a shortened life expectancy from their injuries. Settlement damages totaled several million dollars and were paid by the school district, HVAC system designer, and installer.
A contractor performed routine maintenance on a bank’s rooftop-mounted HVAC system. When yellow jacket bees swarmed near his work, he sprayed an insecticide, which flowed into the HVAC system. A bank teller, who had asthma, had an allergic reaction to the insecticide and had to be hospitalized for one week.
A mechanical contractor improperly installed an HVAC system in an assisted living facility, resulting in mold growth in some residences. The facility had to relocate several patients during mold repair and renovation. Property damage and cleanup cost claims were filed.
An HVAC contractor improperly balanced an existing HVAC system. Because of this, the system caused people to complain about allergies and respiratory problems. The building owner filed a lawsuit against the HVAC contractor, noting that they had yet to receive complaints before the contractor balanced the system. The HVAC contractor was found liable for the resulting indoor air quality issues.
Tenants began complaining about mold in bathrooms within a few years of constructing an apartment community. These complaints came from multiple buildings and units within the complex. An extensive investigation found that construction defects with the HVAC systems and showers caused severe water intrusion and build-up of moisture, leading to widespread mold growth. Damages for the property owner included loss of rent, cleanup costs, and settlements with injured tenants, totaling over $2 million.
An HVAC contractor installed an HVAC system in a new office building. Within weeks of opening, occupants were overcome by the effects of sick-building syndrome. The structure was closed, and the contractor was one of many parties sued. During discovery, it was determined that the HVAC system was installed exactly as the specs described. However, the contractor had to absorb over $250,000 in uncovered defense costs because they had no environmental coverage; therefore, they had no coverage for defense costs.
A project owner hired a contractor to do a constructability review and a value engineering analysis for the construction of a school. The contractor looked everything over and noticed that the HVAC system was undersized. Although the contractor recommended changes, the project owner rejected them due to the higher costs. Because the HVAC system was undersized, extra moisture caused mold to grow. The contractor was held partially responsible for not properly warning of the consequences.
An HVAC contractor installed a new tank and furnace at a residential property. A few weeks later, the homeowner contacted the contractor because of a sudden strong fuel oil odor. The contractor inspected the residence, found a small pool of heating fuel on the concrete floor, and noted that the fuel had caused some of the contents to be wet. It was also noticed that the leak was because of a cracked fitting over-tightened during the installation.
While renovating a 25-story office building, an HVAC contractor installed a new ventilation system. Two years after the renovation was finished, an electrical fire broke out in the building’s basement. As the fire burned, PCBs and dioxins spread throughout the building through the ventilation shafts. The ventilation shaft openings were found too close to transformer equipment, so the contractor was liable for a large portion of the cleanup costs, which totaled more than $40 million.
A school district hired a local HVAC contractor to clean the school’s air ducts while it was closed for the summer. The contractor found mold in the ductwork and applied biocide to treat it. A week before school started, the teachers came back to school. One of the teachers with asthma and chemical sensitivities claimed that the biocide caused an allergic reaction and respiratory problems preventing her from returning to school at the start of the year. She further alleged that because of the exposure, she would never again be able to work as a school teacher and sought significant future lost earnings and benefits.
When a new HVAC unit was installed at an office, the ducts were improperly sealed, allowing condensation to build up. This resulted in the growth of legionella in the system. Several office employees became ill from the legionella and brought suit against the property owner and the contractor.
An HVAC system was installed in a new commercial office building. Three years later, mold and mildew were found along with bacteria. The HVAC contractor was held responsible; bodily injury and property damage claims surpassed $500,000.

Final Consideration

As a contractor you can be faced with the cost to defend yourself against allegations or legal action from pollution or professional related events, regardless if you are at fault or not. Having the proper insurance coverage in place will help fund the expenses incurred to investigate or defend against a claim or suit and provide you with claims handling expertise.

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This environmental risk overview offers a general understanding of potential risks and may not reflect all risks associated with your business. Environmental Risk Professionals has compiled this overview for informational purposes only. This overview does not constitute legal opinion or advice, nor does it establish a consultant-client relationship. This overview is not intended to guide project parties in interpreting specific contracts or resolving disputes; such decisions may require consultation with counsel and depend on various factors. © 2025 Environmental Risk Professionals, LLC