Aire Serv

This article answers two questions. First: exactly what Aire Serv's franchise agreement requires for insurance and how to satisfy it. Second: what those requirements cover and where they end — for a business that handles refrigerant, gas lines, and equipment installation on every service call.

The franchisor entity in the 2025 Aire Serv franchise agreement is Aire Serv SPV LLC, a Delaware limited liability company. That is the exact legal name your franchise agreement belongs to. That name — and the names of all Neighborly parent and affiliate companies — must appear on your liability policies as additional insureds.

The 2025 franchise agreement currently requires commercial general liability insurance at $1,000,000 per occurrence and $2,000,000 aggregate, including products and completed operations coverage. Auto liability must meet a combined single limit up to $2,000,000 for each vehicle used in the business, covering owned, hired, and non-owned vehicles. Workers' compensation is required regardless of whether your state mandates it, at minimum limits as required by law. Cyber liability must be $500,000 per claim and $500,000 in the aggregate, covering unauthorized data access, network disruptions, and loss of income from system failures.

Your insurance must apply as primary and non-contributory. That means your policy responds first — before any coverage that Aire Serv SPV LLC carries. Your carrier cannot require Neighborly's carrier to share the cost of a claim.

Every required liability policy must include a waiver of subrogation in favor of all additional insureds. Without it, your carrier can sue Aire Serv SPV LLC to recover money they paid on a claim. That defeats the purpose of the additional insured requirement.

Your certificate of insurance names two different parties in two different roles. The named insured is your legal business entity — for example, Smith Heating and Cooling LLC. The additional insured is Aire Serv SPV LLC and all Neighborly parent and affiliate companies. The named insured is the entity the policy covers. The additional insured is the franchisor, who receives protection from your policy for claims arising from your operations.

Your additional insured endorsement must cover both ongoing operations and completed operations. A policy that names the franchisor for ongoing operations but not completed operations is partially compliant. HVAC installation claims surface months or years after the job is done — long after the ongoing operations window closes.

General liability covers third-party bodily injury and property damage arising from your operations and completed work. It does not cover the cost of redoing work that was incorrectly performed — that gap is addressed by contractors errors and omissions insurance.

Refrigerant is not covered under most standard general liability policies. This is the most important gap in a standard HVAC franchise insurance program. It is also the one most franchisees discover at the worst possible time.

The standard commercial general liability policy contains an absolute pollution exclusion. It removes coverage for bodily injury and property damage caused by the release of pollutants. Refrigerants — R-410A, R-22, R-32, and newer alternatives — qualify as pollutants under that exclusion. When a refrigerant release causes a third-party bodily injury claim, the carrier applies the exclusion before reviewing anything else.

This applies to every Aire Serv service call involving refrigerant recovery, recharge, or system repair. A leak during a service visit, a slow leak from a fitting that fails months after installation, or a refrigerant release during equipment removal — any of these can produce a bodily injury claim that your standard general liability policy will not pay.

Carbon monoxide is in the same category. Improper furnace service that allows carbon monoxide to enter a living space creates a bodily injury claim. The carrier will cite the pollution exclusion. Carbon monoxide is a pollutant under the standard policy form.

HVAC franchisees regularly subcontract specialty work — sheet metal fabrication, controls wiring, refrigerant recovery. Each subcontractor carries their own certificate on their own renewal schedule. None of them will tell you when it lapses.

The standard general liability policy your franchise agreement requires is necessary. It is also not designed to cover the chemical exposure your technicians create on every service call. Contractors pollution liability fills that gap. Your franchise disclosure document does not require it. That does not mean your operation does not need it.

Gas line work creates a completed operations exposure that does not exist in standard repair and maintenance calls. When Aire Serv franchisees connect gas lines to furnaces, water heaters, or equipment during installation, they create a liability that can surface months or years after the job is finished.

The claim pattern for gas line failures follows a consistent sequence. A small leak develops — sometimes immediately, sometimes over months. It goes undetected until a gas smell is noticed or an appliance malfunctions. When ignition follows, the resulting bodily injury and property damage claims are significant. Completed operations coverage on your general liability policy is the protection mechanism for this scenario — as long as the right policy is in place and the pollution exclusion has not removed coverage for the gas release itself.

Bodily injury and property damage claims from HVAC completed operations failures — improper unit mounting, refrigerant system failures, gas line defects — average $150,000 to $200,000 in documented claim costs. Defense costs for a completed operations liability suit average $150,000 before the case resolves in either direction. A $1,000,000 per occurrence limit can be consumed by defense costs alone on a claim that settles for $50,000.

When your franchise agreement was written, the goal was to protect Aire Serv SPV LLC's system. Gas line liability is a real exposure in HVAC installation work. Your occurrence form general liability policy covers bodily injury and property damage from completed operations. The pollution exclusion removes the chemical and gas-release scenarios that produce the largest claims in this trade.

The answer depends on what caused the fire and when.

General liability covers damage your completed work causes to third-party property. If a furnace you installed causes a house fire — and the cause is a defect in the installation, not a manufacturer's equipment failure — that is a completed operations claim. Your occurrence form general liability policy covers it, provided the fire did not arise from a pollutant release such as a gas leak.

Occurrence form is critical here. An occurrence form policy covers claims arising from work performed during the policy period — regardless of when the claim is reported. A furnace installed in spring 2025 that causes a fire in fall 2027 is still covered by the 2025 policy. The work happened during the active period. Aire Serv's franchise agreement requires occurrence form for exactly this reason — the completed operations tail for HVAC installation can run three to five years.

What general liability does not cover is the cost of fixing an installation that was incorrectly performed. If a fire resulted from an improper electrical connection or undersized gas line, the policy covers the fire damage to the property. It does not cover the cost of replacing the incorrectly installed unit or redoing the connection. That is the contractors errors and omissions gap — coverage for professional judgment errors that the general liability policy explicitly excludes.

Your franchise agreement requires both the ongoing operations additional insured endorsement and the completed operations additional insured endorsement for Aire Serv SPV LLC and all Neighborly entities. A policy with one but not the other leaves the franchisor unprotected for the claims most likely to surface — failures that appear months or years after installation is complete.

Attic and crawlspace access is standard for HVAC work — ductwork inspection, air handler service, insulation clearance. It is also where incidental property damage claims originate most frequently.

Your general liability policy covers damage to third-party property caused by your operations. If your technician steps through a finished ceiling while accessing attic ductwork — and the ceiling is adjacent property, not the specific ductwork being serviced — that is a covered property damage claim. The damage is to adjacent property, not to the work itself.

The coverage question becomes more complicated when the damage is to the work area itself. The standard policy form excludes property damage to the specific part of real property your crew is actively working on when the damage occurs. A technician who cracks a ceiling panel while replacing an air handler in that same attic space may find the exclusion applies — the panel is part of the property being actively worked in.

The practical result: most attic and crawlspace property damage claims are covered because they involve damage to clearly adjacent property. The ones that go to dispute are the ones where the damaged property is directly within the active work area. Document your pre-job conditions before every attic or crawlspace access. Photograph the condition of the space before work begins. The claim that gets disputed is almost always the one where the pre-condition is unknown.

Understanding your insurance cost starts with understanding how each component is rated. Both your general liability and your workers' compensation premiums are calculated against your actual business activity — not a flat annual figure. The rate applied to that activity depends on your trade classification and your state.

General liability

General liability for HVAC franchises is rated on revenue per $1,000. Your carrier takes your total annual revenue, divides it by 1,000, and multiplies by the rate filed for the NAICS 238220 classification — Plumbing, Heating, and Air-Conditioning Contractors — in your state.

That filed rate is specific to your state. Each state's department of insurance reviews and approves carrier rate filings independently. The same NAICS 238220 classification carries a different rate in Texas than in New York or California. As your revenue grows, your general liability premium adjusts at renewal based on an audit of your actual revenue.

At year end, your carrier audits your actual revenue. If it exceeded the estimate used to set your policy, you receive an audit bill for additional premium. If it came in lower, you may receive a credit.

Subcontractor expenses in your general liability audit

How your carrier treats subcontractor payments in the annual audit is one of the most financially significant details in your policy — and the one most franchisees do not know about until the audit bill arrives.

Subcontractor expenses paid to vendors who carry their own general liability insurance and can produce a current certificate of insurance are rated at a reduced rate. Expenses paid to subcontractors without a current certificate of insurance are included in your premium base at the full rate. In some carrier filings, uninsured subcontractor expenses are rated at two to four times the insured rate.

For an HVAC franchise paying $60,000 annually to specialty subcontractors, the difference between insured and uninsured treatment in the audit can exceed what you paid for the general liability policy itself.

Workers' compensation

Workers' compensation is rated on payroll — not revenue. Your carrier applies a rate per $100 of payroll based on the classification code assigned to your employees by the National Council on Compensation Insurance, based on the work they perform.

For HVAC technicians, the primary classification is NCCI 5537 — Heating, Cooling and Refrigeration. That code should appear on your workers' compensation declarations page. If a different code is listed, ask your agent to confirm it accurately reflects what your technicians actually do — including any gas line connections or controls wiring.

The formula: your payroll divided by 100, multiplied by your state's rate for NCCI 5537, multiplied by your experience modification factor, equals your base workers' compensation premium.

Workers' compensation rates vary more by state than any other coverage line. In Florida, the NCCI 5537 rate is approximately $2.995 per $100 of payroll. In Illinois, the rate for the same classification reaches $10.91 per $100 of payroll. An HVAC franchise with $500,000 in technician payroll pays dramatically different workers' compensation premium in those two states — for the same work, the same number of technicians, and the same coverage.

If you operate in California: California uses a dual wage classification system for HVAC contractors. Employees earning above the current hourly wage threshold are assigned the high wage classification. Employees earning below it are assigned the low wage classification — which carries a higher rate. The lower the wage, the higher the rate. The current Plumbing and HVAC threshold in California is $32.00 per hour, with a proposed threshold of $35.00 per hour pending WCIRB finalization. Confirm the current threshold with your agent and track which of your technicians fall into each category.

Your experience modification starts at 1.0 for a new operation. It adjusts annually based on your actual claims history compared to similar operations. One significant injury claim can raise your modification for three renewal cycles. A clean loss history produces a modification below 1.0 — which reduces your total workers' compensation premium.

What the Aire Serv FDD says

The 2025 Aire Serv franchise disclosure document Item 7 lists insurance costs at $3,000 to $6,000 at the initial investment stage. The FDD note clarifies that workers' compensation costs are additional and vary by location. That $3,000 to $6,000 reflects pre-opening insurance costs. It does not represent the ongoing annual cost of a fully staffed HVAC operation with a real fleet, workers' compensation for multiple technicians, and trade-specific coverages including contractors pollution liability.

Your workers' compensation carrier audits your actual payroll at year end. The auditor reviews both your W-2 payroll and your 1099 payments to independent contractors and subcontractors. If a subcontractor cannot produce a valid certificate of insurance showing their own workers' compensation coverage, your carrier treats their payroll as your payroll and charges premium at your NCCI 5537 rate.

A certificate that was current when you hired the subcontractor and has since lapsed produces the same audit result as no certificate at all. The audit date is what matters. Collect certificates before work starts. Verify they are current — not expired — at the time of audit. Maintain certificate records throughout the year.

The five variables that determine your actual number

Your state determines both your general liability filed rate and your workers' compensation rate per $100 of payroll — and the difference between states for HVAC work is significant.

Your revenue or payroll determines the base that each rate is applied against. Growth during the year means your audit premium will exceed your mid-year estimate.

Your fleet determines your commercial auto premium. Each vehicle adds cost based on vehicle type, age, and the driving records of everyone who operates it.

Your claims history drives your experience modification. One significant claim affects your workers' compensation renewal cost for three years.

Your subcontractor use and documentation determines whether subcontractor expenses are rated at the insured or uninsured rate in both your general liability and workers' compensation audits.

No published estimate accounts for all five variables. Your actual premium is built from your specifics — not an industry average.

These coverages are not required by your Aire Serv franchise agreement. Experienced operators carry them because HVAC work creates exposures the standard coverage stack was not designed to address.

Contractors pollution liability covers bodily injury and property damage caused by pollutant releases from your operations. Refrigerant, carbon monoxide, and natural gas are all explicitly excluded from the standard general liability policy. This coverage fills that gap. For an HVAC franchise doing refrigerant recovery, gas line connections, and furnace service, it addresses the most common serious bodily injury scenario in the trade. An improper refrigerant recovery that affects a building occupant, or a carbon monoxide exposure from a furnace improperly vented — both land in the pollution exclusion gap without this coverage. Coverage starts at approximately $2,500 per year for $1,000,000 in coverage.

Contractors errors and omissions insurance covers claims arising from professional judgment errors and faulty workmanship that the general liability policy explicitly excludes. The standard general liability policy does not pay to redo work that was incorrectly performed. If you size a unit incorrectly for a home and the customer runs it for two summers without the house ever reaching temperature, the claim for equipment replacement and the professional negligence allegation fall in the errors and omissions gap. One experienced HVAC operator described the distinction this way: the general liability policy is for when your work causes damage to something else. The errors and omissions policy is for when your professional judgment was wrong.

Tools and equipment coverage — also called inland marine — covers your HVAC field equipment when it is in your vehicles, at job sites, or in transit. Refrigerant recovery machines, manifold gauge sets, diagnostic tools, and service equipment travel with your technicians every day. Standard commercial property coverage applies to equipment at a fixed business address. It does not cover the $35,000 in field equipment that leaves the shop with your first van every morning.