Arbitration Award Termite Damage in Historic Home
Arbitration Award Termite Damage in Historic Home
M and M ("Claimants")
-vs-
Terminix International Co., LP, Terminix International, Inc. and Jeffrey Wills ("Respondents")
AWARD OF ARBITRATOR
INTRODUCTION
I, RM, THE UNDERSIGNED ARBITRATOR, having been designated by agreement of the parties, and having
been duly sworn, and having duly heard the proofs and allegations of the Parties, each represented by counsel, at an
evidentiary hearing held on December 5-7, 2022 (held in Hoover, Alabama) do hereby, AWARD, as follows:
Present at each day of the hearing were the Claimants, along with their counsel, Chris Cochran, Kris Rivers and
Allie Nichols. Respondents, Terminix International Company, LP and Terminix International, Inc. (collectively
"Terminix"), were present, by and through their corporate representative, Jeff Curtis, who is the National Director
for Termite Damage Claims at Terminix, along with their counsel, Haley Cox, Amaobi Enyinnia and Ami Vague. …
Numerous witnesses (both lay and expert) testified, and volumes of exhibits from both sides were admitted into
evidence. A court reporter was not present for any day of the evidentiary hearing.
The evidentiary hearing was conducted in accordance with the Consumer Arbitration Rules of the American
Arbitration Association ("AAA"), even though the case was not administered by the AAA. The evidentiary hearing
took place over three days and ended on December 7, 2022. However, the hearing was held open until 12:00 p.m.
Central Time on January 4, 2023, to allow, by agreement of the Parties, written closing arguments and proposed
awards if the Parties wished to submit same. The evidentiary hearing was declared closed on January 4, 2023, at
12:01 p.m.
Claimants have made claims for fraud; negligence, including negligent training and supervision; breach of contract;
and claims sounding in equity. Claimants seek [a recovery], including compensatory damages, such as cost of repair
and mental anguish, as well as attorney fees, equitable relief, and punitive damages. Respondents obviously dispute
that amount but do agree that they are responsible for the cost of repair, which is calculated by their expert at
$76,449. Claimants agree with Respondents' expert's estimate, so the cost of repair is not in dispute. However,
Claimants assert that they have also incurred incidental and consequential damages as set out herein.
The undersigned finds that Respondents breached their contract with Claimants, intentionally and recklessly
misrepresented material facts to Claimants and suppressed material facts from Claimants. Furthermore, Respondents'
conduct is part of a pattern and practice of fraudulent conduct perpetrated upon Alabama citizens statewide .
See Consent Judgment & Settlement Agreement, State of Ala. v. The Terminix Int'l Co., L.P., et al., No. 20-901368
(Cir. Ct. Montgomery County, Ala. Nov. 4, 2020) ($60 million dollar settlement entered with Alabama Attorney
General Steve Marshall for some of the same conduct in this matter) (hereinafter referred to as "Consent Judgment").
Despite Respondents' assertions to the contrary, Respondents have not limited their misconduct to only Mobile
and Baldwin counties. Respondents are also guilty of the same or similar misconduct in other parts of the state
as well, including the Auburn, Northport, Huntsville and Birmingham areas.
THE CLAIMANTS AND THEIR HOME
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Claimant M and Claimant M own a very nice and well-kept home together. Their home is located [] in
Birmingham, Alabama. Claimants purchased their home in 1997 and have lived there for more than 25 years.
Claimants testified at length about how much they love their home and their neighborhood.
The Claimants decided to purchase a termite contract from Respondents in 2002. The 2002 contract was a bait
contract that did not include a repair guarantee. In 2006, Claimants entered into a repair and retreat contract with
Respondents, which was better for Claimants because it covered any repairs that were necessary due to termite
infestation. It is the 2006 contract that is at issue in this case. However, neither side has been able to locate a
signed copy of the 2006 contract and neither of the Claimants recall signing a contract.
Respondents agreed to provide protection of the home via a complete chemical barrier and, if termites invaded
their home, Respondents would pay the cost to repair the home and retreat the affected areas. The Claimants
renewed their 2006 termite contract each year by paying a renewal fee. However, termite damage was found in
the home in March or April 2017. No live termites were ever found in the home.
Unbeknownst to Claimants, Respondents never provided an initial post construction compliant treatment that met
Alabama Department of Agriculture ("ADAI") regulations. This left gaps in the liquid barrier for termites to
eventually get into the home. Evidence was also submitted showing that Respondents used substantially less than
the necessary chemicals to treat Claimants' home.
When a home is initially treated, a graph of the home is done by the Respondents' inspector which details the termite
treatment. Respondents' inspectors did a graph of the home in 2002 with the bait contract and another graph in 2006
with the repair and retreat contract. Respondents' graphs of the home show that both the 2002 and 2006 treatments
were substandard and neither listed any previous termite damage to the home. Yet, Respondents failed to provide
either of these graphs to annual inspectors who could have seen from the graphs that the treatment was inadequate and
tried to correct the problem. Therefore, each annual reinspection that was done was inadequate.
When the termite damage was found in the dining room area of the home, Claimants notified Respondents of their
claim. Birmingham branch manager Jeffrey Wills came to Claimants' home to observe the damage. He found no live
termites and, according to Claimants, told them that the damage was due to water intrusion. At no time did Mr. Wills
or anyone else at Terminix inspect the remainder of the home for termite damage. Mr. Wills offered Claimants some
money for the repair of their home. According to Claimants, he only offered $1,200 to repair the baseboard.
Claimants then contacted Campbell Law to help determine whether the damage was due to water or termites.
Claimants then contacted the ADAI, which sent an inspector to investigate. The inspector confirmed that there was
termite damage. Claimants, on numerous occasions, asked for a copy of their contract but were never provided a
copy. Further, as set out above, it is undisputed that neither side has been able to produce a signed contract.
Respondents claim that any termite damage found in the home is old termite damage that did not occur during the
time when Respondents were responsible for treating the home. Claimants submitted Respondents' training video
into evidence. It explained that the initial graph of a home, which is prepared by the Respondents' inspector,
should make sure all termite damage is recorded on the graph. The video further noted that the graph was
necessary for any future damage claims. However, the graphs which were done by Respondents' inspectors in
2002 and again in 2006 do not show any termite damage to the home. Therefore, any termite damage must
have occurred when Respondent was responsible for treating the home.
The graphs of the home show a 117 trench and treat only treatment when it is undisputed that a 117A treatment
was necessary to prevent any gaps in the liquid barrier. Furthermore, Jesse Hare, Consumer Protection Specialist
Supervisor from the ADAI, testified that a 117A treatment was necessary to protect the home as there were gaps
left in the continuous barrier treatment due to inferior treatment mechanics.
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ESTIMATES TO REPAIR DAMAGE
Respondents' expert, Phil Wilbourne, set out in his report that the cost of repair is $76,449. Claimants agree with that
estimate but further assert they are entitled to additional incidental and consequential damages such as moving
expenses and expenses for other lodging while the repairs take place. Respondents dispute that Claimants will have
to move out during the repairs. Claimants assert that the incidental and consequential damages total $34,778. The
incidental and consequential damages include $16,497.40 for an apartment, $2,400 for storage, $4,700 for movers as
well as $7,568 for out-of-pocket termite repair already paid to the contractor.
BREACH OF CONTRACT
"The elements of a breach-of-contract claim under Alabama law are (1) a valid contract binding the parties; (2) the
plaintiffs' performance under the contract; (3) the defendant's nonperformance; and (4) resulting damages." Dupree
v. Peoples South Bank, 308 So. 3d 484, 490 (Ala. 2020) (citations & quotation marks omitted).
Claimants testified that they did not recall executing the 2006 Contract and neither side has produced a copy of the signed
contract. Therefore, the undersigned finds, under Alabama law, there is an implied contract. See generally JENELLE
MIMS MARSH, ALABAMA LAW OF DAMAGES § 17:2 (6th ed.) ("In an implied-in-fact contract, some or all the
terms of the contract are inferred from the conduct of the parties and the circumstances of the case.").
Claimants performed their end of that contract when they purchased the termite protection in 2006 and paid the
renewal amounts each year. Respondents clearly breached the contract by failing to timely and adequately repair the
Claimants' home. Respondents also breached the contract by failing to provide adequate protection for their home in
the initial treatments, failing to perform adequate inspections each year up to and including 2017 and further by
failing to provide additional chemicals to ensure the termite barrier remained active (Respondents even concede that
the 2006 treatment was not label compliant). It is clear to the undersigned that had Respondents done a liquid barrier
compliant post construction treatment on the house initially in 2006, adequately performed the annual inspections,
and added additional chemicals as needed, Claimants most likely would not have had termites.
LIMITATION OF DAMAGES
Respondents urge the undersigned to enforce contractual language regarding limitation of liability as follows:
Both sides agree that the above language regarding punitive damages is void as against public policy under Alabama
law. Consequently, such damages are allowed to be awarded in this matter if the evidence so supports. However, it
is not against the public policy of Alabama to disclaim liability for incidental or consequential damages. See Sears
Termite & Pest Control, Inc.. v. Robinson, 883 So. 2d 153, 155-58 (Ala. 2003) (finding that provision in contract for
termite services was not unconscionable simply because it precluded liability for consequential damages such as
mental anguish); see also Stewart v. Bradley, 15 So. 3d 533 (Ala. 2008) (enforcing contract provision that precluded
liability for consequential damages and mental anguish or distress).
Nevertheless, the undersigned declines the invitation of Respondents to enforce the limitation of liability provision
in this matter because there is no evidence that Claimants ever agreed to such provision. If either side was able to
produce a copy of a contract containing this language that was signed by either or both Claimants, it would be an
entirely different matter.
FRAUD
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"The elements of fraudulent misrepresentation are: (1) [a] false representation (2) of a material existing fact (3)
relied upon by the plaintiff (4) who 'was damaged as a proximate result of the misrepresentation." Jones v. The Villa
at Lake Martin, LLC, 256 So. 3d 119, 123 (Ala. Civ. App. 2018) (internal citations & quotation marks omitted)
(quoting Alabama Psychiatric Servs., P.C. v. 412 S. Ct. St., LLC, 81 So. 3d 1239, 1247 (Ala. 2011)).
The elements of fraudulent suppression are: (1) the defendant had a duty to disclose an existing
material fact; (2) the defendant concealed or suppressed that material fact; (3) the defendant's
suppression induced the plaintiff to act or refrain from acting; and (4) the plaintiff suffered actual
damage as a proximate result. ... . . [A]n action for suppression will lie only if the defendant actually
knows the fact alleged to be suppressed.
Alabama Psychiatric Servs., 81 So. 3d at 1247 (internal citations & quotation marks omitted). Fraudulent
suppression may be found when a party provides only half the truth, thereby suppressing material facts. See CNH
America, LLC v. Ligon Capital, LLC, 160 So. 3d 1195, 1202 (Ala. 2013) (explaining that "'once a party' elects to
speak, he or she assumes a duty not to suppress or conceal those facts that materially qualify the facts already
stated') (citation omitted).
The undersigned finds that intentional and reckless material misrepresentations were made to Claimants upon
which they detrimentally relied. Claimants were informed that their house would be protected from termites
via an application of chemicals that Respondents knew was not compliant with ADAI regulations. Claimants
were also informed that their home would be adequately inspected each year and retreated as necessary when
Respondents knew that was not true.
In addition, each year on a continuing basis, Respondents solicited and received more money from the Claimants
based on the representation that there were no conditions conducive to termite infestations present at the home.
Respondents' employees and former employees admitted that an incomplete barrier and an inactive barrier were
conditions conducive to a termite infestation. Respondents chose to withhold the initial graphs of the Claimants'
home from their annual inspectors. The graphs would have shown to each inspector on every annual re-inspection
that the initial treatment was incomplete. Because Respondents' inspectors did not make the determination on an
annual basis as to whether the previous treatment had worn off and become inactive, Respondents represented to the
Claimants that there were no conditions conducive to termite infestations without regard to the truth or falsity of the
statement. These misrepresentations proximately caused damage to Claimants.
The undersigned also finds that Respondents suppressed material facts from Claimants, which also proximately
caused damage to them. Respondents had a duty to disclose numerous facts to Claimants, including but not limited
to the following: The fact that the treatment provided to their home was inadequate and not in compliance with
applicable regulations, that the annual re-inspections were not adequately performed, that there were conducive
conditions at their home, and that Respondents would not apply chemicals as needed each year. Respondents'
fraudulent suppression of these facts caused damage to the Claimants as set out below.
MENTAL ANGUISH
Homeowners are entitled to mental anguish damages in relation to their home if such damages are proven. See, e.g.,
Orkin Exterminating Co., Inc. v. Donavan, 519 So. 2d 1330, 1333-34 (Ala. 1988) (affirming an award of mental
anguish damages where termite damage was involved). In Orkin, the court explained that a "breach of a contract for
termite protection, which affects the habitability of a house, can reasonably be foreseen to affect the solicitude and
well-being of the occupants." 519 So. 2d at 1333. If a breach "necessarily impinges on this solicitude and well -
being," mental anguish damages are appropriate. Id. at 1333.
Here, the Claimants provided substantial evidence of mental anguish. For example, Claimants were informed by their
contractor that their dining room was not safe to use as it was essentially "free floating." There was also testimony that
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one of the Claimants had cried several times about the situation and was also extremely upset because he felt like he
had been "cheated and duped" by Respondents.
Claimants also testified about the fear that they may have to walk away from their home and neighborhood due to
the termite damage. Both Claimants testified at length about their love for their home and their neighborhood.
Claimant M[] described living on their street as being in a family without the family drama.
One of the Claimants now has to wear a heart monitor due to stress, which he believes is caused in part by the
situation regarding termite damage to their home (although no Doctor has connected the use of the heart monitor to
the situation at their home).
PUNITIVE DAMAGES
Punitive damages "ought to sting in order to deter" but not be "large enough to destroy." See Green Oil Co. v.
Hornsby, 539 So. 2d 218, 222 (Ala. 1989) (quoting Ridout's-Brown Service, Inc v. Holloway, 397 So. 2d 125, 127-
28 (Ala. 1981)). In cases such as this one, punitive damages are a needed benefit for society. They should deter
Respondents from repeating their actions and harming other homeowners:
The terms "punitive," "exemplary," and "vindictive," as applied to damages, are used to describe
those damages over and above such sums as will compensate the person for his or her actual loss,
the imposition of which the law permits in proper cases at the discretion of the jury. These are not
awarded because the party injured is entitled to them as a matter of right, but as a punishment to the
wrongdoer and to deter the wrongdoer and others in the same situation from such wrongdoing in the
future. Exemplary damages are imposed on the theory of punishment for the general benefit of
society and as a restraint on the transgressor.
JENELLE MIMS MARSH, ALABAMA LAW OF DAMAGES § 4:1 (6th ed.). Punitive damages are "a well-settled
form of relief under Alabama law when there is a willful and malicious wrong." Id. In general, Alabama law does
not allow punitive damages to exceed three times the compensatory damages or $500,000, whichever is greater. See
ALA. CODE § 6-11-21(a).
Alabama law has long recognized an extraordinary remedy for those whose home was damaged by the fraudulent
acts of a termite company. See, e.g., Orkin Exterminating Co. v. Jeter, 832 So. 2d 25, 40 (Ala. 2001) ("Because we
consider the harm to Mrs. Jeter severe in this case, both because the Orkin defendants caused damage to her most
valuable asset—her home—and because Mrs. Jeter was financially vulnerable and elderly, and the Orkin
defendants' reprehensibility therefore high, we conclude that a higher ratio of punitive damages to compensatory
damages is justified."). In this matter, like the defendant in Jeter, Respondents caused severe damage to Claimants'
most valuable asset — their home.
Respondents knew that Claimants' home did not initially receive a post construction compliant treatment under
ADAI regulations in 2002 or 2006. Respondents' own records contained the 2002 and 2006 initial graphs of the
home, which showed the treatments received in 2002 and 2006 were substandard, leaving gaps in the liquid barrier
for termites to get into the home. Evidence was also submitted that Respondents used substantially less than the
necessary amount of chemicals on Claimants' home and that other treatment mechanics were missing.
Respondents also failed to adequately perform annual inspections, which are required by ADAI regulations before
accepting payment for a renewal of the existing contract each year. The evidence also shows that the graphs could
have and should have been given to inspectors for each annual reinspection, but such graphs were not made
available to them. The significance of this is that the graphs would show any annual inspector that the initial
treatment was not done correctly, and the annual inspector could then treat the home as necessary to prevent termite
infestation. There has been evidence submitted showing that Respondents' inspectors were routinely assigned too
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many inspections per day for them to be done thoroughly and correctly. Lastly, there was evidence submitted that
Respondents had promised their customers they would do an annual inspection and replace worn off termite
barriers, but they had a corporate policy that prohibited the branches from replacing such barriers.
Regarding the Consent Judgment and Settlement Agreement entered between Attorney General Steve
Marshall and Respondents, it has no application in this matter according to Respondents. Respondents'
position is that while there may have been some wrongdoing on the part of Respondents in Mobile and
Baldwin Counties as set out in the Consent Judgment, there is no such similar misconduct in Alabama
outside of those counties. The undersigned disagrees with such assertion.
First, there was evidence submitted in the form of testimony of former Regional Director for Respondents in the
state of Alabama, admitting that, throughout the 2000s, the same time that Terminix performed the incomplete and
noncompliant treatment 117-only at the Claimants' home, Terminix had a pattern and practice of applying these
incomplete 117-only treatments statewide:
Q. Is it fair to say, Mr. Henson, as far as the treatments that Terminix was doing in the 2000s, the
initial treatments, that the typical practice on doing initial treatments was to go out and do unit
operation number 117 only when doing the initial treatments?
A. Yes.
Q. And that practice from what you were able to observe and learn as a branch manager and then as
a regional manager was consistent throughout the 2000s and beyond; is that correct?
A. Correct.
Q. . . . Treating the exterior perimeter wall with just trenching and treating that's unit operation
number 117; correct?
A. Correct.
Q. Treating under attached slabs that touch that foundation, that requires doing unit operation 117A;
correct?
A. Correct.
Q. If all they did in 2004 and again in 2007 was treat around the exterior perimeter without treating under
the slabs, that would be what's known in your trade as a spot treatment; correct?
A. I would call it an OFW, outside foundation wall, is what I would call it.
Q. Okay. That's less than either a conventional post-construction treatment or an exterior perimeter
limited interior treatment as described on Termidor and Premise labels; correct?
A. Correct.
Q. And so since it's less than one of those two full treatments, that is a form of a spot treatment;
correct?
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A. Could be determined that way, yes.
Q. And are you aware that under the Alabama regulations that were in place during the entire time
you've worked at Terminix that the regulations specified at Section 80-10-9.20(a) that a spot
treatment is not intended for whole house prevention?
A. Correct.
Testimony of Terry Henson, Morrison v. Terminix, June 4, 2019, pp. 688-689; 743-745.
Second, the Consent Judgment, along with the ADAI orders regarding the same or similar conduct at the
Auburn/Northport branch (Exhibit 44) and the Huntsville branch (Exhibit 45), shows a pattern and practice of deceptive
and misleading conduct throughout the state of Alabama, not just in Mobile and Baldwin counties. The Consent
Judgment sets out that Respondents failed to do the following:
1. Perform initial termite control treatment in compliance with ADAI regulations and then misrepresented or
failed to disclose same to customers.
2. Perform annual inspections as required by ADAI regulations and then misrepresented or failed to disclose
same to customers.
3. Perform its contractual obligation to provide no cost retreatments as necessary and then misrepresented or
failed to disclose the necessity or benefit to customers.
4. Handle termite claims in a timely manner and in compliance with Terminix's contractual obligations.
See Consent Judgment & Settlement Agreement at 4-5, State of Ala. v. The Terminix Int'l Co., L.P., et al., No. 20-
901368.
The above four failures listed also occurred with regard to Claimants' home in Birmingham, Alabama.
Here, there was evidence submitted that proper treatment reduces the likelihood of termite infestation. Yet, there was
also evidence submitted of a routine practice that Respondents' initial treatments were below the mandatory
minimum standards. Further, the evidence showed that Respondents failed to have a procedure in place to keep their
contractual commitment to inspect annually and apply additional treatment as necessary, including when they knew
the chemical had worn off. Respondents' pattern of willful and egregious conduct warrants the punitive damages
awarded in this matter.
Regarding any argument that Respondents have already been punished adequately for the same conduct alleged by
Claimants, the undersigned does not agree. See Consent Judgment & Settlement Agreement, State of Ala. v. The
Terminix Int'l Co., L.P., et al., No. 20-901368. There has been no evidence showing that Respondents have been
adequately punished for the same or similar conduct as contemplated by the Hammond/Green Oil factors. See Green
Oil Co. v. Hornsby, 539 So. 2d 218, 222 (Ala. 1989); Hammond v. City of Gadsden, 493 So. 2d 1374, 1378-79 (Ala.
1986). Moreover, a large part of the Consent Judgment has to do with an exorbitant 2019 price increase, which is not
present in the instant matter. Respondents have also argued in this case that there should be no evidence allowed
regarding Respondents' practices in Mobile and Baldwin counties because such practices are different than the
Respondents' practices in other parts of the state. Therefore, it should follow that if there was any punishment for
Respondents' conduct, it was for Respondents' actions in Mobile and Baldwin counties and not for other parts of the
state. In sum, there is not adequate evidence to prevent the imposition of punitive damages in this matter.
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The pattern and practice evidence set out herein shows the pervasive and egregious conduct, which should be
addressed by Respondents statewide. Respondents' own documents kept in each customer file detailing whether
each customer has received termite treatment in compliance with ADAI regulations. Respondents' corporate
representative, Jeff Curtis, admitted that Respondents have not gone back and reviewed each file for all
Alabama customers residing outside of Mobile and Baldwin counties to ensure that each customer received
proper treatment. (However, there has been evidence showing that such was done for customers in Mobile and
Baldwin counties as required by the Consent Judgment). Although this award does not require Respondents to do
so, good business practices dictate that it should be done. Reviewing customer files statewide would be a fair
response to ensure that customers' most valuable assets, their homes, are adequately protected.
To be clear, Respondents should immediately implement a policy to review the graphs and other relevant portions of
documentation for each customer who resides outside of Mobile and Baldwin counties to ensure that their homes were
properly treated. For those homes that were not properly treated, Respondents should treat each home free of charge so
that the overall treatment becomes compliant with ADAI regulations. If Respondents do not do so, then such inaction
should be considered by other arbitrators or courts when deciding whether to award punitive damages and more
specifically, an increased amount of punitive damages, in similar cases against Respondents.
Even if the pattern and practice of Respondents' egregious conduct was not considered by the undersigned, the
conduct of Respondents regarding Claimants, alone, warrants the punitive damages awarded in this matter.
Claimants are entitled to damages, including mental anguish, as set out below because of Respondents' breach of
contract and fraud. All other claims such as claims for negligence and claims for equitable relief are hereby denied.
Specifically, Claimants' request for an award of attorneys' fees is denied. Pursuant to the "American Rule" applied
in Alabama, the Parties will each bear their own attorneys' fees. See Ex parte Ala. State Bd. of Ethic., 810 So. 2d
773, 775 (Ala. 2001).
Claimants are entitled to cost of repair as well as some of the incidental and consequential damages sought but not
all, as well as interest. Therefore, Claimants are awarded [] each in mental anguish, for a total award of [] in
compensatory damages. Due to the egregious conduct set out herein, Claimants are also awarded $[] in punitive
damages, which is much less than a three times multiplier generally allowed under Alabama law.
There are no administrative fees due to the American Arbitration. Association (AAA) since the AAA did not administer
the arbitration. The Arbitrator's fee shall be borne by Respondent in the same amount as if the arbitration was
administered by the AAA under the Consumer Rules….
This Award is in full settlement of all claims submitted to this Arbitration. All claims not expressly granted herein are
hereby denied.