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Pool routes and pool businesses change hands regularly, whether an owner is retiring, consolidating, or moving on to something new. Most of the attention in those transactions goes to price, customer count, equipment, and the transition of accounts. Insurance tends to come up at the very end, if it comes up at all.
That is a mistake for both sides of the deal. The work you performed before the sale can still produce claims after it, and the coverage you had will not automatically follow you or transfer to the buyer. Here is what sellers and buyers should sort out before closing.
This is the point most sellers never consider. If you built, repaired, or serviced pools, the work you completed can lead to a claim years later. An equipment installation that fails, a plumbing repair that leaks, an electrical connection that causes an injury, a drain cover that was not properly secured. The claim can arrive long after you have sold the business and moved on.
Here is why that matters. Most general liability policies are written on an occurrence basis, meaning the policy that responds is the one in force when the injury or damage occurs, not when the work was done. If you sell the business, cancel your policy, and a pool you built years earlier causes an injury next spring, there may be no policy of yours in force to respond. Your old policies covered occurrences during their policy periods, and the new occurrence happened after you stopped buying coverage.
Your buyer’s policy usually will not cover it either, because it covers the buyer’s operations, not work you performed before the buyer owned anything.
Discontinued operations coverage. Some carriers offer coverage designed specifically for businesses that have stopped operating, protecting against claims from completed work after operations end. Availability, terms, and duration vary.
Keeping an entity and policy in place. Depending on how the sale is structured, some sellers maintain a policy for a period after the sale to address residual exposure.
Clean contractual allocation. The purchase agreement should state clearly who is responsible for claims arising from work performed before closing, and what indemnification applies. That language should be reviewed by an attorney, and your broker should see it.
Professional or errors and omissions considerations, where applicable, which are often written on a claims-made basis and may require an extended reporting period, sometimes called tail coverage, to respond to claims reported after the policy ends.
Whether the buyer purchases the assets of the business or the entity itself has major consequences for liability. In an asset purchase, the seller’s entity and its historical liabilities often stay with the seller. In a purchase of the company, the buyer may be acquiring its history along with its customers. This is legal territory, and both parties should have counsel, but it directly shapes the insurance planning on each side.
Buyers have their own set of loose ends.
Insurance generally does not transfer with a sale. You need your own coverage in place from the moment you take over operations, including general liability, commercial auto for the trucks, workers’ compensation for any employees, and coverage for tools and equipment. Do not assume a day or two without coverage is harmless. Routes run every day.
Ask for the claims history. A seller’s loss runs tell you a great deal about the quality of the work, the condition of the customer base, and the exposures you may be inheriting.
Understand the customers you are taking on. Commercial pools at apartments, hotels, and HOAs carry different exposures than residential routes, including the drain safety requirements commercial facilities face.
Review the customer contracts. Service agreements may contain indemnification or insurance requirements that you will now be expected to meet.
Confirm licensing. Contractor licenses and similar credentials do not automatically transfer to a new owner. If your work requires licensing, confirm your own status with the appropriate authority before you perform it.
Workers’ compensation for transferred employees. If employees move over with the business, make sure your own workers’ compensation policy is in place before their first day working for you.
Before closing, both sides should know:
Who is responsible for claims from work completed before the sale.
What coverage the seller will maintain afterward, and for how long.
That the buyer’s policies are bound and effective on the transition date.
How vehicles, equipment, and employees are moving and that each is covered.
That the purchase agreement’s insurance and indemnification terms have been reviewed by both an attorney and a broker.
Selling a pool business is often the culmination of years of hard work, and a claim from old work should not be the thing that follows you into retirement. Buying one should not mean inheriting someone else’s problems. If you are planning a sale or purchase and want help sorting out the insurance side, the California Pool Association is here to help members get it right. Reach out anytime.
This article is for general informational purposes and does not constitute legal advice. Business sales involve legal, tax, and insurance considerations specific to each transaction. Consult an attorney and your insurance broker before closing.