American Home Shield 2015 Annual Report Download - page 34

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prevent violations of these or other laws and regulations from occurring. Even if we are able to comply with all such laws and
regulations and obtain all necessary registrations and licenses, the pesticides or other products we apply or use, or the manner in which
we apply or use them, could be alleged to cause injury to the environment, to people or to animals, or such products could be banned
in certain circumstances. The laws and regulations may also apply to third-party vendors who are hired to repair or remediate property
and who may fail to comply with environmental laws, health and safety laws and regulations and subject us to risk of legal exposure.
The costs of compliance, non-compliance, investigation, remediation, combating reputational harm or defending civil or criminal
proceedings, products liability, personal injury or other lawsuits could have a material adverse impact on our reputation, business,
financial position, results of operations and cash flows.
International, federal, state, provincial and local agencies regulate the disposal, handling and storage of waste, discharges
from our facilities and the investigation and clean-up of contaminated sites. We could incur significant costs, including investigation
and clean-up costs, fines, penalties and civil or criminal sanctions and claims by third parties for property damage and personal injury,
as a result of violations of, or liabilities under, these laws and regulations. In addition, potentially significant expenditures could be
required to comply with environmental, health and safety laws and regulations, including requirements that may be adopted or
imposed in the future.
In March 2015, we were informed that the United States Department of Justice (the “DOJ”) initiated a criminal
investigation into allegations that a local Terminix branch used methyl bromide as a fumigant at a resort in St. John, U.S. Virgin
Islands, resulting in serious injuries to four members of a family vacationing there. The U.S. Virgin Islands government is also
investigating the matter, as is the EPA. The EPA also requested information concerning the possible distribution, sale or use of
methyl bromide in Puerto Rico. During the year ended December 31, 2015, we recorded in our consolidated statement of
operations and comprehensive income (loss) a charge of $3 million in connection with civil claims related to the U.S. Virgin
Islands matter, an amount equal to our insurance deductible under our general liability insurance program, although no
assurance can be given regarding our insurance coverage or recoveries in connection with such civil claims.
We continue to cooperate fully with all relevant governmental authorities in their investigations and have had
discussions with the DOJ concerning potential resolution of the criminal investigation. Although we have recorded in our
consolidated statement of operations and comprehensive income (loss) a charge of $8 million as a result of those discussions,
the amount and extent of any further potential penalties, fines, sanctions, costs and damages that the federal or other
governmental authorities may yet impose, investigation or other costs and reputational harm, as well as the impact of any civil,
criminal or other claims or judicial, administrative or regulatory proceedings resulting from or related to the U.S. Virgin Islands
incident, which could be material, is not currently known or reasonably estimable, and any such penalties, fines, sanctions, costs
or damages may not be covered under our general liability insurance program.
On September 15, 2015, a lawsuit was filed in the Circuit Court of the 15th Judicial Circuit in and for Palm Beach
County, Florida, styled Carl Robert McCaughey, et al. v. Terminix International Company Limited Partnership, Sunland Pest
Control Services, Inc., et al. (Case No. 32080796). The lawsuit alleges that fumigation of a Florida family’s residence by
Sunland Pest Control Services, Inc. (“Sunland”), a subcontractor of Terminix, resulted in serious injuries to one of the family’s
children, alleges claims for negligence and strict liability, and seeks an unspecified amount of monetary and punitive damages.
The court has set a trial date in September 2016. The DOJ and other federal and state agencies are investigating the matter, and
the DOJ has filed criminal charges against Sunland and two persons associated with Sunland. We continue to cooperate fully
with all relevant governmental authorities. The amount and extent of any potential penalties, fines, sanctions, costs and damages
that the federal or other governmental authorities may impose, investigation or other costs and reputational harm, as well as the
impact of any civil, criminal or other claims or judicial, administrative or regulatory proceedings resulting from or related to this
incident, which could be material, is not currently known or reasonably estimable, and any such penalties, fines, sanctions, costs
or damages may not be covered under our general liability insurance program.
Public perceptions that the products we use and the services we deliver are not environmentally friendly or safe may adversely
impact the demand for our services.
In providing our services, we use, among other things, pesticides and other chemicals. Public perception that the products we
use and the services we deliver are not environmentally friendly or safe or are harmful to humans or animals, whether justified or not,
or our improper application of these chemicals, could reduce demand for our services, increase regulation or government restrictions
or actions, result in fines or penalties, impair our reputation, involve us in litigation, damage our brand names and otherwise have a
material adverse impact on our business, financial position, results of operations and cash flows.
Laws and government regulations applicable to our businesses and lawsuits, enforcement actions and other claims by third parties
or governmental authorities could increase our legal and regulatory expenses, and impact our business, financial position, results
of operations and cash flows.
Our businesses are subject to significant international, federal, state, provincial and local laws and regulations. These laws
and regulations include laws relating to consumer protection, wage and hour requirements, franchising, the employment of
immigrants, labor relations, permitting and licensing, building code requirements, workers’ safety, the environment, insurance and
home warranties, employee benefits, marketing (including, without limitation, telemarketing) and advertising, the application and use
of pesticides and other chemicals. In particular, we anticipate that various international, federal, state, provincial and local governing
bodies may propose additional legislation and regulation that may be detrimental to our business or may substantially increase our
32 2015 Annual Report