Pest control company Terminix International reached a $60 million settlement with the state over illegal business practices that targeted Alabama customers, Attorney General Steve Marshall’s office announced Nov. 5.
The company systematically overcharged customers and failed in many cases to honor its service contracts, often resulting in termite damage to homes and businesses, Marshall said.
A portion of the settlement will be used to establish a statewide fund for people who suffered damage because of Terminix’s actions.
Mobile County District Attorney Ashley Rich received the first public complaints about the company. Rich contacted Marshall’s office, which investigated and found that Terminix was engaged in a pattern of charging customers annual premiums for termite protection treatments that were applied inadequately. Customers did not receive “competent and thorough” annual termite inspections as guaranteed by their contracts, and were paying extra fees for pesticide that had already been applied and for which they had already paid, Marshall said.
When customers suffered damage from termite infestations, the company passed on the costs to other customers, sometimes charging annual renewal rates as high as 1,000 percent more than what they had been.
Terminix did this to try and force customers to cancel their lifetime protection contracts or accept new contracts that offered less benefits than the lifetime plans, according to the attorney general.
The company’s actions violated several provisions of the Alabama Deceptive Trade Practices Act. Marshall’s office confronted the company with its evidence of illegal acts.
Terminix agreed to a settlement with the following terms:
- $25 million for the Alabama Consumer Relief Fund for the payment of refunds to consumers who were overcharged by Terminix, and for consumers who were forced to pay other termite control companies money for services they should have received from Terminix. Per the terms of the agreement and pending court approval, the claims process will be set up in the coming months and the attorney general will announce how consumer claims are to be made.
- $10 million to re-treat over 12,000 customer homes in Mobile, Baldwin and Monroe counties, whether or not those homes suffered termite damage due to Terminix’s failure.
- Refunds to consumers of any unconscionable price increase paid in termite protection premiums in 2019 and 2020.
- $650 to any Alabama consumer who left Terminix and hired another company to provide termite protection, or pay the difference in the former customer’s new termite protection costs and their previous plan.
- New, competent and complete inspections of homes in the areas affected by Formosan termites to ensure no termite infestation problems still exist, and Terminix must repair all termite damage claims in the affected areas.
- $20 million to the attorney general’s office to settle the state’s claims against Terminix and to be reinvested in statewide consumer protection efforts.
- $4 million to the Alabama Department of Agriculture and Industries.
- $1 million charitable contribution to the Auburn University Department of Entomology.
Terminix also agreed to adopt a reasonable and affordable price increase schedule for its annual premiums. Customers who lost their lifetime contracts can have them reinstated at the reasonable price levels they were paying in 2018, Marshall said.
He thanked Rich for acting in the interest of Alabama consumers. Rich said in a statement that she was pleased Marshall acted on her concerns.
“Unfair business practices like those that have been committed by Terminix cannot be tolerated in our community and our state, and it takes an attorney general with many resources to be able to handle litigation of this magnitude,” Rich said.
Marshall thanked Assistant Attorney General Olivia Martin and Assistant Attorney General Dan W. Taliaferro for their efforts, as well as his office’s Consumer Interest Division, which conducted the investigation with the Alabama Department of Agriculture and Industries.