Hints That you Might Have a Subrogation Case

Anytime that the failure of a product causes personal injury or property damage, there is a possibility that an insurance carrier could recoup its expenditures from the manufacturer, installer or servicer.  However, not all product failures result in grounds for subrogation claims.  Sometimes products “wear out” and when they do, it can be due to the expiration of the useful life of the product.  Case in point: water heaters.  Depending on who you talk to, the useful life of a residential water heater can be anywhere between five and ten years.  Then there are those more expensive models that can last between 10 and 15 years.  The life of a product has to be taken into consideration, usually during the investigation phase, so as to make sure that the subrogation case will not be summarily dismissed if the case goes to court.  In the case of fires, both structural and vehicular, where the cause was electrical or mechanical malfunction; the key here is whether the equipment was recently installed or serviced by an outside service company or individual.  In the case of existing equipment, the question of maintenance will arise and become a key piece of information.  If the equipment has been allowed to go unmaintained, then it might be possible for a manufacturer or installer to argue that the operating condition of the equipment was beyond their control and they cannot be held liable.   The same thing applies to situations involving water damage.  Water damage can occur from leaking refrigerators, dishwashers, washing machines, and any other piece of equipment that uses water in the process. 

There are also situations that arise where subrogation is not so obvious.  Assuming that an employer is operating a safe workplace, on the job injuries can be caused by the operation of equipment that is not properly guarded.  OSHA regulations are in effect that prohibit the operation of rotating or moving equipment without proper guarding.  Such equipment includes, conveyors, wire drawing machines, drill presses, milling machines, and stamping machines.  In many instances, rotating equipment is operated with the use of pulleys or flywheels.  These components have to be matched to the rotational speed of the machine.  If the machine is operated at a speed greater than the rated speed of the flywheel, then it is possible for the flywheel to fail.  If the flywheel fails under normal loading and within its expected life, then subrogation is possible.  However, if someone in the plant has increased the rotational speed of operation beyond load limits, then subrogation is most likely not possible.  It should be noted that many smaller pulleys are adjustable and as a consequence, rotational speed can be increased to a dangerous level.  In addition failures from hydraulic hoses can occur where the operator is sprayed with hot oil.  If the hose is routinely replaced as a maintenance item but, fails during its service lifetime, then it can be argued that the hose was defective and likely warrants a subrogation claim against the manufacturer.  Similarly, pressure vessels can EXPLODE and cause property damage and serious injury.  Vessels containing air, water, oil, or any other fluid under PRESSURE must be certified for the service.  If the vessel failed during its expected life, was not over-pressurized, maintained by minimizing corrosion, and inspected on a regular basis; then, subrogation against the manufacturer is a possibility.  However, if the vessel was manufactured in house, by the insured, then any injured employees might have a design defect claim against the employer.               

Boiler Refresher

R.J. Hill just completed a boiler refresher webinar class presented by Clever Brooks .  The presentation was focused on maintenance, while discussing specific tasks that should be done on  daily, weekly, monthly, and yearly time intervals.  Interest in this type of presentation is not for the sake of performing maintenance as much it is on what has to be done to prevent catastrophic failures.  For example maintaining a daily log of recorded temperatures, pressures, and flows is can be indicative of the boiler’s operating condition.  On the other hand, removal of the tube bundle each year and inspecting the tubes, helps determine when tubes and seals have to be replaced.  A boiler that is not properly maintained can become a potentially huge liability for the insurance carrier as well as the owner.  Catastrophic boiler failures can result in expenditures reaching into the hundreds of thousands of dollars if not millions.    

Gas Logs and Soot Damage

This is a subject that I have blogged about in the past.  Gas log sets are very popular with homeowners and tend to create or add to a warm atmosphere when used.  However, soot damage is continuing to occur because manufacturers continue to build log sets that burn natural gas or propane incompletely.  That is, unburned carbon is escaping in the combustion gases and settling on walls, ceilings, furniture, clothing and anything else that happens to present a cool surface.  The science of combustion of gaseous fuels is well known and by no means new technology.  It has long been recognized that a blue flame is indicative of the closest to complete combustion that can be achieved.  The secret is mixing enough air with the fuel to obtain the correct mixture.  When the correct mixture is obtained, a blue flame results.  In contrast, flames with yellow tips or long yellow flames are indicators of incomplete combustion.  These are the flames that produce unburned carbon that ultimately settles on various surfaces as soot.  There is nothing that a homeowner can do to change the burning characteristics of a log set as the appearance is an inherent design.  If the log set is installed in a ventless fireplace, 100% of the products of combustion will enter the living space.  As a result, all of the soot produced will also enter whatever space the set faces.  If the set is installed in a fireplace with a chimney, then it is possible to control the ventilation of the gases by opening the chimney damper and allowing the gases to escape.  Instead of entering the home, soot usually travels up the chimney and settles on the walls and damper instead of the interior.

If you are unlucky enough to have soot damage, I recommend doing the following: first, take plenty of pictures of the places where soot has been deposited.  It is possible that you might be called upon to prove that soot damaged specific belongings.  Second, notify your insurance carrier.  Homeowners policies usually give policyholders a toll-free telephone number to call in the event that a claim has to be filed.  If you can’t find the number, call your insurance agent.  Your agent also has access to the insurance carrier and can report the claim or tell you what to do.  Third, start making a list of the damaged items.  The adjuster that will be assigned to your case will need to have an itemized list of damages so that they can begin to prepare estimates for those things that can be repaired or will have to be replaced.  Fourth, be prepared to have the gas logs set become the center of controversy.  Your carrier will most likely want to have the set examined by an engineer in order to establish a product defect.  The manufacturer also has the right to examine the set.  In doing so, both sides will have questions and will want access to your home and specifically, the area where the set was located.  Both sides will need documentation in the form of the owner’s manual, purchase invoice, and the metal identification plate that comes with the log set and is NOT supposed to be removed.  Fifth, the log set will become evidence and must be preserved as such.  The engineer hired by your carrier will want to take possession of the log set and place it in storage in anticipation of further examination or for use in court, if the need arises.  Sixth, cases can take months if not years to settle.  So, don’t expect to get the log set back anytime soon after it is taken.  Seventh, if you replace the set with another gas log set, remember that the possibility of soot damage returns again.  The only way to minimize the possibility of soot damage is to limit usage times to short periods or stop using the set altogether.

 

“They Can’t Do Anything But Say No”

We’ve al been in situations where we have to ask for something but at the same time, doubting whether we’ll get what we want. And the only way to justify asking is to rationalize the request by thinking that we’ll never get what we want without asking. So, we inevitably conclude that “they can’t do anything but say no”. The same thing happens when people submit claims to their insurance carrier. You have to put your claim in someone else’s hands and wait for them to decide whether you have a valid claim. Usually, it boils down to a settlement between the carrier and insured. However, there are those instances that arise when damage occurs and the insured feels that it should be covered but, it likely is not. A case in point recently arose when an insured driver hit a plastic five gallon container with his car and filed a claim alleging damage to the transmission oil cooler. Upon investigation, it was also learned that the drainage of transmission fluid, which the driver claimed never to have noticed, resulted in the complete destruction of the transmission. For those that are not aware of the location of a transmission oil cooler, it is usually located in the radiator/condenser area, in the front of the vehicle, where air can come in contact. Knowing that the plastic container would have had to enter the air opening in order to contact the cooler, the bumper and grille areas were examined for damage and none was found. In addition, the air opening was much too small to allow even a part of the container to enter and make contact with the cooler. Furthermore, none of the cooling fins or tubes that were part of the cooler were damaged by anything external to the vehicle. Needless to say, the claim was denied much to the disappointment of the insured.

The message here is if you, as the insured, know that there is element of uncertainty in your explanation, then don’t be surprised if your claim is denied. That is not to say that all claims have to have a reasonable explanation. There are times when only an expert can explain the circumstances that are not obvious to a layman. But, when the explanation is bordering on the absurd, it’s time to reconsider your claim. Remember, you can submit your claim because they can’t do anything but say no.

Educating the public…

In the course of conducting forensic engineering investigations over many years, there is one thing that keeps coming up. That is, people will ask me why their carrier would send an engineer to investigate. It immediately became obvious (early in my forensic career) that policy holders were poorly educated about subrogation. Questions like “do they suspect me of doing something wrong?” and “are they trying to get out of paying the claim?” frequently arise. First let me say that we are engaged because of the way we have been educated and trained to think. In short, we are problem solvers which makes us ideal for figuring out how property damage and personal injuries might have occurred. Second and more importantly, engineers are looking for evidence of a defect in a product, regardless of whether that product is mechanical, electrical, or structural. The reason is because most policies have a clause in the contract that allows the insurance carrier to take possession of whatever evidence is available and litigate against a manufacturer in the name of the insured policy holder. The purpose of doing so is to recover whatever damages have been paid to the insured party. In most homeowners as well as auto and business policies, the carrier’s rights are “subrogated” to the insured’s rights meaning that if the carrier accepts a claim and pays for damages, their rights to recovery are behind the insured’s if the insured recovers anything. For example, let’s say that an insured property owner sues another party for damaging his home and the property owner’s carrier pays to have the house fixed. If the property owner sues and is awarded a judgment for a specified amount, his insurance carrier has a right to that judgment amount as stated in the subrogation clause of the insurance contact. However, defective products are not the only things that can trigger subrogation suits. Faulty work can also cause property damage and personal injury. If a mechanic performing an oil change on someone’s vehicle leaves the oil plug loose causing the new oil to drain and subsequently ruin the engine, he and the company he works for can be sued and held liable for the engine damage. Again, suit would be filed in the name of the auto policy holder and if awarded a judgment, the carrier would be entitled to the award if they spent money to have the engine repaired or replaced.

Having said all of the above, these are the reasons that the public needs to be educated on what prompts insurance carriers to engage engineers and why. The public needs to understand that part of the insurance business is holding those responsible for producing the faulty products and services that they sell.

Getting Bad Gas?

We’ve been working on an assignment where two vehicles equipped with diesel engines were allegedly damaged by bad diesel fuel. We were asked to determine if the gas station where the fuel was purchased was acutally selling contaminated diesel fuel. Unfortunately, the vehicles were already repaired and any diesel fuel had already been discarded by the time we began our investigation. We have been able to determine that at the time the purchases were made, the water level in the diesel tank was above the state mandated maximum level of 2 inches. As a result, there was a possibility that a combination of diesel and water could have been pumped into each customer’s vehicle when the purchases were made. Once the purchases were completed, the water level could have dropped enough so that the next customers would not have purchased water contaminated fuel. It is also possible that while the diesel tank monitoring instrumentation measure water depth inside the tank, the diesel might be contaminated with something else. Something that would ignite in a diesel engine but at the same time, could cause damage to the engine – like gasoline. Diesel samples were obtained and sent to a lab for analysis. The result of that analysis revealed that the samples did not contain any water but instead contained traces of gasoline. Specifically, levels of toluene and xylene were higher than normal.

If you find yourself in a similar situation, regardless of having purchased diesel or gasoline, it is imperative that you don’t lose your purchase receipt. Your receipt will become invaluable regardless of whether you paid cash or used a credit card. Next, get your vehicle to a mechanic as soon as possible after you suspect engine trouble. Second, advise you mechanic that if the fuel tank or lines have to be drained, not to discard anything that comes out of the lines or tank. Third, collect all contents in a clean, dry, container and label the container with the cutomer’s name and date that the contents were taken. Also save all parts. If possible, photograph the contents and all parts that have to be replaced. If the engine has to be replaced, photograph the engine and record the engine identification number. The mechanic should be able to assist in obtaining the number if necessary. Fourth, if the fuel appears to be contaminated, advise your insurance carrier and then the station owner where the fuel was purchased. Once the initial notifications have begun, each party should begin it’s investigation. The more information is obtained when the discovery is made, the easier it will be to prove the claim or discredit the fraud.

Beware of Dishonest A/C Dealers

From time to time we have reported on air conditioning companies that are less than honest in their dealings with the public. Recently, we had a case where a homeowner had some wood siding replaced with a masonry exterior. During the installation process, some refrigerant lines were punctured by nails from a nail gun. The refrigerant subsequently leaked from two systems and wasn’t discovered until warm weather arrived and the cooling units were needed. According to the dealer, the compressors in both systems were damaged as a result of the refrigerant leak and subsequently justified the replacement of both split systems. Both systems were replaced at a cost of $12,000. However, upon investigating, the cost of repairing the damage and placing both systems back into operation was found to have been much less than the cost of installing two new split system heat pumps. The cost to repair was estimated at approximately $2000. In short, the insurance carrier for the masonry company was only willing to pay for the cost of repair, not the replacement. Since the homeowner had approved the installation, the homeowner was responsible for the additional cost of the installation above the cost of repair. It is unfortuunate, but, there are dealers out there and when they smell an insurance claim, there prices tend to escalate accordingly. Before, agreeing to any kind of replacement, get several estimates for comparison. That way, if you, the homeowner, have to pay anything out of pocket, you can at least have some warnning rather than a rude awakening.