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.               

Leaking LG Refrigerator

LG is the manufacturer of a French door refrigerator equipped with a bottom drawer that leaks water.  We recently investigated a case where the homeowner purchased an expensive LG refrigerator and used it for approximately three months before noticing water dripping and accumulating under the right front corner of the unit.  The model number of the unit is LFXC22526D/01.  Upon researching, you find that LG would like you to believe that the water leakage is due to a clogged defrost line.  However, with a refrigerator as new as this was, there should not have been any problems.  Moreover, the refrigerator was clearly under warranty and LG and the Lowes Home Improvement store where the unit was purchased should have addressed the situation promptly.  Instead, the homeowner had to battle both the manufacturer and Lowes for over a month before finally getting Lowes to agree to an exchange.  The refrigerator in question is shown in the photographs below.  It should be noted that the homeowner’s insurance carrier will replace the kitchen floor and is likely to pursue subrogation against the manufacturer in order to recover its costs for the repairs.

Defective LG Refrigerator

Area of Water Leakage and Damage to Floor

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.

Vortens Toilet Tanks

Last year, we announced that Vortens was having problems with their toilet tanks and as a result, home and business owners were experiencing cracking and subsequent water damage. Recently we heard from two owners who had encountered the defective tanks. A photo of a cracked tank is shown below. The fact that we heard from two owners confirms that defective tanks are still in use and consumers want to know what to do. If your property is insured, contact your carrier as soon as possible, take pictures of all damage including the failed tank pieces. If you start cleaning up, do not discard anything. It is especially important to save all of the pieces of the tank; your carrier’s adjuster or investigator will want to take possession of all evidence. Be sure to make notes of all phone calls, meetings, and happenings that take place in regard to repairing your property. The notes will come in handy if you have to go to court and testify against the manufacturer. On the other hand if you are not insured, you can try to file a claim with the manufacturer directly. If that doesn’t work, you can try and find an attorney who will take your case on a contingency fee basis. That is, the attorney will work on your case and will be paid only if you collect anything. Typically, attorneys working on a contingency fee basis will take 33% of what ever is awarded.

Cracked Vortens Toilet Tank

More Recalls?

Whatever happened to the days when recalls were something you never heard about? remember when cars and appliances were built to last and not hurt anyone or anything? Remember when a manufacturer was disgraced if they built a bad product? Those days are long gone and have been for a long time. Those of us that grew up in the 50s and 60s can remember those times. But, those born in the late 60s and afterward do not know a time when american products and quality have NOT been in question. Recalls are part of life. Just take a look at NHTSA’s website or the website of the Consumer Products Safety Commission. Both are filled with problems that plague products, manufacturers, and  consumers. So what’s the answer? The answer is that we have known what the answer is for a long time. A lot of lessons were learned about quality during the 1970s. We know how to build good products. But, building good products doesn’t put people to work. Selling products puts people to work and keeps them working. Building good products keeps them in use for long periods of time. So, if something lasts, sales will be lower than if the product lifetime is shorter. Shorter lifetimes equates to a demand for more products. More products means faster production rates. Faster production means poor quality. Poor quality means more recalls. A vicious cycle?