Hail Damage Causing Billions In Claims

HAIL DAMAGE CAUSING BILLIONS IN CLAIMS

 

According to Verisk Analytics, hail has caused more than 4.5 million claims between 2008 and 2012 resulting in $32.1 billion of insured losses.  Analysis by Xactware determined that 36 percent of all property claims nationally involved roof repairs, which accounted for 24 percent of all property claim costs between 2008 and 2012.  The company performed a risk analysis and determined that if severe thunderstorm losses continue at the current rate, the cost of doing business could become unsustainable.  Further, according to the National Insurance Crime Bureau (NICB) the number of questionable hail damage claims rose 136% between 2006 and 2009.  According to an article published on 5/2/2014 in the Claims Journal, “The Emerging Hail Risk:  What the Hail Is Going On?” recent reports indicate hail damage claims have doubled over the past few years.

The cause of this significant increase includes the fact that there have been significant hail events in large metropolitan areas.  However, there is an abnormally high percentage that are being disputed. In Texas alone literally hundreds of lawsuits are being filed each week in Dallas, Tarrant, Potter, Hidalgo and other counties.  These lawsuits allege underpayment of hail related roof damage claims. 

There are some red flags to hail damage claims that may be exacerbated or fraudulent.  Firstly, claims that are submitted late, months or years after the reported hail event may be deemed suspicious.  The insured may be absent from the claims process, leaving only a contractor or public adjuster involved.  Roof damages that are not leaking and damage that is not visible to the naked eye is another issue.  And, then there are the pesky claims of damages involving lost granules which have exposed the asphalt which may now cause deterioration and can be a nuisance.  Similarly the claims of minor dings in metal roofs that may now collect water, etc., causing rusting over time and leaks, are a similar pattern.

Strategies recommended by Steven Badger with Zelle Hofmann Voelbel & Mason LLP, include:

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  •  Finally he recommends that “insurers can also decide to step up and start fighting the worse abusers, not only in the claims process itself, but also in the shady underworld of referral fees, inflated invoices, kickbacks and outright fraud”.Engaging qualified engineers with real experience in identifying hail damage;
  • Refusing to negotiate claims with contractors and other individuals acting as unlicensed public
    adjusters;
  • Holding the insured to its policy burdens (establishing physical loss or damage and
    establishing a date of loss within the insurer’s policy period);
  • Refusing to accept inflated Xactimate estimates but instead require read bids from real
    contractors;
  • Refusing to pay “10+10” overhead and profit when general contractors are not reasonable necessary and their costs not incurred (there is no “TDI
    Bulletin” or “three trade rule” dictating otherwise);
  • Closely monitor appraisals to avoid the inevitable manipulation of the process and race to the
    courthouse for a favorable umpire appointment; and steer clear of the predictable traps.

Contact your local Investigative Engineers Association member to assist with investigation and reporting on these types of claims.

 

 

Toyota Recalls 6.4 Million Cars Worldwide

Toyota Recalls 6.4 Million Cars Worldwide

 

Toyota, the world’s biggest auto company, announced five recalls early in April, 2014, affecting a total of 6.39 million vehicles globally. There are five serious defects, however, no injuries or crashes have been reported. 

The recalls cover 27 Toyota (TM) models -- including Camry, Corolla, Matrix and Highlander -- the Pontiac Vibe and the Subaru Trezia. Some of the vehicles were made as early as 2004. The recall involves a spiral cable that if damaged can cause the airbag to fail in the event of a crash.

This is Toyotas second major global recall of 2014.  First in February, Toyota recalled 2.1 million Prius, RAV4, Tacoma and Lexus vehicles due to a software problem that could cause the cars to stop suddenly.

Additionally, earlier this year, Toyota agreed to pay a $1.2 billion dollar fine to settle a criminal probe into its conduct during the recall involving unintended acceleration of more than 10 million cars four years ago. The repairs and lost sales cost $2 billion before legal settlements.

Toyota plans to inspect and, if necessary, replace parts including seat rails, steering column brackets, engine starters, windshield wiper motors and air bag cables for the recent April 2014 recall. The announcement affects around 2 million vehicles in North America, which may be experiencing problems with an air bag cable and seat rails.

 Source: http://money.cnn.com/2014/04/09/autos/toyota-recall/

General Motors Fined While Federal Judge Could Force GM To Park All Vehicles Involved In "Switchgate" Recall

GENERAL MOTORS FINED WHILE feDERAL JUDGE COULD FORCE GM TO PARK ALL Vehicles INVOLVED IN "SWITCHGATE" RECALL

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There are numerous lawsuits popping up against General Motors due to a recall fiasco which has been dubbed “Switchgate”. Faulty Chevrolet, Pontiac, and Saturn ignition switches have been linked to at least 31 accidents and 12 deaths, according to ABC News. The problematic switch has prompted the recall of 2.6 million small cars.

According to the New York Times, General Motors has been fined $28,000 for its failure to cooperate in the National Highway Safety Administration's "Switchgate" investigation. Federal safety investigators are fining General Motors $7,000 per day for failing to respond to more than one-third of their requests for information about a faulty ignition switch.

On April 3rd it was reported by Bloomberg that the judge hearing the Silvas’ case could force GM to tell customers to park their recalled vehicles until further notice. The Silvas' lawsuit stems from vehicle owners upset because of diminished resale value because of the recall. They are asking for class action status.


There are additional lawsuits going on involving wrongful death that are complicated because there is a question as to whether GM hid the switch problems during their 2009 bankruptcy. If they are found guilty, plaintiffs could be allowed to sue “New GM” for accidents and deaths that occurred before the restructuring was finalized. The initial reports indicated that problems with Chevrolet, Pontiac, and Saturn ignition switches began surfacing in 2004, ten years before the “Switchgate” recall. More recently, however, according to an article by Richard Read with thecarconnection.com entitled, “Switchgate Update: GM On Trial & On Capitol Hill”, “GM says that it knew there might have been problems as early as 2001, long before the first recalled vehicles rolled into showrooms”.

According to CNN, GM has announced recalls of nearly 7 million vehicles this year (2.6 million related to the ignition switch problem). And, according to Automotive News, the General Motors' investigation of faulty ignitions turned up more than 250 crashes in which airbags failed to deploy on cars that have not been recalled, according to a lawsuit filed against GM. The lawsuit alleges that GM has not recalled all of the defective cars.


The suit says GM rejected changes recommended by engineers in 2005 that would offer a 'sure solution' due to the cost involved. “GM’s engineers understood that increasing the detent in the ignition switch alone was not a solution to the problem,” the lawsuit says, “but GM concealed — and continues to conceal from the public...the nature and extent of the defects, which the current recall will not cure.” Many, if not all, of the unrecalled vehicles that lawsuit refers to have been recalled since that lawsuit was filed.


The order to park all vehicles involved in the "Switchgate" investigation is a result of the Silvas' lawsuit which is regarding the diminished resale value of the cars, not from the wrongful death suits. They are seeking up to $10 billion in damages from GM for a "fail-safe solution" to the problem which involves the steering, brake and airbag systems shutting off without warning. The park order would stay in effect until the full recall and repair of the vehicles could be carried out.

So how much would the ‘park order’ cost General Motors?

Reported by Law360, New York (April 10, 2014, 9:01 PM ET), General Motors Company told the Texas federal court that the plaintiffs suing to force GM to park the 2.5 million recalled cars, should post a bond, which reportedly would cost up to $1 billion dollars. GM continued to argue that Rule 65 of the Federal Rules of Civil Procedure requires the plaintiffs to post a security bond that reflects the costs that the automaker may incur in complying with a “park it now” notice, if the injunction turns out to be wrongful.


The plaintiffs have argued that they don’t have the financial resources to post a bond and that GM would not incur monetary losses by asking the drivers to park their cars. GM argued that the plaintiff’s had not shown proof to support their claims that if additional keys are removed from the ignition key chains that that cars would run into an ignition problem.


GM has argued that the plaintiffs have not shown expert proof to support claims that problems would arise with only the ignition key being used.


NHTSA RECALL REPORTS:

General Motors LLC (GM) is recalling certain model years:

2005-2010 Chevrolet Cobalt
2006-2011 Chevrolet HHR
2007-2010 Pontiac G5
2006-2010 Pontiac Solstice
2003-2007 Saturn Ion
2007-2010 Saturn Sky
2005-2007 Chevrolet Cobalt, and 2007 Pontiac G5 vehicles. 2006-2007 Chevrolet HHR and Pontiac Solstice vehicles and 2003-2007 Saturn Ion vehicles
2007 Saturn Sky vehicles
2008-2010 Chevrolet Cobalt, Saturn Sky, and Pontiac G5 and Solstice,
2008-2011 Chevrolet HHR vehicles.

The information provided in this article was obtained from the
various sources cited herein and does not reflect the opinions of
I-ENG-A.

Risk Of Lightning-Based Fires With CSST Gas Lines

RISK OF LIGHTNING-BASED FIRES WITH CSST GAS LINES

By KPE Investigative Engineers

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CSST, or corrugated stainless steel tubing, is a type of tubing used to transfer natural gas to home appliances. CSST is meant to be a more flexible and lighter replacement for typical rigid black iron pipe which is found in many homes. While it is much more expensive than black iron, CSST allows for easier installation and more customized tubing layouts. However, black iron pipe has much thicker walls than CSST. Specifically, CSST has walls which are 10 mils or thinner while black iron pipe is closer to 120 mils thick.

CSST has been installed in over 2 million homes in the United States since it became available for commercial use in 1988. Since the inception of CSST’s use, there have been an increasing number of recorded cases of home fires from the damage caused to CSST gas lines as a result of lightning strikes. For example, in Carmel, Indiana there were 6 fires related to CSST in just two years. The CSST gas lines contacted by lightning often develop small perforations, around 100 mils wide, in the wall of the tubing when the lightning arcs from the CSST to an adjacent object. 

This arcing burns a hole in the CSST which causes a gas leak and, in many cases, ignition of the gas which leads to a house fire. The reason for CSST’s susceptibility to failure through arcing is the wall thickness. In cases where black iron pipe has been subjected to arcing from lightning, there is often only a small crater in the wall which does not cut deep enough to cause a gas leak. 

In the case of a house fire in Nebraska, a fire was caused by a failed CSST line perforated by an arc from a lighting strike. It was determined the ground wire for the CSST was not correctly installed so the electricity from the lightning strike, instead of flowing to ground, flowed through the steel wall of the CSST and caused the failure.

The incorrect installation of a ground wire was determined to be the cause of many other fires in homes with CSST gas lines throughout the United States. Inconsistent installation standards among different installers are believed to be the cause of such problems. While the gas line is typically installed by the plumbing contractor, grounding is typically done by the electrical contractor. Many times the grounding of the gas line is overlooked.

In 2007, a class-action lawsuit against four CSST manufacturers was settled by an agreement that these companies, and later a few others, would reissue more thorough and clear bonding and grounding instructions for their CSST products.

The National Fuel Gas Code (NFPA 54) is the primary source covering installation of natural gas systems. The National Electric Code (NFPA 70) also has requirements for bonding metal gas pipe. Neither code explicitly calls out who is responsible for grounding. A contractor who is qualified should install the bonding clamp and conductor. In many jurisdictions, this is considered electrical work and requires a permit to be pulled. However, it is not uncommon for the HVAC or plumbing contractor with a limited electrical license to do the work. Until there is coverage within the NEC, CSST installers and electrical contractors are cautioned to get local concurrence regarding the direct bonding of the CSST from the Authority Having Jurisdiction (AHJ). The question of who performs the grounding depends on several factors:

  • Stage of construction (new vs retrofit)
  • Local licensing requirements for trades
  • Local plumbing and electrical codes
  • Opinion of local building officials

Until the NEC is updated, the CSST installer is ultimately responsible to insure the bonding is installed in accordance with local code.

According to a recent article, “Whose Job Is It to Bond Corrugated Stainless Steel Tubing (CSST)?” by Beck Ireland published in Electrical Construction and Maintenance, the latest information regarding the update of the NEC is as follows:

The NEC requires bonding of gas piping but the focus appears to be on hazards from the building electrical system, not lightning.

An excerpt from the article reads, “Proposals to include specific bonding requirements for CSST gas piping systems in the 2011 NEC were rejected by NEC Code-Making Panel 5 on the grounds that lightning protection for gas piping systems is beyond the scope of the NEC. “The mitigation of the effects of lightning is a design option,” reads the rejection. “The purpose of the NEC is the practical safeguarding of persons and property from hazards arising from the use of electricity.”

Ethical Challenges Faced By Investigative Engineers

Ethical Challenges Faced By Investigative Engineers

Article by Babar Khan, PE and Ken Discenza, PE

 

When the Investigative Engineers Association met in Ft. Lauderdale for its annual conference during the week of November 10th, 2014, one of the topics covered in detail concerned the issue of engineering ethics.  As was pointed out during the meeting, the National Society of  Professional Engineers’ Code of Ethics serves as an invaluable tool in assisting today’s  professional engineer in matters relating to  engineering ethics.  This Code provides  guidelines when engineers in any discipline are confronted with ethical dilemmas.  Adherence to the Code is a requirement for all engineers who have met the educational, training, and  licensure qualifications to place the title “Professional Engineer” after his or her name.  Besides defining the high standards and expectations that go along with the title, the NSPE Code of Ethics also serves a very practical purpose: it enables all engineers to withdraw from situations involving possible breaches of the Code with the explanation that violating the Code could result in an engineer’s suspension or loss of license.

As forensic engineers with I-ENG-A, we most often provide services to the insurance industry through the investigation of claims to determine cause and origin of covered incidents. In these cases, we can often find ourselves in the difficult ethical position of balancing the interests of the insurance company (who, after all, are footing the bill) versus the needs of the claimant. Those areas in forensic engineering which can present the greatest ethical challenges include conflicts of interest which might arise between the forensic engineer and the disparate parties in any particular case, and the necessity to avoid prejudices or peremptory conclusions during the course of investigation. 

A basic understanding of the purpose and application of property insurance policies can be of assistance in helping to resolve some of these ethical dilemmas. In its most fundamental form, an insurance policy is a contract between two parties. This contract, however, is different from other contracts between parties, which are typically executed for commercial advantage. Insurance policies are not created solely for commercial advantage. Instead, they provide protection for the insured against certain calamities, with explicit exclusions. Another example of a difference between insurance contracts and other types of contracts is that insurance companies and their policies are regulated by states, in the public interest. The insurance contract and the state regulations require that insurance companies meet certain basic requirements for the insured: to respond to claim notices in a reasonable and timely manner; to advise the insured of available benefits; to prepare a valuation of the loss; to pay the undisputed claims (or parts of the claim that are undisputed); and, in some instances, to conduct a thorough investigation for causation in order to determine eligibility for coverage on a claim. 

Professional engineers can often assist the insurance companies in fulfilling some of these responsibilities. They provide professional opinions through cause and origin studies, to help determine causation of a loss. Insurance companies can then decide whether the loss is the result of a covered calamity and whether it is, or is not, an exclusion in their contract. Professional engineers can also assist the insurance company in determining the valuation of a loss, as well as with subrogation efforts. On occasion, these tasks can conflict with an engineer’s ethical responsibilities to his profession. The NSPE Code of Ethics states that the professional engineer’s primary obligation is to safeguard life, health, and property, and promote public welfare. His or her secondary obligation, however, is to the client. In I-ENG-A’s forensic investigations, the engineer’s duty is to assist his or her clients, the insurance companies, to fulfill their responsibilities under the insurance contract. This involves providing professional, objective, and unbiased reports to ensure full and accurate detailing of the facts. To facilitate this, the engineer should respond to the assignment in a timely fashion, thus enabling the insurance company to accomplish its own obligation to respond to the claim in a reasonable manner. 

Adherence to the NSPE Code of Ethics, however, also requires consideration for the insured. With this in mind, the engineer should obtain permission from the insured before entering and/or examining the insured’s property. Additionally, and of utmost importance, the engineer must recognize that the insured may be in a vulnerable economic and emotional condition due to the loss. This means that it is the engineer’s job to respect the schedule and time constraints of the insured, and strive to accommodate them as much as possible. And, of course, arguments with and criticism of the insured should be avoided at all cost. 

In the interest of fairness, the engineer should respond to the insured’s questions and concerns in a professional manner. For example, it’s possible that an insured could confront an investigating engineer with the suspicion that the engineer’s fact-finding will be biased in favor of the insurance company, because it is the insurance company who foots the bill for the investigative engineer. In this circumstance, the engineer should have an open and unencumbered discussion with the insured, and assure them that he or she is under an ethical and moral obligation to provide an objective and unbiased opinion regarding causation, regardless of who is paying for his or her services. 

This approach assures that engineering professionals will behave in accordance with the NSPE Code of Ethics. As members of I-ENG-A, it is essential that we maintain integrity and honor in the course of our duties. Doing so will produce a result that benefits both the profession and the public, and ensures that the personal interest of the engineer is subordinate to his or her service to society. 

icon I-ENG-A Code of Conduct (12.73 kB 2014-11-04 13:22:01)