INSURANCE

Problem Solving

Insurance

At the very least, a claim cannot be paid or denied unless the cause is understood. Other cases concern the question of either fraud or vandalism and whether a claim is valid. In some cases the service involves a second party opinion or a third party arbitration to settle the matter.

Insurance companies are required to evaluate claims for various forms of attempted fraud. Two forms of fraud are involved:
1) soft fraud, where an actual loss has occurred and the cause is attributed to something that is covered in the policy, rather than the true cause, and
2) fraud, where the claim and the damage are entirely fabricated. Typically, only the latter are prosecuted, while insurance companies must repeatedly investigate the former soft-fraud type in the interest of keeping costs low.

Some examples include the following:

• A request was made to examine cracking in basement walls where it was obvious that collapse was possible if not imminent. The house had been purchased approximately two years prior to the claim under an FHA loan program. Visual examination found that all four basement walls had been pushed inward as indicated by horizontal cracks in the mortar joints. Examination of the exterior landscape found that the ground on two sides sloped directly toward the foundation with no provision for water drainage around the house. This was the cause of the settling and the wall movement. The inspection also found, however, that prior to the purchase, major horizontal cracks had been filled and painted to hide the problem that already existed. Because the FHA requires pre-purchase inspection by a bonded engineer, the expense of the repair was recovered through subrogation from the engineering firm that inspected the house prior to purchase, but did not detect the problem.
• Another question from the insurance industry concerned the presence of dark stains on the exterior walls of a residence. Visual examination found that the stains followed a pattern, which reflected the location of studs in the walls. Evaluation of some of the stain material found that the stains were actually spores produced by molds growing on the exterior walls. During the examination and interview with the homeowner it was discovered that the problem developed after recent painting and remodeling about two years prior to the inspection. The remodeling had included installation of whole house air conditioning, but not insulation of the exterior walls. The problem was attributed to cooler exterior wall temperature and excessively wet weather that allowed the mold to grow over the surface.
• One unit in a condominium experienced flooding and water damage when the safety valve on the water heater opened. Examination found that the heater had not been installed according to code; in particular, the outlet from the safety valve did not empty into a drain. The installer paid the total damage cost.
• A request for inspection involved sagging flooring in a single-unit house. It was suggested that a recent water pipe leak had caused the settling. Inspection of the structure crawl space found that virtually all of the floor joists were completely rotten and falling from the structure. Further examination found that the crawl space vents had been plugged to minimize infiltration by cold winter air and had not been opened to allow ventilation. The lack of ventilation had caused the wood to rot. The damage was so extensive that the house had to be razed.
• A complaint of hail damage to shingles resulted in a claim against the contractor. The damage did not appear typical of hail impact but, rather, looked like some of the shingles had been mishandled. Further examination found that the damaged shingles were clearly from a different manufacturing lot as indicated by the color difference as compared to undamaged shingles. In fact, only the shingles from the darker colored lot were damaged. It was concluded that the contractor had used some older shingles remaining from one construction combined with newer shingles to complete this construction, and that the older shingles were damaged during storage.
• An insured homeowner claimed hail damage and leakage on a recently shingled roof. Normally, hail damage does not cause leakage unless it is very severe, but rather shortens the life of the roof. In this case no typical hail damage could be seen. However, at least nine instances of sub-standard or non-standard workmanship that could cause leakage were identified on the roof. The claim was denied.
• A question of brake failure was traced to contamination of the hydraulic fluid by non-compatible petroleum products. A sample of the fluid was analyzed using the GC/MS and was found to contain compounds that were very similar to power steering fluid. The likely cause was accidental addition of the wrong fluid to the brake reservoir. Because only the dealer had ever worked on the vehicle, the claim was paid through the dealer’s insurance company, not the insured’s.
• An investigation following the collision of a new truck with a utility pole found that the loss of steering ability resulted when the steering connecting rod separated from the steering gear box. Further examination found that the rod had not been properly connected when the truck was manufactured. The driver had complained about steering problems previously, and the original rod had been replaced, but also not properly connected. The dealer and the truck manufacturer agreed to pay all costs involved.
• A request was made concerning liability in an automobile wreck where one car struck another from behind. There was a need to know whether the first car’s taillights were illuminated and visible priori to impact. Examination of one broken lamp using a stereomicroscope and the SEM found small shards of glass fused to the lamp filament. This proved that, at the time of impact, the lamp filament was hot and the lamp was lit.
• A complaint was made about premature deterioration of face brick on a residence. Examination found that about 50% of the brick veneer had a 1/2″ to 1″ thick layer split from the surface. A test of several pieces for water absorption resistance found that the brick absorbed more water than allowed by ASTM specifications. The damage was due to water absorption and subsequent damage during freeze-thaw cycles when the water within the brick expanded. The cause of the damage was sub-standard brick.
• Damage to brick at another residence was incorrectly blamed on ice damage. The lintels on the weather side of the house had never been painted or otherwise maintained, and the volume expansion from rust formation on the steel had lifted the courses of brick above the lintels and forced them outward. The claim was denied.
• It has become rather commonplace for some heating/air conditioning contractors to replace older or questionable heat pumps and/or air conditioners and tell the homeowners to claim lightning or power surge damage. In many cases the cause of the failure is either age, freon leakage, or some other mechanical problem. One such claim involved a compressor that locked up mechanically. The contractor claimed that lightning struck the unit and caused the oil to leak from the compressor. Clearly, there was an oil leak, but examination of the unit found that a small pinhole at the bottom of the dryer cartridge had formed from rusting. The oil leaked from this hole and, subsequently, the compressor locked up. The claim was denied.
• A similar claim involved an older air conditioner unit with a water circulation system. Again, a lightning strike was claimed, and in fact, there was lightning damage to other items in the house. However, examination by a qualified service person found that the unit had an excessive charge of Freon and a bad flow switch on the water circulation pump. The unit was repaired. No claim was paid.
• In another instance of supposed lightning damage, the exterior compressor/condenser unit was replaced. The unit was tested at Touchstone by an electrical engineer and found to be free of damage and fully operable. The probable cause of the complaint appeared to be Freon leakage from a loose fitting.
• Another A/C claim evaluation found that a compressor had locked up and been replaced as lightning-damaged. No short circuit or burnt wiring, however, was present. The problem was simply a worn compressor. No claim was paid.
• A complaint involving moisture damage to interior and exterior walls near a chimney was investigated. The contractor had tried roof replacement and repair of a chimney in the attempt to stop the leakage. Examination of the recently installed, high-efficiency gas furnace found that the contractor had not installed the unit according to manufacturer’s instruction. In either case the furnace had been vented in the same manner as older, low efficiency units. This was not acceptable with a newer furnace, and the moisture from the cooler exhaust condensed on the chimney and seeped through to the interior, causing the damage. The contractor paid all claims.
• Water damage on an unusually large residence was traced to undersized gutters and downspouts. The house had a very steeply-pitched roof. The combination of the roof slope and the gutter arrangement allowed rain to overflow the gutters and to flow over the outside of the house. The result was mildew, moss growth, water damage to the basement, and water damage to exterior brick. The contractor paid for the damages.
• An interesting complaint involved an above ground swimming pool, which had developed large tears in the plastic liner. The pool was of the type that uses a steel or aluminum liner on a light support frame with the bottom resting on sand. The damage was isolated to the uphill end of the pool. Site examination found that the damaged end faced south, and the liner in this area had become brittle from exposure to the sun. Because of settling from water runoff, the sand bottom on the uphill end had eroded, causing the one end to drop and to tear the brittle liner.
• The collapse of a concrete front porch had been incorrectly blamed on mine subsidence. No evidence of subsidence was found by either surface evaluation or core drilling. Examination found that the edge of the porch against the house had simply rested on wood and was not tied securely to the foundation. In addition, two steel angles had been incorporated into the original structure in an attempt to provide reinforcement. The angles had actually provided a stress point where the concrete broke when the wood under the concrete floor rotted. The claim was denied.
• A second claim of supposed mine subsidence was denied because no mine was located in the vicinity. The cause was traced to water runoff from the steep street in front of the house and the failure to provide a safe channel for the water. Continual saturation of the land caused a large corner section to slip and give the appearance of subsidence. The claim was denied and referred to civil court.
• An interesting claim involving settling concerned a house located atop a high hill with no obvious source of runoff. The damage included severe inward collapse of three basement walls and separation of the brick facing because of loss of support from the foundation. Examination found that small gardens were located on three sides of the house against the foundation walls. The continual watering of these gardens had provided the water needed to cause settling. The claim was denied.
• An insured had an automatic dishwasher installed immediately before leaving for a vacation. Upon return he discovered that the water supply line had leaked and had allowed the water to run. Damage totaled more than $20,000. The fault was traced to the use of a non-standard connection by an unqualified installer. The claim was paid by the installer’s insurance company.
• A complaint of foundation cracking involved an unusual cause of damage. The back garage wall and patio of a house were pushed outward approximately one inch, causing damage to exterior brick and ceramic tile in the basement. Initial examination did not detect an obvious cause, such as settling or impact by a vehicle. Further examination of the property found that the extremely long driveway (150+ feet) had been installed without expansion joints. The damage occurred during a long period of heat when evening temperatures remained above 75 degrees and daytime temperatures were above 100 degrees for several weeks. Calculations of total expansion based on temperature and the coefficient of expansion of concrete confirmed that driveway expansion had pushed the garage floor horizontally and had caused the back wall to move an equal amount.
• A complaint concerning structural damage was investigated to determine the cause. What was claimed as damage from weight of snow was found to be a structural defect from construction. A kitchen addition to a home was constructed over a patio with the outer end of the room resting on three wooden posts. Cracks developed on the interior walls near the point of attachment to the floor system. Structural examination was limited because of soffit which covered the underside of the structure and ceiling tile in the house basement obscured the framing. It was possible, however to ascertain that the sill plate for the addition was probably only nailed to the house and that no other support had been provided for the additional framing. The conclusion was that the addition was pulling away from the house under its own weight.

The above examples are only a sample of our work in this area. We would be pleased to provide any additional information you may require. We also invite you to review examples on our website of work that we have performed in support of other business sectors.