Good fire investigators will do their best to determine thecause and origin (C&O) of a claim. However, there has been adisturbing increase in the number of fires where the investigatoris listing the cause as “undetermined.” This means that insurancecompanies may be missing out on opportunities to pursue subrogationagainst third parties whose product or services may have beenfaulty.

GE Insurance Solutions has noted this worrying trend as a resultof reviews and audits it has conducted for ceding company customers— in order to help them investigate and handle property claims.Ceding companies are spending thousands of dollars on C&Oinvestigations only to find that the investigator has listed “causeundetermined” on the back page of the report. The typical expensefor fire investigation costs between $750 to $3,500, and in someinstances even higher. As a result, a verdict of “causeundetermined” should only be used when all possible avenues havebeen exhausted.

There are several reasons for this trend. One is that thefinding of “undetermined” is the easiest verdict for an untrainedfire investigator. The competency level of some investigators isnot up to the highest standards — partly due to the burgeoningranks of part-time and inexperienced investigators. The number ofpeople conducting investigations has grown exponentially since the1980s — in large part due to the romantic image and the publicitysuch work has received. Further, the U.S. government's “war onarson” spawned a cottage industry that includes C&O experts,mega-subrogation law firms, and forensic laboratories.

While the media has portrayed fire investigation as a forensicscience with a certain air of infallibility, many new investigatorswere part-time firemen or public safety personnel. Over the years,as more and more people have entered this business, sometimes thequality of the work has suffered.

Another reason for the “cause undetermined” trend is that newregulatory requirements from the National Fire ProtectionAssociation (NFPA) have opened the door to additional“undetermined” findings. NFPA 921, first enacted in 1992, includesa “Guide for Fire & Explosion Investigation.” This guide hasincluded “undetermined” as a legitimate category when the level ofproof is insufficient to classify another cause such as“incendiary,” “natural,” or “accidental.” The guide indicates thatit is okay to list “undetermined” as a cause for a fire.

As a result this provides an excuse for investigators to say, “Idon't know.” A finding of “undetermined” should only be the lastresort, when all avenues of investigation — including asking forhelp — have been exhausted.

An additional reason is that fire investigators sometimes tellinsurers what they think they want to hear. If the investigatorscannot support their cause determination, they may opt for the easysolution of “undetermined.” Other investigators who have long-termrelationships with insurance companies may make a finding of“incendiary” when they think that best suits the immediate needs ofthe company with regards to possibilities for subrogation.

If these same private investigators are hired to look at firescenes where there are no preconceived notions as to cause orresponsibility, they sometimes believe that these cases areassigned to them as a “thank you” for their loyalty.

In short, the advent of more “experts,” as well as theguidelines in NFPA 921, have produced less expertise resulting infewer positive determinations in the field.

Definite Causes Can Be Found

A large share of fire causes can be determined, unless there istotal consumption or vaporization of the materials at the point oforigin. Other difficulties result when there has been fire-scenespoliation, such as a complete wash down of the origin site by thefire department.

Every fire circumstance is different, so it is up to individualinsurers to decide when to use fire investigators. Effective firemanagement requires:

• A prompt action by the company staff.
• An up-to-date database of fire investigators ranked by theirlevels of expertise.
• A panel counsel that specializes in subrogation and recoverytechniques.

While not all fires will have a cause determination, too manyfire investigators are not giving their clients the opportunity toinvestigate a case further. Most fire causes can be determined withadditional resources. However, the clients of the investigatorsfrequently are not being consulted, so they are not in a positionto make decisions on whether additional work should beperformed.

As a result, once the investigation is complete and before thefinal report is written, the investigator should meet with theinsurance company to provide advice on what has been discovered. Atthis time, the investigator can indicate that with additionalresources, up to and including the hiring of other experts, theremay be a chance of narrowing down the cause of an undeterminedloss. The decision can then be made by the company to terminate orcontinue the investigation. (In too many cases, the insurancecompany has not been given the chance to provide any moredirection.)

Assessing the Investigator

If you hire an employee to handle your claims, you should askthe candidates many questions during the interview about why theyfeel qualified. The same type of detailed question and answersessions should be conducted when you are considering aninvestigator.

Be sure you have prior information about the firm. If thepreliminary information indicates that an explosion took place atthe risk, consider using an individual that has prior experience inthis field. The same consideration should be made for electricalfailure or mechanical failure cases. At the time of notice, theinsured often has an idea about what happened. This initialinformation is extremely valuable in making sure the company getsthe most out of the investigation dollars spent.

Depending on the size of the loss, never be afraid to hire morethan one expert. Pulling together a team of experts to come to ajoint conclusion solidifies a recovery effort. Especially if thetarget defendant is also familiar with the experts you havehired.

The defense will hire experts, so make sure yours are wellqualified in major loss litigation. Ask peer companies whom theyhave used on major losses and see how they liked their workproduct. Ask an investigator to share a previous fire report to seeif the work product meets your standards. However, somejurisdictions may prohibit this in order to protect privacy, so besure legal implications have been considered.

Here are some additional questions for peer companies that areuseful for assessing an investigator's merits:

• What have been the strengths and weaknesses of theinvestigators they have hired?
• How or by what means does the investigator provide reports totheir client?
• Are they timely for on-scene investigations?
• Are they timely in reporting back to you?
• How do their rates compare with others?
• What do they charge per hour? Mileage? Photos?
• Is there a travel-time rate versus an on-site rate?
• Is their rate different for court time?
• How successfully have they testified in the past?
• Were their educational background resum?s tested at trial?
• Do they bring additional staff to the site? (Additionally, areyou paying for the education of training staff to investigatefires? You should not have to.)

If you build a firm understanding of what an investigator can dofor you, you then can develop your own catalog of investigators whomeet your specific needs, depending on type of loss and locality.If a case is big enough, you may decide to fly investigators fromone part of the country to another in order to enhance yourrecovery efforts.

Fire investigation is a detailed and changing process with muchat stake for each insurer. With careful selection of investigatorsa company can maximize the potential for recovery in a subrogation.But few cases can return a recovery of any kind without many hoursof investigation and research.

Michael Harvey is a claims representative, based in OverlandPark, Kan.

Thomas J. Hulse is a certified fire investigation instructorand is chief engineer, manager of fire protection services withIndiana University/Purdue University at Indianapolis. He also isauthor of Fire Origin and Cause for Insurance Professionals. He isbased in Carmel, Ind.