Good fire investigators will do their best to determine the cause and origin (C&O) of a claim. However, there has been a disturbing increase in the number of fires where the investigator is listing the cause as “undetermined.” This means that insurance companies may be missing out on opportunities to pursue subrogation against third parties whose product or services may have been faulty.

GE Insurance Solutions has noted this worrying trend as a result of 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&O investigations only to find that the investigator has listed “cause undetermined” on the back page of the report. The typical expense for fire investigation costs between $750 to $3,500, and in some instances even higher. As a result, a verdict of “cause undetermined” should only be used when all possible avenues have been exhausted.

There are several reasons for this trend. One is that the finding of “undetermined” is the easiest verdict for an untrained fire investigator. The competency level of some investigators is not up to the highest standards — partly due to the burgeoning ranks of part-time and inexperienced investigators. The number of people conducting investigations has grown exponentially since the 1980s — in large part due to the romantic image and the publicity such work has received. Further, the U.S. government's “war on arson” 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 forensic science with a certain air of infallibility, many new investigators were part-time firemen or public safety personnel. Over the years, as more and more people have entered this business, sometimes the quality of the work has suffered.

Another reason for the “cause undetermined” trend is that new regulatory requirements from the National Fire Protection Association (NFPA) have opened the door to additional “undetermined” findings. NFPA 921, first enacted in 1992, includes a “Guide for Fire & Explosion Investigation.” This guide has included “undetermined” as a legitimate category when the level of proof is insufficient to classify another cause such as “incendiary,” “natural,” or “accidental.” The guide indicates that it is okay to list “undetermined” as a cause for a fire.

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

An additional reason is that fire investigators sometimes tell insurers what they think they want to hear. If the investigators cannot support their cause determination, they may opt for the easy solution of “undetermined.” Other investigators who have long-term relationships with insurance companies may make a finding of “incendiary” when they think that best suits the immediate needs of the company with regards to possibilities for subrogation.

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

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

Definite Causes Can Be Found

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

Every fire circumstance is different, so it is up to individual insurers to decide when to use fire investigators. Effective fire management requires:

A prompt action by the company staff.
An up-to-date database of fire investigators ranked by their levels of expertise.
A panel counsel that specializes in subrogation and recovery techniques.

While not all fires will have a cause determination, too many fire investigators are not giving their clients the opportunity to investigate a case further. Most fire causes can be determined with additional resources. However, the clients of the investigators frequently are not being consulted, so they are not in a position to make decisions on whether additional work should be performed.

As a result, once the investigation is complete and before the final report is written, the investigator should meet with the insurance company to provide advice on what has been discovered. At this time, the investigator can indicate that with additional resources, up to and including the hiring of other experts, there may be a chance of narrowing down the cause of an undetermined loss. The decision can then be made by the company to terminate or continue the investigation. (In too many cases, the insurance company has not been given the chance to provide any more direction.)

Assessing the Investigator

If you hire an employee to handle your claims, you should ask the candidates many questions during the interview about why they feel qualified. The same type of detailed question and answer sessions should be conducted when you are considering an investigator.

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

Depending on the size of the loss, never be afraid to hire more than one expert. Pulling together a team of experts to come to a joint conclusion solidifies a recovery effort. Especially if the target defendant is also familiar with the experts you have hired.

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

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

What have been the strengths and weaknesses of the investigators they have hired?
How or by what means does the investigator provide reports to their 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, are you paying for the education of training staff to investigate fires? You should not have to.)

If you build a firm understanding of what an investigator can do for you, you then can develop your own catalog of investigators who meet your specific needs, depending on type of loss and locality. If a case is big enough, you may decide to fly investigators from one part of the country to another in order to enhance your recovery efforts.

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

Michael Harvey is a claims representative, based in Overland Park, Kan.

Thomas J. Hulse is a certified fire investigation instructor and is chief engineer, manager of fire protection services with Indiana University/Purdue University at Indianapolis. He also is author of Fire Origin and Cause for Insurance Professionals. He is based in Carmel, Ind.

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Fire Investigations: Are You Getting Your Money&#039;s Worth?

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