What Do You Know? Readers Take the Adjusting Challenge

Mr. Parker does condition his answer, however (and adds facts not in play to the loss, which is a great parlor game we engage in here all the time…"Yeah, but what if…"). "Now, if the thief left the house, had second thoughts about covering up his earlier act and went back with some gas and set fire to the house the next day, I would figure two losses." In other words, the acts — and losses — are separated by time and place. You win a cigar, Mr. Parker.

Phil Washington (I can't tell his company from his e-mail address) sees it like this: "Being an adjuster for 21 years, my opinion is as follows: one break-in. There was a theft — a covered peril — and then there was a fire — a covered peril. There are two separate claims (same day). [So] figure out what was stolen, make a list, apply limits, and settle the loss.

"Then address the fire. What was burned or damaged, make a list, settle the loss.

"Without interviewing the person who did this, you do not know his intentions. The homeowners' policy covers the perils of 1) theft, and 2) fire. There is no covered peril for a mean person who does several things to you. What if he broke into your house (smashed a door or a window), stole stuff, did graffiti all over the house, broke a water pipe or caused the sink or tub to overflow, set fire to the house, and then stole the car and drove it through the garage door without opening it and hit the corner of the house? Is this one claim because one person (or group) did it?"

We would think so. Here's the FC&S answer. "We think the damage arose out of one occurrence. There was one break-in. During commission of the act, the criminal stole property and set a fire. The insurance company would not be justified in imposing two deductibles, nor the insured justified in claiming two occurrences. We have seen situations where a break-in occurred and because the culprit broke a window or left a door open, at some other time another culprit or vagrant enters the building and a fire occurs. There, the acts are separated in time such that two occurrences can be said to have been involved. But in an unbroken string of events — the crook breaking in, stealing items, then setting a fire to cover up his acts, there is only one occurrence involved."

Deductibles and occurrences flow from the loss (the damage) and not each separate peril involved.

Beware Falling Cargo

In this situation, a tire bounced from the bed of a tow truck and the insured was unable to avoid running over it, causing damage to the undercarriage of the vehicle. The carrier said it was a collision loss, but the agent argued for comprehensive coverage.

Mr. Washington sees it like this: "It depends — was the tire still moving when the car ran over it? If it was still moving or bouncing it would be a comprehensive claim. If it was not still moving, it is a collision claim."

Mr. Parker agrees. "I was given this same question by my boss 35 years ago when I first started out as an adjuster. If the tire or object was still moving at the time of impact it would be considered a comprehensive loss. If the object became stationary, it is a collision loss."

The FC&S answer comports, although not so much on the "moving/not moving" factor. "This is a collision loss. There was an impact with another object by the insured's auto and that fits the definition of a collision. Now, if the tire had fallen off the truck here's that playing-with-the-facts parlor game again and hit the insured's car directly, we can see that being a falling object, or an other-than-collision loss. But, with the tire bouncing on the road and being hit by the insured's car, this is collision."

Cereal Killer

Loss: covered breakdown in cooling chamber one ruins a large amount of garlic in that chamber. This loss is paid. Cooling chamber two has cereal in it. It is unaffected by the breakdown (no damage to chamber), but the cereal in it is contaminated by the smell of the deteriorating garlic. Is that cereal covered?

According to Mr. Washington, "So the claim is the cereal tastes or smells funny? What is the peril? So the cereal tastes like garlic — any physical damage? I agree the cereal can't be sold as intended. Morally, I think it should be part of the claim. But is there coverage?"

Mr. Parker: "I have little experience with boiler and machinery losses, but common sense tells me this is one continuous chain of events and the indirect loss to the cereal should be covered."

And the FC&S answer. No coverage. Consequential loss is not covered unless specifically endorsed as part of the policy. This is consequential damage, just as the spoilage of frozen goods arising from change of temperature is generally consequential and not included unless covered by a food spoilage endorsement.

"Garlic Flakes" for breakfast anyone?

Bruce Hillman is editorial director, Professional Publishing Division, of the National Underwriter Co.

The FC&S Claim Queue is prepared and written by the editorial staff of The Fire, Casualty and Surety (FC&S) Bulletins, the most widely used encyclopedic reference service devoted to insurance policy interpretation and coverage topics. FC&S is published by The National Underwriter Company.