Adjusters are involved in losses of all varieties on a daily basis. During my career as an independent, I investigated a possible murder case for a life insurance company; interviewed plane crash survivors and handled the hull claim; checked out losses aboard oceanic cruise ships; and inspected damaged nuclear power plant equipment. In a memorable fire claim, I knew that I was working against an organized crime gang in a commercial arson loss. I have been assigned several Miami Beach hotel jewel thefts. At the time — perhaps even still — that was a good way for tourists to pay for their Florida vacations! Every day was a new adventure.
Along the way, I encountered hundreds of auto accidents (some fatalities), numerous "fall-down" claims, and one case involving a network television crew member who drowned in a hotel swimming pool during a political convention. Salvage operations — whether it be a load of burned household furniture aboard a moving van, a truckload of Kosher chicken arriving at 5 a.m. on a Sunday morning, or a damaged pet store full of live tropical fish — required knowing what to do and whom to call. Who said this was a boring job?
Loss is a fascinating subject, whether one is looking at it from a post-loss perspective, as claim adjusters do, or from a pre-loss position, as risk managers do. In both, imagination is a crucial tool. When all that exists is an empty wall safe, a burned-out shell of a store, or a pile of debris being shoveled from the back of a truck that has overturned and burned, it is difficult for an adjuster to envision what happened in order to determine key elements of coverage, liability, and damage evaluation.
Despite the existence of official fire or police reports in cases such as these, the adjuster must decide whether the factors that occurred created a covered peril and whether a covered peril was the cause of loss. He also must determine where the responsibility for that loss lies and the covered cost of the resulting damage, less any potential salvage value.
Liability is an equally important factor for determining property loss. Too many insurers are failing to pursue their subrogation, and from a risk management point of view, post-loss control (salvage and subrogation) are just as important as pre-loss prevention of damage.
Digging Into Hazards
The Iconoclast has explored the other side of loss on several occasions. Pre-loss risk science is as vitally important for claim adjusters to understand as is the nitty-gritty of post-loss claim handling. The two are connected, so it is crucial that the adjuster fully understands the process of how loss occurs. Otherwise, important factors in the claim investigation could be lost.
For example, an auto accident does not just "happen." It builds from a series of hazards that may be of varied duration. A rear-end collision can be the result of many hazards — some being driver-related, such as inattention, intoxication, fatigue, road rage, or inexperience. Highway-related factors may even come into play. Wet or icy pavement, the direction of travel, excessive speed on multi-lane highways during heavy traffic, a blind view over a hill or around a curve, or a sudden stoppage of traffic ahead can pose hazards. The cause also may be vehicle-related, including bald tires, worn brakes, sudden brake failure, or burned-out brake lights in a preceding vehicle. Or there may be some extraneous causes. For instance, a large animal might run in front of a vehicle, causing emergency braking and skidding in front of the following vehicle.
Whatever the hazard that triggers a collision, the adjuster must look beyond the obvious "insured rear-ended claimant" and determine the hazard that triggered the wreck. Otherwise, potential subrogation or contributions from other tortfeasors who helped create the hazards will be lost.
Imagination and Foresight
Loss prevention requires resourcefulness. Walk around a premise and look at situations. How many extension cords run from an electrical outlet? How old are they? Are appliances grounded? Are fuses constantly blowing? If so, why? Are appliances left running when no one is home? Are there small children with access to matches? Each of these questions seeks a hazard. A can of gasoline in the tool shed is necessary for the lawnmower. However, if the gasoline is stored in a glass bottle kept on a shelf above a hot water heater, then there is a real hazard.
We know, for example, that one major cause of structure fires is juvenile arson. Yet Hal Bruno, political editor of Firehouse magazine, reports, "A big part of the problem is the refusal of schools to cooperate with fire departments in public education programs. Educators have their own priorities and fire prevention classes aren't one of them. Shawn Longrich of Peoples' Burn Foundation of Indiana relates, 'We can't work with our schools. The teachers are too busy and won't give us the time of day. We can't educate the parents and we can't educate the kids.' She reports that they have had more success working with community centers. 'Until we change behavior, we can't change anything,' she insists."
Forensic Adjusting
In seeking causation, adjusters must be as studious as those crime scene investigators popular on television these days. Adjusters must be forensic coroners, research engineers, detectives, and investigative reporters all in one. Here's a mystery for a few Texas adjusters, from the pages of the January Firehouse: "The Houston, Texas, fire department experienced a record 18 multiple-alarm fires in a 30-day period ending Nov. 27, 2007. After a lull of only two multiples between Sept. 1 and mid-October, the department was inundated with big fires, including two four-alarms, two three-alarms, and 14 two-alarms. This rash of blazes came mostly in clusters of two or three per day starting on Oct. 29, when simultaneous two-alarm fires occurred early that evening. On Nov. 8 there were three two-alarm fires in one 24-hour duty shift, including a simultaneous pair late in the evening. Two days later, a pair of three-alarms fires, only 10 hours apart on a single duty shift, burned down three townhomes under construction in one and four apartment units in the other."
"By the first week of December, the HFD had responded to 71 multiple-alarm fires for all of 2007…." As that was probably the publication deadline; the losses may have continued into December. Had this been Los Angeles County during the recent rash of Santa Ana fires, a number of multi-alarm blazes would be understandable. But Houston is not a dried-out, drought-ridden bunch of hills. So what was happening? Tom McDonald, Firehouse's major incidents editor, doesn't say. Perhaps some Houston property adjuster involved in one of these catastrophes can fill us in.
Poor Construction and Poor Tenants
In many large metropolitan areas, apartment fires occur almost daily. There could be many reasons for the Houston rash. Perhaps a cold spell in October or November led to apartment dwellers using dangerous forms of heating. A substantial number of the Houston fires were in apartments, many of which were built prior to strict code enforcement — or somehow avoided code compliance. This resulted in structures that lacked firewalls that might block or slow a fire's progress from one unit to another. Many fires occur where families are on the brink of poverty or where newly arriving immigrants reside, often with many family members crammed into apartments designed for smaller numbers. If the immigrants are illegal, then they may be reluctant to call 911, fearing deportation. Children might be left alone while parents work. While the article seems to suggest a pattern — perhaps controversial in nature — that may not necessarily be the case. Only by carefully seeking out the hazards will the adjusters arrive at the correct conclusions about causation, perhaps finding a viable, responsible subrogation target.
We're learning the reasons for so many western and southern state forest fires, which have ravished our nation's resources over past decades. Part of the problem is that many citizens elect to build their dream houses in these forested, mountainous areas. They are remote from local fire service and therefore fall victim to fires easily. Well, it may be a "free country," where one can choose to live where one wishes, but for the rest of us who pay taxes and insurance premiums, the causation of loss is a very important issue. Most urban and suburban areas have strict codes and zoning laws. The remote forested terrains may not. While their state and local governments may be immune from tort action, the insurance industry's lobbyists ought to start focusing on loss prevention steps, perhaps restricting home-building in remote exposed areas, or at least refusing to insure such homes.
In some cases, building codes may be the culprit. A number of years ago, the Iconoclast cited a very luxurious area of Monterey County where the homeowners' association required use of wood-shake shingle roofs. When the Pacific breezes stirred a small fire in this wooded, hilly section of million-dollar homes into an inferno, the fire was able to jump from house to house, totally unprotected by their roofs. Subrogate, the Iconoclast suggested, where the fire might have been prevented but for the silly code. He doubts anyone ever did!
Understanding exposure, hazards, and the nature of each insurable peril is crucial if claim adjustments are to be accurate and losses correctly allocated to the responsible parties. Most of it is simple common sense. Even so, common sense requires time and energy to develop. Insurers must allow its claim staff adequate time and experience for imagination to take the place of process in evaluation. A vivid imagination is still the adjuster's best tool.
Ken Brownlee, CPCU, is a former adjuster and risk manager based in Atlanta, Ga. He now authors and edits claim-adjusting textbooks.
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