Insurers can maximize recoveries by doing some basic, but important, things. Think of the typical property loss that involves a fire in a home. Now imagine that you are a litigator who receives a call from a property insurer saying the homeowner was drying some clothes when, all of the sudden, the dryer burst into flames. The insurer further tells you the fire happened two days ago and the homeowners are currently living in a hotel. Like all insureds, they want to get back into their home as soon as possible, and the carrier wants to begin reconstruction work immediately. The subrogation professional is left with many considerations, from ensuring that subrogation recovery is successful to ensuring that the insurer's concerns are addressed as well as those of the insured.

With these concerns in mind, the subrogation professional must immediately contact the appropriate experts to quickly investigate. In a case similar to our example, this would include an electrical engineer if the dryer was electrically powered or a mechanical engineer if powered by gas. An origin and cause investigator would also be essential. At the same time, the dryer information should be obtained, and proper notice of the claim should be sent to the dryer manufacturer and/or seller.

Preservation of the entire fire scene should also be conducted. Too many times, the dryer or other product is removed from the home and stored. The home is then repaired, and only then is subrogation considered. Most defendants are looking to make a spoliation argument. By not preserving the entire scene for the defendant to inspect, the argument is easily made for them. To prevent this problem, the subrogation professional must get timely notice out, and provide the potential defendant with an opportunity to inspect the entire fire scene.

What does a successful claims investigation look like?

Similar to the previous answer, a successful and thorough investigation includes getting critical information early. This information primarily comes in the form of witness statements. What occurred at the time of the loss and shortly beforehand must be determined by speaking with the witnesses. Finding out about any problems the homeowners or others were having with the product, as well as any service performed, is also critical. This information must be obtained early as witness memories fade, witnesses sometimes move and cannot be located again, and they can also become uncooperative. It is also wise to speak with the local fire officials about what they found and what they know about the cause of the fire. Often times, your origin and cause investigator will be a former fire official and, if experienced enough, will know the local fire official investigating your case. This can go a long way in getting the fire report without having to send a subpoena and in getting the fire official's photographs. So, getting the information on your fire early, and in detail, is crucial.

What are some common culprits that catastrophically fail, thereby leading to property claims?

There are many common culprits in the home that can lead to property loss. These products can fail catastrophically shortly after purchase, which is the early stages of the product's life and a failure mode consistent with most persons understanding of defective products, but also these products can catastrophically fail after being used for many years. While most people associate a defective product with one that is so inherently defective that it causes a fire after only a few uses, the fact remains that there are many products that fail only after extended use.

These common culprits usually have a poor design or common flaw in which the defect only manifests itself after exposure over time to foreseeable external factors. Examples of such foreseeable external factors include the accumulation of combustible materials in the product during normal usage, such as lint accumulation in a clothes dryer or bathroom exhaust fan.

Another common failure that can occur from exposure over time to external factors are defects in the materials used to construct some products, such a certain types of plastics that degrade from exposure to certain chemicals. For example, certain plumbing fixtures, such as toilet supply lines and fill valves, are made from plastic, such as acetal, that can degrade over time when exposed to common household cleaners and chlorinated water. This type of degradation can cause the plastic to weaken resulting in fractures that can lead to substantial water damages. Such water losses can be particularly excessive when the failure occurs at the top of a multi-story structure when the property is not occupied.

In the absence of a manufacturer recall, how can adjusters identify trends or specific products that are prone to failure?

In the absence of a public recall, an adjuster can identify products with a history of failure through other trustworthy means. A beneficial resource is the National Association of Subrogation Professionals (NASP). It has a list service that includes many subrogation professionals, from adjusters to attorneys, who are constantly posting about matters they are handling. Becoming a part of the list service can provide one with lots of valuable information regarding typical product failures and issues encountered on a daily basis in these types of cases. There is also the Consumer Products Safety Commission (CPSC) website. This site now includes consumer complaints about products, and not just recalls. A subrogation professional is wise to review this site any time a loss involving a product is encountered. Searches through Google are also very beneficial. It is amazing how many chat rooms there are where people discuss problems they have with almost any product. A search through Google or other search engine can also reveal complaints that have been filed in court, verdicts rendered and discussions regarding certain manufacturers and issues they have had with defective products. A general search on the internet is a great place to start.

What factors can lead to failure? What about product age and contamination?

Before discussing the factors that can lead to or cause a product to fail catastrophically, it is imperative that the analysis begin with the understanding that a product, regardless of age, should never fail catastrophically. Products should be manufactured and designed in a manner that allows them to operate safely until the end of their useful life, at which time the product should simply cease to operate- never failing catastrophically.

Generally speaking, there are an infinite amount of factors that may play a role in or contribute to the failure of a product. As mentioned previously, such factors may include the build-up of lint within the product or the use of chemicals that may cause degradation of the materials in which the product was constructed. Regardless of the factor(s) that potentially played a role in causing the product to fail, the central question in determining the viability of a subrogation claim against a product manufacturer is whether it was foreseeable to the manufacturer at the time of sale that normal usage of the product would expose it to the external factor(s) that played a role in the products failure.

Sticking with the example from above, the question that must be asked is whether it is foreseeable to the manufacturer that a plastic toilet supply line would be exposed to normal household cleaners during use. If the answer is “yes,” then a valid design defect claim exists against the toilet supply line manufacturer for failing to properly design a product with materials that could withstand exposure to the chemicals contained in normal household cleaners.

Once an insurer finds evidence of product defect, what is the next step in subrogating against the manufacturer?

As discussed above, it is absolutely imperative that after a particular product is determined to possibly be the cause of a loss that the scene and evidence be preserved, as well as the manufacturer be put on notice of their potential responsibility.

After the above, the next step in the subrogation against the manufacturer is to conduct a joint evidence examination. The joint evidence examination is often performed several months after the scene exam and is almost always destructive in nature. The joint evidence examination is the event where all of the evidence retained from the scene inspection is taken apart, tested, examined and photographed in an effort to conclusively determine the cause of the loss.

Such an evidence examination not only includes the analysis of the allegedly defective product, but also all of the other evidence removed from the scene that could have potentially been the cause of the loss. As a result, the joint evidence examination is conducted to not only determine if the alleged product was cause the loss, but to also rule out all other causes.

Given the destructive nature of the joint evidence examination, it is essential that a written protocol be drafted prior to the exam that summarizes the actions to be undertaken by all of the parties, including any and all tests that the parties intend to conduct. The protocol should always be drafted and reviewed by the experts that have been retained to participate in the examination. While the written protocol should allow for some deviation based on circumstances that may arise during the actual examination, it is crucial to have a protocol in place prior to the examination so that all parties have an understanding as to the scope of the exam.

While each case is different, upon completion of the destructive exam your experts should have more than enough information to form an opinion as whether the subject product was the cause of the loss. If you experts agree that the product was in fact defective, then it is time to file a complaint and pursue the damages owed by the manufacturer.