Claim Investigation Expenses—Whose Responsibility?

A question has been raised as to who is responsible for the expenses associated with a claim investigation. Please comment on the following:

#1. The insured reports a “problem” with the plumbing system. There is no physical damage, just a decrease in water pressure. A plumber inspects and determines it will be necessary to open the concrete floor in order to ascertain the nature of the problem. It is determined that the drain pipe was simply clogged. Is the cost to open the floor covered?

#2. The insured reports that water is seeping up through the floor and that walls around the foundation are cracking. The cause of the damage must be determined as a basis for payment or denial. Further, if coverage is written on a special or comprehensive form, the insurer must provide the insured with specific policy language that precludes coverage, so would the insurer be obligated to pay the cost of investigation?

#3. Finally, when the insured suffers a covered loss and inspection charges are made by a repairer just to examine the damaged property, are those charges included in the replacement or repair cost of the property?

Pennsylvania Subscriber

Simply put, the insurer is obligated for loss investigation expenses where insured damage is involved. If the loss event is covered, loss investigation expenses are also covered; if the loss event is not insured or is excludable under the policy, loss investigation expenses are not the insurer's responsibility.

 

In #1, the cost of opening the floor is not covered, as there is no accidental physical damage to trigger coverage. The concrete floor does not have to be opened to get to covered damage — only to clear a clogged drain (not a covered event).

 

The editors agree that the insured has the burden of proving coverage in situation #2; there is nothing to cover or exclude under the policy until the insured proves a loss. Therefore, the insurer would be responsible for loss investigation expenses if this turned out to be a covered loss, but not otherwise.

 

Finally, in situation #3, inspection charges charged by a repairer who does not ultimately do the repair work are recoverable by the insured if the damage is insured and the charges are incurred in cooperating with the insurer (such as gathering bids or determining the extent of damage).

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