If you’ve handled fire claims before, you’ve probably noticed that no two fires are exactly alike. Some fires can bring down a whole building, while others are contained to a single corner. Similarly, when a fire occurs, not all equipment is effected equally even though it may all be in the same room and covered in soot. It can be easy to assume that all of the equipment in the area of the fire must have been damaged, but while reviewing claims it is critical to look past the surface. Being able to assess which items are in fact damaged and which can be repaired or restored can result in significant savings on a claim.
Following these 3 steps will help you save time and money when evaluating claims involving possible fire damage to equipment.
1. Know when equipment is truly totaled
There are many factors experts consider when determining whether or not an item can be restored to pre-loss condition. The type of damage, which components are effected, and where the equipment was located can all play a role.
The challenging part is finding the balance between satisfying the insured and making sure the claim doesn’t get out of control. By having a basic understanding of the types of damage that can occur to equipment during a fire loss, you can show the insured you are being reasonable when recommending to them what can and cannot be repaired.
Damage can result from one or more of these three factors:
Heat – materials can melt or burn when exposed to the heat of a fire
Smoke/Soot – particles can be deposited on surface, causing odors or localized corrosion
Water – water from sprinklers or fire department efforts can cause corrosion or staining
During an on-site inspection, you’ll be able to tell visually whether any of these types of damage have occurred. Burnt, or melted materials are usually obvious to the naked eye, but knowing whether these visible types of fire damage have caused a significant impact on the equipment requires some knowledge about what the equipment does and how it works. If you’re not sure, you may need to bring in an outside expert to help. An expert with a mechanical or electrical engineering background will be able to help identify both visual damage and damage that occurs indirectly, such as when electronics are damaged due to a short circuit caused by the fire.
This should give you a basic understanding of the process of assessing equipment to determine if it’s a total loss, and how it’s useful by allowing you to immediately begin research on a reasonable replacement cost.
2. Identify equipment that can be repaired or restored
After you have determined what equipment is a total loss, move on to the damage that doesn’t appear to be as severe. This might include discoloration on an outer cover, small amounts of water spotting, or a melted power cord, but the insured is claiming that the whole machine should be replaced. This is where the majority of the savings on the claim occur, as these items can be restored or repaired at a fraction of the replacement cost, while also getting the insured up and running quickly.
If the damage consists solely of smoke, soot, and water exposure, it’s important to know that many types of equipment can be restored to their pre-loss condition without requiring repair. Equipment restoration specialists can remove corrosion, stains, and odors and return the machine to the insured better than it was before the fire.
If you are not comfortable evaluating the damage yourself, you can work with the insured to bring in repair and restoration contractors, or have an equipment expert assist in managing this part of the claim. It is important to note that even very old equipment can often be repaired by removing and replacing individual damaged components, such as motors, pumps, and transformers. The equipment manufacturer or a qualified vendor should be able to provide a repair quote.
3. Draw the line on loss-related damage
Some claims, especially fires, result in different types of damage (such as direct heat, water exposure, power outages, and other factors) that can cause issues with equipment. Still, it’s necessary to draw the line between actual loss-related damage and other costs that may get lumped in with the claim.
Here are some examples of costs that may or may not be loss-related:
Testing & troubleshooting equipment
Cleaning & preventative maintenance
Rearranging or redesigning a work area
Upgrades & code compliance
In some cases, some of these costs may in fact be claim related to fire damage. If you determined that a CNC machine could be cleaned and restored, it may still require recalibration after that process is completed. On the other hand, a repair contractor may charge for testing that is really just normal everyday maintenance. If you aren’t sure where to draw the line, an outside expert can help you sort through the claims.
Understanding the ins and outs of damage assessment of equipment can help you make quick work of some fire damage claims, while adding some cost benefit. But when you run into something you haven’t seen before, or the damage is widespread and varied, consider bringing in an outside equipment expert to help you assess damage, verify costs, and trim away unrelated costs on your equipment damage claim.
I hope you found this information helpful, and if you ever find yourself in need of a forensic engineering expert to assist you on these types of claims, contact Amset Technical Consulting and find out how we can help.
About the author:
Josh Held, BSME, CFEI, CVFI Technical Loss Consultant
Josh Held holds a Bachelor of Science degree in Mechanical Engineering from Northwestern University and has been with Amset since 2008. Josh is experienced in litigation claims, fire investigations, mechanical damage claims, project management, and specializes in claims involving subrogation which have led to successful outcomes for his clients.
Josh is a Certified Fire and Explosion Investigator (CFEI) and a Certified Vehicle Fire Investigator (CVFI) through NAFI.