You likely already know that typical residential and commercial property insurance policies do not cover losses caused by flooding. However, water damage caused by rainfall is likely to be covered. This is a good example of two different causes of loss that can appear very similar when you look at the damaged property. Even two experts looking at the same damage may disagree whether the loss was due to flooding or rain.
For this reason, it’s important to remember that you have other options at your fingertips to evaluate the true cause of loss for a claim. I will take you through how a $2 million dollar dispute was settled between two experts claiming HVAC units were damaged by either rain or storm surge damage.
Were the HVAC Units Damaged by Rain or Flooding?
This claim stems from a set of 25 commercial HVAC units, valued at around $2 million that were stored outside in preparation for being installed. It just so happens this was on Long Island in the fall of 2012, and Hurricane Sandy was coming up the coast. Both the insurance carrier and the insured hired experts to evaluate the equipment, and while both found that water damage had occurred, they did not agree on the source of the water. One expert felt that rain had fallen onto the open tops of the HVAC units, filling them with water, and the other felt that the storage lot had been flooded with storm surge from a nearby creek.
A final inspection confirmed that water damage had definitely occurred, but not what the source of the water was. It was clear that some other information was necessary to settle the matter.
Gathering Eye Witness Accounts
First, eyewitness accounts were sought from anyone who might have been near the storage lot during or after the storm. Employees from several businesses on either side of the creek were interviewed and were asked about the water level during the storm. They were also asked whether they saw any flooding in the storage lot around the HVAC units in particular.
People who aren’t involved in your claim can often be helpful in establishing the events of a loss. Unlike the insured or their friends or employees, these witnesses have no stake in the claim, and may be happy to answer a few easy questions. If there are no witnesses, you may be able to find reporting from newspapers, blogs, or local television channels to fill in some details.
In this case, several eyewitness accounts helped determine what the storage lot looked like at the time of the storm. However, these statements may not be sufficient grounds to resolve a large claim, and other sources of information can help nail down what happened.
Analyzing Impartial Government Data
You’re probably familiar with basic online weather data and various hail and lightning surveys. You can also get flooding and sea level data from some government agencies, such as FEMA, NOAA, and USGS. In the case of Hurricane Sandy, FEMA released a map showing the extent of storm surge throughout the New York area, including the storage lot where the HVAC units were being kept. Depending on the type of loss and location you’re dealing with, other agencies may have useful information and tools available.
Combined with the eyewitness statements, the FEMA map gave a clear sense of the conditions in the storage lot during the storm. Still, it would be nice to have some physical evidence to tie the signs of water damage to the loss event.
Send it to The Lab
When a visual examination is not conclusive, or when you need to tie up every loose end, you may be able to do additional analysis on the physical evidence from a loss. In this case, the question was the source of the water that caused damage to the HVAC equipment, so samples of residue were taken from several units. The samples were brought to a lab to be tested for the presence of salt and other minerals present in sea water.
This is just one example of laboratory testing that can be helpful in resolving a claim. In other cases you may choose to have x-rays done, or have a piece of metal tested for impurities. An expert can assist in determining what testing may be helpful and in carrying out the sampling and analysis.
Results: So Was it Storm Surge or Rain?
While visual inspections led to contradictory conclusions from the original experts, all of the subsequent additional information pointed to flooding from storm surge as the cause of the damage to the HVAC units. The $2 million dollar claim was settled at a fraction of the cost by using these three key pieces of information.
The eyewitnesses saw the creek flooding during the storm
The FEMA map showed storm surge across half of the parking lot (satellite images from before the storm even confirmed that the HVAC units were in the flooded area)
Laboratory analysis confirmed that the residue on the equipment was from saltwater (as opposed to rain)
Having access to additional sources of information can make it possible to conclusively determine the cause of a loss, or resolve conflicting opinions that may come up while handling a claim. In the case of a large or contentious claim, digging deeper to have all of the information available will help you resolve it fairly and confidently.
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.