In this Issue:

HAIL DAMAGE CAUSING BILLIONS IN CLAIMS

PEX PLUMBING FAILURES

US STORMS TO COST INSURERS 1 BILLION

HAIL DAMAGE CAUSING BILLIONS IN CLAIMS

HAIL DAMAGE CAUSING BILLIONS IN CLAIMS

According to Verisk Analytics, hail has caused more than 4.5 million claims between 2008 and 2012 resulting in $32.1 billion of insured losses. Analysis by Xactware determined that 36 percent of all property claims nationally involved roof repairs, which accounted for 24 percent of all property claim costs between 2008 and 2012. The company performed a risk analysis and determined that if severe thunderstorm losses continue at the current rate, the cost of doing business could become unsustainable. Further, according to the National Insurance Crime Bureau (NICB) the number of questionable hail damage claims rose 136% between 2006 and 2009. According to an article published on 5/2/2014 in the Claims Journal, “The Emerging Hail Risk: What the Hail Is Going On?” recent reports indicate hail damage claims have doubled over the past few years.

The cause of this significant increase includes the fact that there have been significant hail events in large metropolitan areas. However, there is an abnormally high percentage that are being disputed. In Texas alone literally hundreds of lawsuits are being filed each week in Dallas, Tarrant, Potter, Hidalgo and other counties. These lawsuits allege underpayment of hail related roof damage claims.

There are some red flags to hail damage claims that may be exacerbated or fraudulent. Firstly, claims that are submitted late, months or years after the reported hail event may be deemed suspicious. The insured may be absent from the claims process, leaving only a contractor or public adjuster involved. Roof damages that are not leaking and damage that is not visible to the naked eye is another issue. And, then there are the pesky claims of damages involving lost granules which have exposed the asphalt which may now cause deterioration and can be a nuisance. Similarly the claims of minor dings in metal roofs that may now collect water, etc., causing rusting over time and leaks, are a similar pattern.

Strategies recommended by Steven Badger with Zelle Hofmann Voelbel & Mason LLP, include:

  • Engaging qualified engineers with real experience in identifying hail damage
  • Refusing to negotiate claims with contractors and other individuals acting as unlicensed public adjusters
  • Holding the insured to its policy burdens (establishing physical loss or damage and establishing a date of loss within the insurer’s policy period)
  • Refusing to accept inflated Xactimate estimates but instead require read bids from real contractors
  • Refusing to pay “10+10” overhead and profit when general contractors are not reasonable necessary and their costs not incurred (there is no “TDI Bulletin” or “three trade rule” dictating otherwise)
  • Closely monitor appraisals to avoid the inevitable manipulation of the process and race to the courthouse for a favorable umpire appointment; and steer clear of the predictable trap

Finally he recommends that “insurers can also decide to step up and start fighting the worse abusers, not only in the claims process itself, but also in the shady underworld of referral fees, inflated invoices, kickbacks and outright fraud”.

Contact Stephen Ternullo & Associates, Inc. to assist with investigation and reporting on these types of claims.

PEX PLUMBING FAILURES

PEX PLUMBING FAILURES

According to Cadell Calkings, BAE/MAE, Penn State, with the price of copper continuing to rise, there has been a need for more economical plumbing solutions. Synthetic materials are being used to accomplish this with the most prevalent in recent years being PEX plumbing systems. PEX is cross-linked Polyethylene. It has gained popularity in the heating and potable water plumbing because of its ease of use and less fittings. PEX can bend around corners, whereas copper or PVC would need an elbow fitting. This makes for easier and quicker installation; however, it is currently involved in recent failures and lawsuits.

Failures can be linked to two different areas; the pipe and the fitting. The pipe can fail when it has been exposed to chlorine. It is common to have small levels of chlorine in the water supply. This can cause oxidation. Another cause of failure is when the PEX has been exposed to sunlight. Plastic when exposed to ultraviolet light or sunlight causes the molecules to break down making the pipe brittle and subject to rupture. PEX is also permeable to certain chemicals and oxygen causing further problems. PEX piping also has chemical byproducts that are often left behind in the pipe; some of them have been reported by the United States Environmental Protection Agency to be carcinogens. Dezincification is another problem that has caused fittings to leak. Due to these many failures, there is a civil lawsuit as well as class action lawsuits.

The Investigative Engineers Association (I-ENG-A) Convention 2014, slated for November 9-12, 2014, may address this and other failure issues. Look for the preliminary convention agenda coming soon.

US STORMS TO COST INSURERS 1 BILLION

US STORMS TO COST INSURERS 1 BILLION

According to Aon, in its Global Catastrophe Recap report for May 2014, there were four periods of severe weather across the country from hail and wind that are likely to be around $1 Billion with economic losses likely to reach several billion more. The most costly occurrence was a five-day period across the Midwest, Rockies and the Northeast including the major cities of Chicago and Denver. The tornado activity in this year so far remains in the bottom 25th percentile of all years dating back to the early 50’s.