BY MICHAEL R. CHANEY
Large loss subrogation success is a goal shared by all team members in the recovery process. In other articles, we have read there is much “spill-over” benefit to the general public, to use an economist’s term, when the team members do their job correctly. Maximizing subrogation recovery is not just about proper fiscal responsibility for our own company or clients. The public has a vested interest in what we do as well. This article discusses problems that can ruin major loss subrogation success and suggests solutions in the process. The concepts apply to other investigations as well, not just the $20 million inferno.
In the fire investigation community, one of the primary sources used to guide the investigative process and to help assess responsibility is National Fire Protection Association (NFPA) 921, Guide for Fire and Explosion Investigations, 2004 edition. This document is must reading for claims professionals.
NFPA 921 addresses major loss investigations in Chapter 27: “Management of Major Investigations.” Various other sections of the document also guide the professional origin and cause (O&C) specialist when working a major loss. The ultimate goal of assessing responsibility is discussed in Chapter 19, “Analyzing the Incident for Cause and Responsibility.” The document has been around since 1992, and it would behoove all of us to read it.
MAJOR LOSS INVESTIGATION
What is a major loss investigation? NFPA 921 defines it this way in the introduction of Chapter 27. 1.1:
“A major fire or explosion incident may include fatal fires, fires in high-rise buildings, incidents involving major damage to large complexes or multiple buildings, conflagrations involving a large monetary loss, or fires resulting in a large number of personal injuries. While major incidents are not always large in size or magnitude, they do tend to be more complex. As a result, the primary goals in such circumstances are to preserve the evidence and to preserve the interests of the different parties involved.”
One of the primary spillover benefits for the public stems from assessing “Responsibility” properly. A lot is packed into that word “properly”; we will touch on that in due course. NFPA 921 discusses assessing responsibility also. Assessing responsibility for fires and their damages leads to a decrease in frequency and severity, reducing human suffering and property loss. Through these efforts, fire has become less of a problem in America, but just watch the nightly news: America is still burning.
Before we consider crucial aspects of a major fire loss investigation, we first turn to the team members other than the fire analyst. In fact, we turn first to a short consideration of one of the major problems plaguing our industry today-spoliation: “Spoliation by fire department.” In the hands of a seasoned fire analyst and good “subro” counsel, the insurance industry will net a fair recovery, but this recovery could be much greater if it were not for spoliation.
Spoliation has a technical legal definition and is a term discussed in NFPA 921 as well, but the concept of “something spoiled” is a matter of paramount interest to us all, including-and especially-the public at large. The “something spoiled” is often the fire scene, before you even know about the fire. Whereas the technical legal definition of “spoliation” can be debated as to its applicability in this area of concern, I submit that it does indeed apply.
Two departments of a local fire department can help you make or break your case-suppression and investigation. Public fire investigators may also become involved in your fire from the county, parish, state, or federal level. Excellent opportunities to identify the “real” fire cause are sometimes, frequently in some jurisdictions, lost when fire suppression or fire investigation is done improperly by the public sector. This is not the venue for an in-depth analysis of the many things that should be done or those that should not be done by public personnel, but I turn to two primary points:
1Firefighters need to preserve evidence as much as possible, fighting fire correctly and conducting overhaul properly as well.
2Fire investigators need to keep the insurance industry’s interest (the public interest) in mind. They need to process fire scenes methodically and carefully. They need to know when to wait for concurrent but separate investigation (by insurance fire experts) to unfold. With a truly “proper” team effort, the fire’s true cause, instead of some speculative, nonscientific cause, can be assessed.
But what do we find in the real world of major losses? We find a growing number of agencies that seek to accomplish this type of preservation, but very often we find the public’s interest is literally tossed right out the window by the fire department.
Oh the irony of it all! Here is the public, the taxpayer, funding the public fire service, and the public fire service in many locations is the first and, often, the worst enemy. What can be done? For one thing, education. Education is the reason many fire departments are light years ahead of where they used to be in fire scene preservation. Many departments know that major fire losses and, in fact, almost all moderate fire losses, will be investigated by experienced fire and engineering specialists as we all go about “fighting fire.” Many preserve evidence and the scenes well. But many do not.
Sadly, many fire departments, even in major cities, disregard the public’s best interest, and scene after scene is spoiled during their suppression or investigation process, or both. Sometimes it is even on purpose when petty people pursue petty interests in their “turf” wars, forgetting the larger picture and forsaking their public duty. When wanton and where this should be avoided, the “spoilers” should be held responsible themselves. Education works for some, fiscal penalties for others. But this is often not legally possible. What are we going to do about it? Education, public relations, and coordination will go a long way to maximizing recovery potential. Joint educational efforts and discussions at the fire house help.
It is true the public sector has a duty to investigate fires. It also must suppress fires and ensure they don’t rekindle. Both activities by necessity “alter” a fire scene. There are ways to maximize subrogation potential; this involves minimizing the alteration of a fire scene. NFPA 921 speaks to this; it is a document for all fire investigators, not just private or public ones. We in the private fire sector are often found in joint education with public departments about these issues, and many agencies fully understand their public duties. However, more needs to be done. There is still too much “spoliation by fire department” going on.
What can the other team members do to maximize major fire loss subrogation recovery? Adjusters can assign fire losses quickly, and they can hire investigators/analysts who know the “ins and outs” of the subrogation process. The recently retired fire investigator often doesn’t know many of the various recovery avenues; when you try to save on the hourly rate, it often costs you the whole opportunity to recover all or some of your monies. Care must be taken when selecting a fire analyst or an engineer. Does the company you use put its new analysts through a very lengthy educational process, or are they “put on the street” in just a few short months after retirement from some of the very agencies tossing your evidence out the fifth-floor window? Some train their new personnel for only a few short days. Some don’t get any training. Weeks upon weeks of education are needed for a fire expert to become properly prepared to serve an insurer’s interest so as to maximize recovery potential. We often have to dig for subrogation avenues, and we need to learn about them through intensive study, training, and experience. You are paying an expert’s fees. Why don’t you demand an expert’s expertise?
What else can be done? The insured can be quickly instructed to leave the fire scene alone, to preserve it, to have it fenced off, for example. Debris piles can be covered with tarps, and maintenance personnel and risk managers can be told to preserve these items for the team investigators. And when we know of a potentially responsible party, the responsible individual/agency should be put on notice quickly.
The adjuster can become even more proactive and can call the fire department directly, letting it know there will be a private fire inquiry and that preservation of the fire scene will be appreciated. Often the fire department is happy to learn that engineers and trained O&C specialists are going to investigate.
In the event of a very large loss, it may well be that insurers need to have counsel obtain a temporary restraining order if private specialists are not allowed on a scene. Sometimes, insurers cannot get their private experts out to the scene immediately, and a destructive post-fire fire department operation is ongoing. After all, whose money is it? If it is not incendiary-and somewhere around 85 percent of fire losses are accidental-the insurer’s, the insured’s, and the public’s interest are best served through a team effort.
A team effort includes having the fire officials “onboard” with the private side-not in collusion but in cooperation and ready to take proper action in a major loss. Waiting one day for the insurance industry to marshal its forces will not usually adversely affect the final outcome of a fire investigation. In fact, a measured response enhances our chances of success. There are a lot of “pre-dig” steps that need to be tended to anyway. Contrarily, an uncoordinated, “against 921” process will often ruin everyone’s chances in getting to the root cause and responsibility of a fire. What does 921 say?
CHAPTER 27 CONSIDERATIONS
Chapter 27.1.2 of NFPA 921 advises: “Thorough investigations do not just happen, but instead are the result of careful planning, organization, and the ability to anticipate problems before they arise. Prior to actually beginning the scene investigation, numerous events, facts, and circumstances should be identified and considered before deciding how the investigation will flow. (See Chapter 14.)”
This section is immediately followed by 27.2: “Interested parties should be allowed to participate in the investigation and examine the evidence in its undisturbed condition. No party should remove evidence of materials without adequate notice to other interested parties.”
Obviously, not all interested parties may be initially known, but it is equally obvious that the property owner, our insured, will have an interest as will the insured’s insurer. Due care and preservation of the scene, even though it is processed, can be accomplished and other interested parties, such as potentially responsible parties, can be notified; sometimes the process has to be temporarily halted. The fine details of all of this are not the point of this article, however, so we shall move on.
What else does NFPA 921 discuss under chapter 27? Many pertinent things-secure the document and read this section as well as several other chapters. Here is a list of the points covered beyond the introduction in the “Management of Major Investigations” section:
An Understanding between Parties
An Agreement between Parties
Organization of the Investigation
Team Leader Committee
Organization of an Investigation Team
Securing the Scene
Adherence to NFPA 921 Practices
• • •
It is like the book says, “Good investigations are planned investigations.” Preplanning is an absolute must, and every team member needs to “think subrogation” because thinking subrogation should make us cognizant of various subrogation avenues, some having to do with fire code and various fire science issues. If your expert isn’t well versed in these fields, you are not going to maximize your recovery. On average, we can determine the cause of about 80 percent to 85 percent of the fires we are assigned. The 15 percent to 20 percent that end up undetermined are often those major losses where the fire scenes have been brutalized “after the fire has been extinguished” by those who should know better. Let us join together to educate the public fire sectors as to the private, yet public, interests that attend every fire. And let each of us on “the team” learn how to do our job by knowing the ins and outs of the global subrogation process. ■
■ MICHAEL R. CHANEY, CFI-IAAI,, is chief fire analyst for Premier Claims Investigations, Inc., based in the Houston, Texas, area.