Category: Adjuster Tips

Adjusters, Don’t Let Complex HVAC Systems Be Your Claim to Shame

Four Consequences That Can Occur When You Settle a Complex HVAC Claim Alone

As an adjuster it’s your job to handle claims as quickly and accurately as possible. But the second part can be a lot more difficult if you aren’t familiar with the equipment being claimed – regardless if it’s a single residential HVAC system damaged by a lightning strike or dozens of HVAC systems at a shopping center that were damaged during a hailstorm.

Here are four consequences that can occur when adjusters try to handle claims that include complex HVAC systems without assistance from an objective expert.

Not providing a fair settlement by either overpaying or underpaying can have negative consequences for both the insurance carrier and the policyholder. Photo Credit: “Calculator” by Steve Buissinne / CC BY 4.0

 

1) Overpayment and Underpayment of Claims

Claims need to be settled fairly and accurately. That means the policyholder is issued the right amount of money – no more, no less – required to bring the HVAC system back to pre-loss condition.

Overpayment means the policyholder was awarded more than was needed for an accurate settlement, which can happen by paying for a replacement when the system could have been repaired. This results in claims leakage for the insurance carrier and could increase premium costs for the insured.

Underpayment stems from a policyholder not being provided enough money to adequately make repairs or replacements, though they should have been covered by the policy. This could cause claims to be reopened because the insured cannot get the necessary work completed – and that could risk losing your customer if you don’t take care of them.

Overpaying and underpaying could negatively impact the insurance carrier and your customer service reputation. A third-party vendor that is knowledgeable in HVAC systems can help you determine market value to ensure adequate settlements. A qualified expert can also confirm if a repair or a replacement is warranted before settling the claim.

 

2) Paying for Equipment that Was Not Damaged by a Covered Peril

Just because there was a storm with lightning in the area around the time an HVAC system sustained damage doesn’t mean it’s the true cause of loss. Adjusters can get caught in a pitfall of paying for equipment that was not damaged by a covered peril by not having the knowledge and experience to verify claim data.

To ensure an accurate settlement, adjusters need to be able to examine the equipment information and claim details to distinguish if the damage occurred from some other peril, was due to age-related wear and tear, or didn’t happen at all. Claim assessments have frequently had findings that some claimed equipment wasn’t damaged, had a loose connection or mechanical failure that required a minor repair, or was damaged by a non-covered peril.

Instead of guessing, seek the help of experts of both HVAC systems and insurance claims. They can provide a comprehensive inspection and use their knowledge, experience, and the claim data to obtain an accurate cause of loss for the HVAC system and a recommended resolution.

Replacements are sometimes necessary, but make sure what you’re settling for is of Like Kind and Quality to what a policyholder had before.

 

3) Settling for Equipment That Was a Betterment or a Downgrade From What Was Installed

If a replacement for the entire system, or even a small component, is warranted, “Like Kind and Quality” is the overarching goal for adjusters when settling claims. Adjusters who don’t know the changing regulations on HVAC systems and aren’t familiar with the various manufacturers’ products could settle for equipment that is better or not as good than what the policyholder previously had installed. And even if it is a Like Kind and Quality replacement, local contractors may be providing estimates and recommendations that don’t align with market value, unbeknownst to the insured or you.

HVAC system experts deal with this equipment regularly and know how to compare what could seem like apples to oranges to people unfamiliar. Someone in the know will also have access to manufacturer pricing that details when components are available and their market value.

 

4) Getting Told You Should Have Used HVACi

It happens. You make a mistake, and someone tells you about a way it could have been avoided. But now you won’t fall into the above traps because you know you don’t have to handle claims with complex HVAC systems alone, thanks to HVACi.

HVACi is a team of technicians and HVAC experts who are ready and willing to offer support on your next HVAC claim. They use their experience and knowledge to inspect the equipment, find an accurate cause of loss, and make recommendations for repairs and replacements, plus they have databases to ensure you are settling for an available component at market value.

Get the help you need to settle claims promptly, accurately, and fairly.

Don’t Let Improper Installations and Repairs Hide in Your HVAC Claims

An attic caught fire because the air handler was wired incorrectly. Ductwork developed microbial growth because it was re-routed improperly. Hail damaged outdoor HVAC equipment because components were missing. These are a few real-life claims that adjusters assigned HVACi that resulted in findings of improper installation and faulty workmanship.

How adjusters resolve these claims, including settling with the policyholder, subrogating with a third-party’s insurance carrier, or dismissing them because of contract exclusions, depends on the individual policy. HVACi remains objective by purposefully not being involved in how the claim is settled, instead providing all the information in the final assessment report needed for whichever way an insurance professional decides to proceed. But it’s important adjusters are aware of how improper installation and faulty workmanship have appeared in HVAC claims to handle them as accurately as possible and to avoid potential claims leakage.

An acid test revealed the refrigerant was acidic after a contractor replaced the condenser coil.

Claim filed after faulty workmanship

Contractors working on HVAC systems should be licensed professionals with training and certifications.

In one example of improper installation, an insured told an adjuster that the compressor locked up following a coil replacement. HVACi found the system refrigerant was acidic, there was moisture present in the refrigerant circuit, and a filter drier had not been installed. These all go against industry best practices.

Among the options for this claim are that the adjuster may have settled with the policyholder or may have had to start subrogation and attempt to collect money from the party at fault. Regardless, the damage could likely have been prevented by having a certified technician handle the initial coil replacement.

The insured claimed the peril as high voltage surge, but the HVACi technician noticed the wire insulation was cut and caused voltage arcing.

Claim filed with a different cause of loss

In many instances, claims were filed with a different peril listed, but HVACi’s comprehensive assessments determined improper installation or faulty workmanship caused the damage.

In one example, a policyholder was claiming high voltage surge. It was discovered that when the heat exchanger was replaced not all the screws were returned, which prevented the panels from closing. Wires were also found to be modified and insulation was cut, which left sections exposed and caused voltage arcing. Assessors determined the faulty workmanship proved to be a safety hazard and recommended replacements if coverage was afforded.

In another example, an insured claimed lightning damaged a system. During our assessment, the system was functioning properly. However, someone had rerouted the fluepipe under the fresh air intake, which caused gases leaving the property to cycle back through the system. Though the system was undamaged by lightning, the results of the faulty workmanship posed a safety hazard. Repairs were recommended, though it would be up to the adjuster to decide how to proceed.

Regardless of how these claims were settled, adjusters should ensure claimed equipment is thoroughly inspected to confirm causes of loss and that there aren’t other concerns.

The wrong wiring connected to an air handler resulted in a fire that burned an attic joist.

Claims filed for ensuing damage

Sometimes the improper installations or faulty workmanship causes damage to something other than the component that was serviced. This may lead to a claim for the ensuing damage, which may or may not be covered by the policy depending on the circumstances and details of the claim.

In one instance of this happening, an attic caught fire after wiring with the wrong amp was connected at the air handler. The improperly sized cord overheated and caught fire, which burned a joist in the attic but didn’t damage the air handler. The adjuster in this case would have to consider the ensuing damage from the overheating.

This incident could have had a much worse consequence, but it also could have been prevented had the wires been properly installed.

Large loss claims with equipment damaged by something else

HVACi has investigated many large loss claims that were for multiple hail-damaged HVAC systems but also included equipment that was no longer in use or missing components.

In a claim regarding a shopping center that had more than 100 HVAC systems, nearly 10 had missing components, such as paneling, motors, or condenser coils. Some of the HVAC systems had been out of operation with no sign of hail damage, but they were included in the claim.

In another claim, there were 79 systems damaged by hail, but two others had exhaust fans missing top covers that left the motors exposed, which caused damage that may not have occurred otherwise.

Assessors must inspect all systems listed in the claim. If they weren’t all closely examined, they may have been claimed as needing repairs or replacements that shouldn’t have been covered by the policy.

What can policyholders and adjusters do?

Your insureds may not always know something was done improperly to cause the claim, and if they did, they may not always admit it. It’s important adjusters receive a thorough inspection of the damaged equipment to confirm cause of loss and scope of the damage. Adjusters should also make sure they know what is covered in the policy and under what conditions.

A policyholder can sometimes be convinced by a contractor or a friend that he or she knows how to make the needed repairs or installations – and find out too late that it wasn’t the case. Ensuring policyholders use licensed contractors to make necessary repairs and installations may have prevented some of these claims from ever being filed.

HVACi is here to help

Our technicians are vetted for their skills knowledge prior to being hired by HVACi so that when we assign them to gather data for us, we trust them to know what to inspect so we can then write accurate reports. That will, in turn, help you decide how a claim should be handled, whatever the outcome may be.

Have a claim that may have been related to improper installation or faulty workmanship? Our team of experts will use just the facts to deliver accurate inspections and recommendations.