Discovering the underlying cause behind a claim
Discovering the underlying cause behind a claim is not always easy. Complex claims require fair and careful handling to establish causation and confirm whether the loss is covered by the policy.
When an incident takes place insurers can appoint a variety of experts. The first is usually the loss adjuster whose role includes investigating and identifying the cause of the loss to determine whether or not it is covered by the policy.
Additional technical experts can often be brought in by the insurer where the cause may not be clear and further specialist investigation is needed. The independence of such an expert is imperative to ensure an impartial view of the circumstances and the cause of the event.
These forensic experts are tasked with determining precisely what happened and why, but causation is frequently not an open-and- shut case. When the process is left entirely to the insurer and its advisers, there is a risk of a decision that the policyholder may not consider equitable.
Consensus of opinion
A claims consultant can be appointed to ensure the policyholder's best interests are served in the claim settlement process.
When operator error caused a huge hydraulic press to malfunction, insurers were notified some three months later when inspection during a planned summer shutdown revealed significant damage that had been caused to cylinders and sleeves. As soon as the damage was discovered, replacement of one of the sleeves and cylinders began as quickly as possible in order to make the most of the planned interruption.
Echelon Claims Consultants was appointed and supported the policyholder in dealings firstly with the adjuster, then with various experts appointed by the insurers including forensic engineers and hydraulic specialists. We assisted in providing the experts with various information and documents they requested as well as persuading insurers that their position had not been prejudiced by late notification of the claim.
As the enquiries of the various experts drew to a conclusion, the insurers’ assessment was that the loss arose from a processing error and would be excluded under the policy wording applicable. Whilst the policyholder accepted that an operator error had occurred, our analysis of the facts resulted in a different interpretation of the policy exclusion, namely that it would not exclude this type of event. Insurers subsequently agreed with our findings and accepted the claim for damage to the press, noting that our explanation of the facts had been the key factor in their decision.
Some claims consultants also have industry specific knowledge and expertise, which carries additional weight when challenging other experts. A recent example is where the policyholder had notified a claim under an operational policy, which carried a significant deductible. When Echelon investigated the claim, it became apparent that it should have been pursued under a contract works policy – and under that policy there was a significantly lower deductible. This was then applied to give a satisfactory outcome.
Establishing cause is a complex business, which can go as far back as purchase of the equipment in question. The claim investigations will include reviewing documentation detailing the history of the equipment involved. Are there details of the specification of the product available, plans and contracts where appropriate and photographs? Once all the initial information has been collated and reviewed, we consider what further investigations might need to be made, such as whether the manufacturer knew what the product would be used for.
Those investigating would also want to know whether the equipment was properly tested and maintained, and whether there were any warning signs. Maintenance records should detail testing and quality assurance processes, and event logs, to show actions taken from the point at which the problem was discovered. An obvious party to go to is the original equipment manufacturer (OEM) because of their knowledge and prior maintenance of the machine.
On the other hand, the OEM will not be impartial if there is potentially some level of blame to be directed at them.
Establishing causation is far from straightforward. The right approach by the right experts is vital, not only for ensuring the claim is settled fairly, but also to benefit the future business. Once cause is established, the policyholder will ask: ‘How can we prevent this from happening again?’ If we discover something the policyholder can rectify to prevent similar losses, we will work with them to minimise future risk.