Your expert has just determined the origin and cause of a fire. But what does he/she do with that information? Do they stop there, or are they helping you establish your subrogation case? After all, subrogation is probably one of the reasons you initially hired them. The following are some facets of subrogation that your fire investigator should be exploring for you during the course of their investigation:
Does subrogation potential exist?
Negligence is defined as “a failure to exercise the care that a reasonably prudent person would exercise in like circumstances.” The first step in deciding if subrogation (“subro”) potential exists is determining if there is negligence. If so, who is the person or entity that breached their duty of care which resulted in the fire? I was once approached by a subrogation adjuster who said her expert determined a fire was caused by a space heater with an internal malfunction. Her question was, “That’s an act of God, right? There’s no subrogation, is there?” With the exception of cases involving natural disasters such as earthquakes and direct lightning strikes (and even some of those may not be an exception), there is nearly always an at-fault party.
This doesn’t necessarily mean that the negligence was intentional. I was speaking with another expert in a recent case where a vehicle caught fire and substandard repairs may have been the culprit. When the topic of subrogation arose, he said, “We’ll have to determine if the repairer’s actions were accidental.” Whether accidental or intentional, if a party contributed to the fire, they are at least somewhat liable. To what degree they are liable will, of course, be negotiated by you and the defendant later.
Negligence not only pertains to an action, but also a failure to act in an instance where they should have acted. For example, an HVAC contractor is working in a crawlspace and smells natural gas which is leaking from a deteriorated pipe connection. If they choose not to report it to the homeowner and/or natural gas service provider, they may be considered negligent when the house catches fire or explodes because they knew, or should have known, there was an imminent threat of disaster. In complex fires I like to work “backwards” to determine who is liable, for example: 1) The fire originated in the chimney chase. 2) The cause of the fire was cellulose attic insulation that came in contact with the flue pipe while a fire was burning in the fireplace. 3) The cellulose was able to contact the flue pipe because there was no attic insulation shield. 4) The cellulose insulation installer should have identified that there was no attic insulation shield and kept cellulose away from the flue pipe. 5) The fireplace installer should have installed an attic insulation shield. 6) Both the fireplace installer and insulation installer were negligent.
Do the state laws allow for subrogation?
Your fire investigator should become familiar with some of the basic state laws dictating subrogation. In some states, such as Virginia, if the insured is determined to be even 1% negligent, subrogation may not be possible.
Many fire investigators are not familiar with the term “statute of repose”. While statute of limitation refers to constraints for legal action based upon the elapsed time since the loss, statute of repose refers to the time period between the manufacture of a product or work performed, and the time of the loss. For instance, the statute of repose for State X is six years. A fire resulting from faulty wiring occurred eight years after the wiring was installed. Subrogation is not possible due to the loss occurring after the statute of repose. Conversely, if an electrician performed repairs to the eight year-old wiring two years before the loss, and those repairs caused the fire, then subrogation is a possibility. Your fire investigator should consider the statute of repose before making recommendations to investigate further. In the very least, if there is any question of whether the statute of repose has passed, they should recommend that you or your legal department research the matter. It must be noted that many states’ repose statutes contain caveats that can drastically change the cut-off date. If the statute of repose has passed, additional investigation would mean your money is invested where it cannot be recovered.
Are there contracts?
Any time there is a tenant/landlord situation, contractors who performed work, or repair facility involved, your fire investigator should be asking if a written contract was in place at the time of the loss. Despite the existence of third party negligence, the language of the contract will determine your ability to pursue subro. Are there hold-harmless agreements? Was it the property management’s responsibility to maintain the smoke detectors which didn’t operate during the fire? Was it your insured’s responsibility to repair and maintain the track hoe they leased? Was there a “handshake” agreement versus a written contract? These are considerations which may affect what, if any, evidence is retained and assist you and your fire investigator in determining the next steps in the investigation.
We’ve all heard fire investigators say, “My job is to determine the origin and cause of the fire- nothing else.” These investigators may be very good at their job, but they are lacking in customer service. This does not mean they should be helping you “gun” for a defendant or creating circumstances that do not exist. Rather, they should be identifying aspects of the loss that help establish liability. Ultimately, we are fact gatherers. As such, it is our duty to gather as much information as possible and assist in interpreting that information in order to make your job as simple as possible.