HVACi Releases 2019 Annual Claims Report

HVAC Claims Continue to Offer Property & Casualty Carriers a Monumental Opportunity to Realize Millions in Claims Leakage Annually  

HVACi’s 2019 Annual Claims Report showcases the significance of partnering with a third party subject matter expert in identifying and recapturing claims leakage

CHARLOTTE, North Carolina, February 20, 2019 — HVAC Investigators (HVACi), the nation’s leading provider of HVAC Refrigeration damage assessments for Property & Casualty insurance carriers, announced the release of its 2019 Annual Claims Report today. The report highlights and analyzes significant data and offers carriers compelling insight into opportunities for claim leakage control.

In 2018, 61% of the claimed perils investigated by HVACi were recategorized, with 16% of claimed systems found not damaged during an onsite assessment. This data illustrates that when carriers partner with a trusted, third party expert to evaluate HVAC losses, they can better control and reduce indemnity leakage. Further, the report delves into each policy line, a variety of causes of loss, and the year’s major catastrophes to reveal meaningful data points for Property & Casualty claim professionals. The analysis underscores the prevalence of HVAC claims in the insurance industry and features insights that will be valuable in setting indemnity reserves and making staffing decisions.

Distributed to Property & Casualty insurance carriers nationwide, the HVACi 2019 Annual Claims Report features data derived from many thousands of residential and commercial claims referred to HVACi by the nation’s top carriers in all 50 states. These claims encompass all major perils, manufacturers, and equipment types that adjusters encounter on a day-to-day basis.

This year’s report features popular topics carriers rely on, including Average Claim Accuracy, Repair vs. Replace Frequency, Reported vs. Actual Cause of Loss, and Frequency of Claims by System Type. In particular, claim trends such as Distribution of Claims by State and Reported Claims by Month by Peril offer key insights into setting indemnity reserves. 2019’s report also dives into data from the year’s most devastating catastrophes: Hurricane Florence, Hurricane Michael, and the California wildfires. The increasing trend toward large-scale catastrophes emphasizes the significance of implementing a standardized HVAC investigation process to minimize catastrophe claim leakage. Lastly, new additions to this year’s report include analysis on Repair vs. Replace by System Type, Cause of Damage Frequency by System Type, Equipment SEER Rating trends, and large loss claims examined by building type.

According to Matt Livingston, co-founder of HVACi, “The 2019 Annual Claims Report once again illustrates how significant HVAC claims are in the Property & Casualty insurance industry. This year, the average accuracy for a residential claim was $4,376 and $15,934 for a commercial claim. When you apply these figures to the many thousands of HVAC claims we see on an annual basis, there is over a billion dollars of potential accuracy.” This report will be immediately accessible to insurance professionals.

HVAC Investigators (HVACi) is the nation’s leading provider of HVAC and refrigeration damage assessments. Our prompt inspections, actionable reports, and national footprint help insurance carriers settle HVAC claims more quickly and with a higher degree of accuracy. To learn more about our services or to submit an assignment, please visit hvaci.com, email info@hvaci.com, or contact us by phone at (888) 407-5224.


Understanding HVAC Diagnoses – Acidic Refrigerant

Year after year, lightning is consistently the most frequently claimed peril for HVAC systems in homeowner’s claims, and it is also the most often misdiagnosed cause of loss, according to the HVACi 2018 Annual Claims Report. One symptom that is regularly misinterpreted as lightning damage is acidic refrigerant in the system.

Contrary to popular belief among contractors, it is not possible for lightning to cause acid in the refrigerant circuit of an HVAC system. Instead, this symptom is caused by one of three conditions:  wear and tear, improper repairs, or a lack of system maintenance. Because this common misconception is often cited as an indicator of lightning damage, it is important for adjusters to understand why this is not the case.

Compressor oil tested positive for acid

The oil from a compressor was drained during destructive testing and tested positive for acid

What Causes Acidic Refrigerant

When the refrigerant circuit is subjected to moisture, excessive heat, contaminants, or other impurities, it leads to a chemical reaction that creates acid. This condition is brought about by age (ordinary wear and tear), a lack of maintenance, or an improper system repair. As a system ages, leaks can develop in the copper coils that contain the refrigerant, providing an point of entry for outside contaminants. Additionally, the compressor’s components can break down due to age, introducing impurities into the refrigerant. Once contaminants or moisture enter the refrigerant loop, the resulting chemical reaction will create acid. Acidic refrigerant can also occur when the system overheats due to a clogged coil or a failed condenser fan. Excessive heat caused by this lack of airflow can accelerate the creation of acid within the refrigerant. Finally, when a compressor burns out because of the presence of acidic refrigerant and is ultimately replaced (but the lineset is not properly flushed or a new filter drier is not installed) acid may be reintroduced into the new compressor, leading to another burnout.

Clogged coil leads to acidic refrigeration

A clogged coil can lead to elevated temperatures and accelerate the creation of acid

Organic vs. Inorganic Refrigerant Acids

Depending on the type of chemical reaction, the acid generated will be either organic or inorganic in nature. The type of refrigerant, oil composition, and the type of contaminant all influence this reaction. While both types of acids are destructive to compressors, the types of damage they cause are very different.

One factor in determining the composition of the acid produced is the combination of refrigerant and oil. Hydrochlorofluorocarbon (HCFC) systems, such as those that contain the refrigerant R-22, typically use mineral oil to lubricate the systems. When moisture or contaminants enter these systems, the refrigerant breaks down, because the natural lubricating oil is more stable than its accompanying refrigerant. This results in the creation of an inorganic acid. Such acids result in abnormally high temperatures in the motor windings and/or discharge area of the compressor. These high temperatures break down the windings and lead to the loss of electrical resistance of the compressor, or a compressor burnout.

Acidic refrigerant damages compressor motor windings

The above compressor motor windings were damaged by compressor burnout due to acidic refrigerant

Conversely, R-410a and other hydrofluorocarbon (HFC) systems use a polyolester (POE) lubricating oil, which has a very different chemical structure from HCFC/mineral oil systems. While the refrigerant itself is more stable, the oil composition is less stable and can break down easily in the presence of moisture, air, or high temperatures. When POE oils (as opposed to the refrigerant) break down, the resulting chemical reaction leads to the formation of organic acids rather than inorganic acids. Instead of leading to compressor burnout, organic acids typically create a sludge that can clog small valves or cause the oil to lose its ability to properly lubricate the compressor. When this occurs, the compressor will seize.

Positive acid test

This system tested positive for acidic refrigerant

Regardless of composition, HFC (R410a) and HCFC (R22) systems still run the risk of developing inorganic acids that can burn out the compressor. This can occur when contaminants and impurities (those not moisture, air, or excessive heat) enter the refrigerant system.  If contaminants (such as metals from the degeneration of the compressor) enter the system, an inorganic acid will form, leading to compressor burnout.

What does this mean for adjusters?

As an adjuster, you should always be on the lookout for any clues that a claim may need further investigation. It is critical that you understand what signs could be “red flags” when reviewing claims for complex equipment such as HVAC systems. A contractor’s attestation that points to acidic refrigerant as an indicator that a system has been damaged by lightning should always prompt a deeper discussion.

If you have a claim involving lightning damage to HVAC equipment, and you want to ensure an accurate settlement, you can submit your new claim here.

An Introduction to Evaporative Coolers

Evaporative coolers are a popular alternative to traditional refrigerant-based air conditioning units in regions with hot, dry climates. While they are not seen as frequently as traditional split systems and package units, adjusters should still make themselves familiar with this type of equipment, particularly if they handle claims in regions that are ideal for evaporative coolers.

What Is Evaporative Cooling?

Before we get into how evaporative coolers work, it is important to understand the principles behind evaporative cooling. The evaporative cooling process begins with the evaporation of water (or other liquid) into the surrounding air. When the liquid turns to a gas, it absorbs heat, thereby reducing the temperature of the surrounding air.

Evaporative Coolers - How the evaporative cooling process works


The concept of evaporative cooling has been around for thousands of years. The ancient Egyptians used this process to provide cooling by soaking fabric in water and hanging it across the door to the home. As the air passed through the fabric, it absorbed moisture and created a cool breeze in the space (How Stuff Works).

Get your copy of our Evaporative Cooler Claim Guide here

Evaporative Coolers - An inside view of an evaporative cooler

How Do Evaporative Coolers Work?

Evaporative coolers harness this process to provide cooling to a space. Residential properties typically utilize a direct evaporative cooler. In this type of system, a pump circulates water from a reservoir to saturate a cooling pad. A fan then pulls air from the outside through the wet pad, initiating the evaporation process. The cool, humid air is then distributed to the home.

There are three common types of direct residential evaporative coolers:

  • Portable Coolers – These are designed to cool a small living area. They do not require professional installation or ductwork. Some even come with wheels to make them easy to move from room to room.
  • Side Draft – These systems are installed so that the air blows from the side of the unit directly into the home. This type of evaporative cooler is installed either in the window or through the wall. These may require professional installation, but no ductwork. They will only be able to efficiently cool one room; however, they can provide cooling for a larger room or area than a portable cooler would.
  • Down Draft – These units are installed on the roof of a home and can provide cooling to the whole home through the use of a duct system. These are the most expensive to install and can be difficult to maintain.

Where Are Evaporative Coolers Effective?

To effectively use the evaporation process to create cooling, the air must be dry enough to absorb the moisture. Evaporative coolers are only consistently effective in areas where the relative humidity does not reach over 60%. Once the relative humidity reaches 60%, evaporative coolers can, at best, only lower the temperature by 10 degrees. Even in dry climates, when it does rain the humidity will rise. An evaporative cooler should not be used during these periods of high humidity.

Differences Between Evaporative Coolers and Traditional Air Conditioning Systems

Traditional air conditioning systems use a coil filled with refrigerant to transfer heat, provide cooling, and remove humidity from a conditioned space. This type of cooling system is a closed process, where the air from the room is cycled back through the cooling process. Allowing air to escape from the conditioned space will reduce the efficiency of the system.

How a downdraft evaporative cooler provides cooling to a home

Instead of using refrigerant, an evaporative cooler uses a pump to circulate water to the pads and a fan to pull air through the pads. This adds moisture to dry air and therefore requires the space to be ventilated so the moist air has a way out. Evaporative coolers do not always use ductwork to direct the airflow, but when they do, the ducts must be larger than traditional air conditioners to account for greater flow of air from the evaporative cooler.

Common Evaporative Cooler Issues

Evaporative coolers require frequent maintenance. The cooling pads need regular cleaning or replacement to avoid air quality issues and odors. This should be done as often as once per month when the evaporative cooler has been running constantly. Additionally, sediment and minerals can build up inside of the cooler. These need to be drained and cleaned at least once per season to keep the system working year after year. These tasks can become tedious, particularly when the system is mounted on the roof.

Growth from a pad of an evaporative cooler that was not maintained properly

The pads for this evaporative cooler had not been cleaned in so long that the build up has reached the pad’s guards

Evaporative Cooler Claim Considerations

The regions that are best for evaporative coolers tend to have a high propensity for hailstorms. Because evaporative coolers are often located on the roof, they are frequently included in a hail claim. Unlike condensing units, these systems do not have a coil that can be easily damaged by hail. Often, the unit shows no signs of damage from a hailstorm. However, large hailstones can dent the metal panels of the unit. While this does not generally affect the system’s operation, it still must be considered to sufficiently return the insured’s system to pre-loss condition. Luckily, these panels can typically be replaced as opposed to replacing the entire unit.

A hail damaged evaporative cooler

Hail broke through the top panel of this evaporative cooler, the top panels required replacement to return the insured to pre-loss condition

Additionally, compared to a standard HVAC system, an evaporative cooler has much fewer electrical components that could be damaged by an electrical event. Frequently, the evaporative cooler is activated by a simple variable-speed switch, therefore there are often no integrated circuit boards in the system. While the pump and electrical blower motor can still be damaged by a surge event, these occurrences are much less frequent than electrical damage to refrigerant-based systems.

While evaporative coolers are not as popular as the more traditional HVAC systems, adjusters (particularly those who handle claims in the western half of the country) should know what to look for when handling this type of unit on a claim. For more information on evaporative coolers, get your free adjuster guide here.

If you have a residential or commercial evaporative cooler claim that you need assistance with, submit your new assignment here. 

The Effect of Corrosion on Repairing Hail Damaged HVAC Coils

The following article on “Corrosion and Hail-Damaged HVAC Coil Repairs”, written by Matt Livingston of HVAC Investigators, originally appeared on Property Casualty 360

Wind and hail losses are the most frequently claimed homeowner’s insurance peril, causing approximately $1 billion in damages each year (III). HVAC systems, particularly condensing units and package units, have a high risk of hail damage. These systems, which sit outside either on the ground or the roof, contain a condenser coil constructed of copper tubing covered in a layer of malleable aluminum fins that facilitate heat transfer from the refrigerant to the surrounding air. When hail (or any other foreign object) strikes the coil, these fins can be bent and flattened, eventually reducing the ability for the coil to transfer heat efficiently.

Get Your Free Copy: 4 Things to Look for When Assessing Hail Damaged HVAC Systems

To return the unit to pre-loss condition, the coil should be restored to its original state before the hail occurred. The most common repair option for this kind of damage is to straighten the coil fins using a fin-combing tool (provided that the fins were not torn as a result of the damage). However, if the aluminum fins are in a corroded state, they may be too brittle to be properly straightened.

Corrosion can prevent the condenser coil fin straightening as an option following hail damage

Hail damaged condenser coils can often be straightened using a fin combing tool

Corrosion of the coil

Although aluminum is ideal for outdoor applications, like any metal exposed to the elements, a condenser coil is susceptible to long-term corrosion. As corrosion begins to deteriorate the composition of the condenser coil, it weakens its integrity, making the fins difficult to straighten through traditional methods.  Certain conditions accelerate the corrosion of an outdoor coil, and may include the following:

Proximity to Saltwater

When saltwater comes in contact with the metals of a condenser coil, corrosion will be accelerated and pitting will likely occur. This air-borne saltwater can be carried by spray, mist, rain or fog, and can impact systems located more than 5 miles from the coast. Once the coil has begun to corrode (which can happen very quickly in a harsh coastal environment) the coil’s ability to be easily combed will be impeded.

Corrosion can be caused by a harsh coastal environment

The harsh coastal environment caused the severe corrosion of this condenser coil

Industrial and Urban Areas

During the combustion of coal and fuel oils, sulfur and nitrogen oxides are released. These atmospheric emissions are frequently found in both industrial and urban environments. The particles of these oxides are highly corrosive when they combine with oxygen, water, or high humidity conditions, which can lead to corrosion of the metals exposed to these harsh environments.  The common placement of HVAC equipment near these emission sites further exacerbates the issue.

Read More: Hail Damage to HVAC Condenser Coils 

Bi-Metal Coil Construction

Galvanic (or bi-metal) corrosion occurs when dissimilar metals come in contact with one another and an electrolyte (such as water).  When this condition exists (which it frequently does, due to common coil construction and their outdoor placement), corrosion will be accelerated in the “less noble” of the two metals.  Because the aluminum fins in the condenser coil are less noble than the copper tubing contained within, and the coil is frequently wet, electrons freely flow away from the aluminum to the copper, causing the aluminum to degrade over time.

Corrosion can cause the fins of a condenser coil to be too brittle to starighten

A hail damaged condenser coil that required replacement because the corroded fins were too brittle to straighten

Get Your Free Copy: HVAC Hail Damage Repair Hierarchy 

Sprinkler Systems

Water that has a low pH value, low alkalinity, or contains total dissolved solids such as inorganic salts, can accelerate condenser coil corrosion.  When untreated water (most often, well water) is used in lawn sprinkler systems, its effect on exposed metal surfaces could be problematic.  Condenser coils that are in the path of sprinkler systems using untreated water are subject to the potential of accelerated corrosion.

Although this system sustained minor hail damage, it was in the path of a sprinkler system, which corroded the coils and rendered them too brittle to be straightened

Although this system sustained minor hail damage, it was in the path of a sprinkler system, which corroded the coils and rendered them too brittle to be straightened

Cleaning Agents

Many condenser coil cleaning agents contain sodium hydroxide and are highly caustic. If these agents are not thoroughly rinsed (with neutral pH water) after cleaning the coil, they can deteriorate the aluminum fins quickly. Certain household cleaners, such as bleach, vinegar, and hydrochloric acid are corrosive to aluminum and should not be used.  Moreover, some cleaning agents which may be suitable for aluminum may not be advised for copper, thus, both metals must be taken into consideration when choosing the appropriate agent.

Corrosion Prevention

Protective coatings may prevent or slow coil corrosion in high-risk areas.  For this reason, condenser coil coatings have become a popular choice for HVAC equipment manufacturers and maintenance organizations. Coatings can be applied by the manufacturer during production or by a service technician after the system has been installed.

The coil coating that is applied in the factory is dipped and baked on, so that the application is even and covers the entire coil. If the coating is applied in the field, the coating is likely to be less evenly applied and therefore, less effective.  If the field-based coating is too thick, the coil’s fins may be difficult to straighten after hail damage. And because the entire coil may not be coated, corrosion can still occur. Finally, if the coil is not properly cleaned before the coating is applied (or if it is coated after corrosion has already begun), the full benefit of corrosion prevention will not be realized.


While aluminum is ideal for HVAC condenser coil construction, due to its natural corrosion prevention characteristics, no metal is completely immune from corrosion.  Insurance professionals would be wise to understand the factors that contribute to coil corrosion, and the steps that can be taken to mitigate its impact on HVAC claim settlement options.

HVACi Releases 2018 Annual Claims Report

Data Reveals the Elevated Potential for Claims Leakage on Daily and Catastrophe HVAC Claims

Trends in HVACi’s 2018 Annual Claims Report expose the risks facing insurance carriers on HVAC claims settled without the engagement of a subject matter expert

CHARLOTTE, North Carolina, March 14, 2018 – HVAC Investigators (HVACi), the nation’s leading provider of HVAC and Refrigeration damage assessments for Property & Casualty insurance carriers, announced the release of its highly anticipated 2018 Annual Claims Report today. The data included in the report affords insurance carriers an opportunity to analyze where claims leakage is occurring and how it can be reduced to improve accuracy. The information also provides valuable insights for setting expense reserves and making staffing decisions. Finally, this analysis highlights the importance of establishing a standardized process that includes a third-party subject matter expert to handle HVAC claims more consistently and with a higher degree of accuracy.

HVACi’s Annual Claims Report is distributed to Property & Casualty insurance carriers nationwide. It includes statistics from many thousands of actual claims assigned to HVACi by the nation’s top carriers. These figures are derived from the results of both onsite inspections and desktop reviews of residential and commercial claims (both daily and catastrophe) in all 50 states, for all perils, and across all major equipment types.

This year’s report includes the topics carriers have come to depend on, such as Claim Accuracy, Reported vs. Actual Cause of Loss, Repair vs. Replace Frequency, Recommended Action by Peril, and Frequency of Claims by Equipment Type. The report also provides data on three of the year’s most devastating catastrophic events — Hurricane Harvey, Hurricane Irma, and the California Wildfires — to help carriers determine where processes can be improved to reduce claims leakage on catastrophe losses. New additions to this year’s report also include a distribution of claims by state, five-year catastrophe claim trending, and average age of equipment by refrigerant type.

According to Matt Livingston, Co-Founder of HVACi, “HVACi’s 2018 Annual Claims Report is particularly meaningful for insurance carriers. The losses following the extraordinary catastrophe events of 2017 makes understanding how to better control indemnity leakage critical. This report conclusively proves that establishing a consistent process for HVAC claims that includes an objective expert can improve the accuracy of claims settlements.” This report will be made available immediately to insurance professionals.

HVAC Investigators (HVACi) is the nation’s leading provider of HVAC and refrigeration damage assessments. Our prompt inspections, actionable reports, and national footprint help insurance carriers settle HVAC claims more quickly and with a higher degree of accuracy. To learn more about our services or to submit an assignment, please visit hvaci.com, email info@hvaci.com, or contact us by phone at (888) 407-5224.

HVAC Investigators announces the acquisition of Donan Engineering’s HVAC Forensics division

HVACi announces the acquisition of Donan Engineering’s HVAC Forensics division
Consolidation of two market-leading insurance claim services to benefit combined customer base

HVAC Investigators (HVACi), the nation’s leading provider of HVAC damage assessments for insurance claims, announced yesterday the acquisition of Donan Engineering’s HVAC Forensics division. The consolidation of two market-leading brands in the insurance industry is anticipated to benefit the customer bases of both organizations through larger service areas, increased technical expertise, and quicker cycle times.

Damon Stafford, CEO of HVACi, stated, “We are excited about the opportunities this strategic acquisition will bring in advancing our leadership in the onsite HVAC assessment business and enhancing services for clients of both organizations. Not only will this provide current HVAC Forensics customers with a nationwide service, but it will also expand the technical depth of the current HVACi network of technicians.”

Donan’s HVAC Forensics division previously served 23 states. Those customers will now be able to utilize HVACi’s 800+ network of technicians and national footprint to assign any HVAC or refrigeration claim, anywhere, to one service provider. The breadth of HVACi’s technician network will also provide HVAC Forensics’ clients with quicker assessment cycle times. HVAC Forensics customers can anticipate additional benefits, such as access to real-time HVAC market pricing verification and availability, technical professionals following the closing of the claim, and HVACi’s dedicated large loss team.

The acquisition will be equally beneficial for current HVACi customers, according to Matt Livingston, HVACi’s President and Director of Vendor Relations. “The integration of Donan’s HVAC Forensics team and its extended technical expertise is a powerful addition to HVACi’s current network. Additionally, the growth of the network following the HVAC Forensics acquisition will allow HVACi to service loss locations at faster turnaround times.

HVACi and Donan are committed to providing a smooth transition for all customers and have worked diligently to ensure a seamless integration and customer experience. HVACi’s proven record of excellent customer service and dedication to maintaining the quality of support clients have come to expect from Donan, assures that there will be no disruption of service for either customer base.

Following the February 1, 2018 acquisition, all of Donan’s HVAC Forensics division will become part of the HVACi group of companies. All other lines of Donan Engineering’s business will remain within the Donan Engineering Company family.

HVAC Investigators (HVACi) is the nation’s leading provider of HVAC and refrigeration damage assessments.  Our prompt inspections and actionable reports help insurance carriers settle HVAC claims more efficiently and with a higher degree of accuracy.  If you’d like more information about our services or to submit an assignment, please visit hvacinvestigators.com, email info@hvacinvestigators.com, or contact us by phone at (888) 407-5224.

HVACi announces the acquisition of Donan Engineering's HVAC Forensics Division


Katie Rosenberg
Director of Marketing
HVAC Investigators
Phone: 888-407-5224 x114
Email: krosenberg@hvaci.com

Identifying water-damaged HVAC systems after a hurricane

The following article on “Identifying water-damaged HVAC systems after a hurricane”, written by Matt Livingston of HVAC Investigators, was originally published on Property Casualty 360.

As the floodwaters recede across the Gulf Coast following Hurricane Harvey, the arduous process of claims investigation begins to unfold. CAT adjusters from across the country are travelling to the impacted areas to assess property losses and assist insurance carriers in reaching accurate settlements.

For many adjusters, one of the most difficult property components to assess is the HVAC system. HVAC equipment is simply too expensive to indiscriminately write replacement estimates, and accurate pricing and availability is also difficult for adjusters to access. Moreover, determining if the equipment is damaged is itself a difficult task – it’s not always a matter of just turning on the system to determine whether or not it works. Many of the properties are still without power, and once restored, diagnosis may prove difficult without first determining the full extent of potential damages.

Related: HVAC compressor damage: Lightning or wear & tear?

Hurricane Harvey: Water Levels on Condensing Unit

This illustration depicts the amount of water that can accumulate before affecting a ground-mounted condensing unit. 

Outdoor equipment inspection

The first component to be assessed for damage is the outdoor condensing unit, typically located on the ground or on the roof of the property. If the unit is located on the roof, it is unlikely that it suffered any damage from floodwaters, although it should still be checked for any additional storm damage.

Condensing units are designed to withstand the elements, but muddy, rushing floodwaters can impact ground-mounted systems and lead to repair actions ranging from a simple coil cleaning to a full system replacement. The water can typically rise to the compressor terminals before causing significant damage, as seen in the illustration here.

When assessing the outdoor condensing unit, here are a few things to look for:

  1. Check for dirt and debris stuck in the condenser coil fins. Where the debris ends typically indicates how high the floodwaters rose on the unit.
  2. Water lines on the system’s back panel, its electrical compartment, or an adjacent building wall also provide clues as to how much of the condensing unit was exposed.
  3. Based on how high the water rose, determine which components the water may have compromised, such as the compressor, electrical compartment and fan motor.
  4. Look to see if the condensing unit shifted on the pad. If shifting did occur, check the copper lineset for any breaks or kinks. A breached lineset may have allowed contaminates to enter the refrigerant loop, which could damage the compressor and other components.

Related: Know these covered losses and exclusions after a collapse

Hurricane Harvey: Water Line on Condensing UnitWater line on condensing unit indicating how high the floodwaters rose

Indoor equipment inspection

Depending on the type of HVAC system, an indoor furnace or air handler may also be present. The location and orientation of the indoor equipment will influence the amount of damage the unit sustained. A horizontal furnace mounted in the crawlspace is typically more vulnerable to water damage than a vertical furnace in a lower floor utility closet or basement (unless the basement was completely flooded). Furnaces or air handlers mounted in the attic or on a second floor, on the other hand, may have no damage whatsoever.

Hurricane Harvey: Water Levels on a Horizontal Furnace

How various water levels can impact a horizontally-mounted furnace in a crawlspace

Water levels in horizontal systems

A horizontal furnace or air handler in a crawlspace is particularly susceptible to water damage. The amount of water that can inundate the crawlspace before impacting the equipment depends on how high the system is mounted (sometimes dictated by building code) above the ground. Once the water reaches the system, however, it will likely suffer significant damage, as seen in the illustration here.

Related: Texas’ No. 1 homeowners’ insurer responds to Harvey, offers tips

Hurricane Harvey: Water Levels on a Vertical Furnace

How a vertically-mounted furnace can be affected by floodwaters. 

Vertically mounted units

A vertically mounted furnace may be more protected from water damage. This orientation will not typically sustain significant damage until the water reaches the burner compartment (found in the middle of the unit, several inches above ground level), as seen in the illustration here.

Here are a few things to look for when assessing the indoor equipment for floodwater damage:

  1. Look for a water line on the outside of the furnace/air handler, on rigid ductwork or on an adjacent wall.
  2. Check the control board for water damage. Often (depending on when it was printed), the board’s writing will “bleed” when exposed to water, providing a useful clue in estimating the water’s reach.
  3. Examine any sheet metal ductwork for premature rusting or corrosion.
  4. Flex ductwork will sag and duct board will swell after getting wet, indicating floodwater contact.
  5. The insulation on the inside of the blower compartment will often be damaged by the water.

Related: Keys to identifying hail damage to HVAC condenser coils

Hurricane Harvey: Water Line on a Vertical Furnace

Water line on furnace indicating how high the floodwaters rose

Once you have determined (both indoor and outdoor) how much water damage an HVAC system sustained, you can begin the process of establishing a proper scope of repairs. It is important to keep in mind that even in severe flood scenarios it is rare that a full system replacement is necessary. In many cases, individual components can be replaced and systems can be cleaned to achieve pre-loss condition. Remember, a portion of the system (or in the case of packaged units, the full system) may be located high enough on the property to avoid the floodwaters from the hurricane, and could thus significantly influence the required scope of repairs.

For information on wind and lightning damage accompanying hurricane claims, you can access our adjuster toolkit for hurricane claims. You can also review a labeled split system diagram and a labeled packaged unit diagram, to assist in identifying components and their susceptibility to floodwater damage.

The Impact of HVAC Theft on Property Claims

One in every 235 homeowners files a theft claim each year. These damages average nearly $4,000 per paid claim, according to the Insurance Information Institute. A major contributing factor to these staggering theft claim statistics is HVAC theft.

Get your free copy of our HVAC theft claim guide here

HVAC theft of coils from multiple units

Theft of coils from multiple HVAC units

Why is HVAC theft such a common occurrence?

HVAC systems include valuable metals that criminals can easily sell. The placement of the units in accessible areas makes HVAC systems vulnerable to theft.  The condensing unit is located outdoors and is often placed out of plain sight, especially on commercial buildings, making it very easy for thieves to access without drawing attention to themselves. The desired components can be stolen quickly and easily, if the property owner has not taken preventative steps.

HVAC Theft copper lineset

Copper lineset cut and removed

The outdoor portion of the HVAC system contains valuable copper, which is a hot ticket item for thieves. Stolen copper can be sold to scrap yards for up to 90% of its current value. Copper theft has more than tripled in the past five years, and the amount of copper stolen annually exceeds $1 billion (20 Extraordinary Copper Theft Statistics). While the price of copper has declined slightly since its peak in 2011, the value has steadily increased over the past year to $2.91 per pound at the time of this writing (Investment Mine).

HVAC Theft

Whole condensing unit stolen from pad

Additionally, the rising number of copper thefts over the past 5 years led some states to enact stricter regulations on scrap yards, requiring locations to enforce more stringent requirements when accepting salvaged copper.  This has resulted in some thieves removing full units, as opposed to simply stealing copper coils and linesets (Copper Theft: The Next Gold Rush).


What considerations are required for a repair or replacement option following theft?

The main consideration following theft of HVAC components for determining scope of repairs is what components were stolen. However, the theft of a few components can create a domino effect, leading to a major repair or a full system replacement. A few additional factors need to be taken into consideration before determining the scope of repairs required to return the insured to pre-loss condition.

Amount of time passed since the theft

When a thief is stealing copper or the outdoor condensing unit, they will have to cut the lineset that connects the outdoor compressor to the indoor evaporator coil. If the lineset is left open, moisture and contaminants can enter the refrigerant loop and lead to a major repair or replacement requirement. The length of time the lineset can remain open depends mainly on the type of refrigerant used in the system. HCFC refrigerants, such as R-22, can typically remain open for a longer period than HCF refrigerants, like R410a. This is because HFC systems use polyolester (POE) oil in the compressor that is more impacted by moisture in the atmosphere than the mineral oil traditionally used in HCFC refrigerant compressors. Some newer R-22 compressors also use POE oils, so the age of the system needs to be taken into consideration, in addition to the type of refrigerant.

HVAC Theft: Copper Lineset Cut

Copper lineset cut from condensing unit compressor

Equipment Availability

Some theft damages may require a more extensive repair or even a full system replacement due to the availability of repair parts. This is especially prevalent in older systems. For example, if the coils are stolen and there are no longer compatible coils available from the manufacturer, the outdoor condensing unit may need to be replaced to return the insured to pre-loss condition. This could increase the recommended settlement amount by thousands of dollars.

Federal Regulations

Currently, there are federal regulations surrounding HVAC systems that are enforced by the Department of Energy (DOE) and the Environmental Protection Agency (EPA). The DOE regulates the minimum efficiency standard of newly installed equipment. The efficiency of an HVAC unit is rated by the seasonal efficiency ratio (SEER). If a split system is damaged by theft and as a result, the outdoor condensing unit needs to be replaced, the new unit must meet the minimum efficiency requirements (currently 14 SEER in the south and southeast, 13 SEER in the north). The SEER rating of the remaining indoor equipment must be taken into consideration because of the potential for SEER mismatch between new and old equipment.

HVAC Theft: DOE Efficiency Changes

Current EPA regulations are phasing out the production of net-new R-22 refrigerant through 2020. Though R-22 is still being produced and parts are still being manufactured, it is becoming increasingly difficult to find dry shipped condensing units that meet the current DOE SEER requirements. Moreover, R-22 systems cannot be retrofitted to use R410a refrigerant. This means that if the outdoor condensing unit is stolen or needs to be replaced, the indoor coil may also require replacement.

HVAC Theft: R-22 Phaseout Chart

How can we reduce the risk of HVAC theft?

There are many steps that property owners can take to reduce the risk of HVAC theft and, subsequently, thousands of dollars in insurance losses, including:

  • Improve or add lighting surrounding the unit to increase visibility. Because the HVAC unit is often tucked away out of sight on the property, outdoor lighting may not illuminate it, making it easy for a potential thief to access. An even better option is to install motion-censored lights, which will activate when someone walks in the path of the motion detector.
  • Install metal cages around the HVAC equipment. Manufacturers produce HVAC system specific security cages, which allow the unit to be locked away from theft, while maintaining the airflow required for the system to operate properly.
  • Incorporate an HVAC alarm system. These alarm systems typically connect to a standard security system. If power is manually shut off to the HVAC system, or the refrigerant pressure levels suddenly drop, it triggers the security system.
  • Add a video surveillance system and signs that notify potential culprits that the site is being recorded, which will deter many thieves. If a theft does occur, video footage of the crime can be accessed, which can potentially assist in finding the culprit.

HVAC theft prevention

Condensing unit enclosed in security cage to prevent theft

What does this mean for insurance carriers?

As long as HVAC theft remains a prevalent concern, it is critical that insurance carriers take all steps necessary to reduce indemnity leakage. This can be achieved by ensuring that claims are settled for a proper repair scope, as opposed to simply replacing every system subjected to a theft. Additionally, agents and risk managers can help policyholders to properly reduce the risk of HVAC theft and reduce the exposure of insurance carriers for theft claims.



Identifying Lightning Damage to HVAC Systems

Lightning strikes the earth about 100 times every second and can heat the surrounding air to up to 50,000 degrees Fahrenheit (The Weather Channel). As such a destructive force, it’s no wonder lightning damage caused $790 million in homeowners insurance losses in 2015 and an average of almost $8,000 per paid claim (Insurance Information Institute). Moreover, these amounts are expected to rise as the average number and value of electronics within a home increases.

The rising cost of lightning damage claims illustrates the importance to insurance carriers of properly identifying the peril prior to making a settlement decision. According to a study conducted by Vaisala of 14,000 lightning claims from a top insurance carrier, 30% had no recorded lightning strikes in the vicinity. If each of those claims were settled for the average settlement amount of $8,000, that would have resulted in over $33 million of indemnity leakage.

To make matters worse for claims involving HVAC equipment, many symptoms of age-related wear & tear are often misdiagnosed as lightning damage. We’ve put together an overview that illustrates the symptoms of lightning, surge, and wear & tear damages, to help adjusters settle lightning claims with a greater degree of accuracy.

Lightning Damage

The outdoor placement of the condensing unit or packaged unit lends itself to direct lightning damage. This type of damage is almost always limited to the outdoor equipment. With confirmed lightning damage, there will always be visual evidence of arcing and charring of the equipment casing and/or housing. Additionally, multiple outdoor electrical components will be damaged, such as the contactor, capacitor, compressor, and fan motor.

Lightning Damage to the Disconnect Box

Visual evidence of a direct lightning strike to the disconnect box

While lightning damage is the most frequently claimed cause of loss to HVAC equipment, lightning is very rarely the actual peril to the system. Most often, HVAC systems reported as a lightning damage are in fact damaged by wear & tear, surge or, perhaps worse, not damaged at all.

Surge Damage

A voltage surge occurs when there is a spike in the home’s or business’ electrical current. While this could be caused by a nearby lightning strike, it could also be the result of the utility company switching grids, or even internally when larger appliances turn on and off (State Farm’s Simple Insights).

Lightning Damage

Surge damage to the capacitor, contactor, and wiring

Surge damage in an HVAC system is typically much less severe and more common than direct lightning damage. A surge could cause damage to multiple components and often includes the contactor and capacitor. Additionally, large portions of wires will often show visual signs of overheating in the form of melting and/or arc marks in surge events.

Wear & Tear Damages

Many symptoms that are actually caused by age-related wear & tear are often misdiagnosed as lightning damage to an HVAC system. In fact, in 2016, 48% of claims reported as lightning damage were found to have failed due to wear & tear following an objective damage assessment.

Claimed Lightning Damage - Actually Wear & Tear

Wiring charred within 2″ of the connection to the capacitor indicating there was a loose connection

One major indication that the damage was simply caused by age-related wear & tear is when a single component fails, such as the compressor only or capacitor only. Another sign of wear & tear is charred wiring within 2” of the component connection, as this is typically a sign of loose wiring connections. The final misdiagnosed lightning symptom is acid in the refrigerant. Acid builds over time when moisture or contaminants enter the refrigerant, and does not occur instantaneously following a lightning or surge event.

The frequency of lightning claims (and often their misdiagnosed symptoms) underscores the importance of engaging an objective expert prior to making a coverage decision. By ensuring that lightning claims are settled accurately, insurance carriers can reduce their risk of indemnity leakage.

The Rising Wildfire Risk And Property Claims

Wildfire risk has been on the rise throughout the past decade. The first four months of 2017 have shown an increase of 20% in the number of wildfires compared to the beginning of 2016 (III), and 2015 set a new record of 68,151 wildfires burning 10,125,149 acres. Wildfires are a natural way for the ecosystem to remove dried brush, add nutrients to the soil, clear out invasive weeds, and allow sunlight to reach the floor of the forest, but climate changes and increased development have caused this natural phenomenon to become catastrophic with immense financial implications to the property and casualty insurance industry.

Wildfire Risk: fire damaged electrical componentsPackaged unit irreparably damaged by fire

One of the main reasons for increased wildfire is due to a change in climate in the United States.  According to the National Wildlife Federation, warming temperatures have led to an earlier seasonal snowmelt. Due to the earlier snowmelt, the ground and vegetation dry sooner, leading to a longer wildfire season. Additionally, the warmer temperatures have increased evaporation rates, which leads to drier conditions and more wildfires.

Get Your Adjuster Guide to HVAC Smoke/Fire Damage

Another contributing factor to the increased wildfire risk is the expansion of urban development in wildland areas. According to Property Casualty 360, since 1990, 60% of all new housing units in the United States were constructed in wildland-urban interface zones. These zones are areas where people are inhabiting undeveloped natural lands, such as forests and grasslands. With more people living where wildfires naturally occur, wildfire risk management has become increasingly complex (US Department of Agriculture). Additionally, researchers at IBHS have discovered that windblown embers cause the most damage to homes during wildfires, particularly when homes are in clusters less than 15 feet apart.

2017 has already seen a large increase in wildfires. Long-term drought and high winds created a wildfire of epic proportions in parts of Oklahoma, Texas, Kansas, and Colorado in early March. It is estimated that the fires in Texas burned over 2 million acres (NOAA).

Wildfire Risk: Soot and Ash Clogged Condenser Coil

A condenser coil clogged with soot and ash following a wildfire 

This increased wildfire risk has immense financial implications for insurance carriers nationwide. Insurance Information Institute estimates insured wildfire losses at over $2 billion for 2015, and the wildfires that ravaged Gatlinburg, TN in the fall of 2016 caused over $500 million in property damages. In the Western United States alone, CoreLogic estimates almost 29 million properties are currently in a residential wildfire risk zone.

An important factor for insurance carriers to keep in mind, when attempting to control this increased wildfire risk, is that while wildfires can be potentially catastrophic for homes directly in the path, many HVAC systems that are subject to smoke damage from wildfires can easily be remedied by a simple repair.  For HVAC systems with claimed damage from wildfires in 2016, 94% of the systems could be returned to pre-loss condition with a repair, 4% were in proper working condition at the time of the onsite assessment, and only 2% required a full system replacement.

The most common repair action for losses reported due to wildfire is cleaning the condensing unit coil to remove ash and debris. The average cost for this repair in 2016 was $255. In some instances where the air handling unit was running during the wildfire, the ductwork and/or evaporator coil also required cleaning. The average cost for this repair in 2016 was $437. In extreme wildfire cases, where the fire actually reaches the home, individual components or the entire outdoor unit may need to be replaced. Finally, there are also instances where the fire compromises the entire system and either renders the system irreparable, or the repair cost exceeds that of the replacement. However, it is important to keep in mind that this scenario is very infrequent occurring only 2% of the time last year.

Wildfire Risk: Soot and ash inside of a flex duct

Soot and ash inside of a flex duct

Additionally, not all HVAC systems claimed as a wildfire loss are, in fact, related to Smoke/Fire damage. Out of the systems assessed by HVACi in 2016, 13% were found damaged due to age-related Wear & Tear, and 4% of the systems assessed for wildfire claims were found not to be damaged.

As this historical evidence shows, it is important for carriers to consider all options before simply settling for full system replacement on any claim, but particularly in the case of wildfires in the area. For more information on repair options for Smoke / Fire damage to HVAC systems, access your copy of the adjuster guide here.