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Hurricane Havoc: Damages in Storm-Related HVAC Systems Claims

The following article on “Hurricane havoc: Damages in storm-related HVAC systems claims,” written by Jay Dykstra of HVACi and StrikeCheck, was originally published on Property Casualty 360.

It’s easy to understand why hurricanes have such a bad reputation compared to other thunderstorms. The images of large, rotating storms created over the warm, tropical waters can be alarming, especially factoring in the minimum 74 mph winds and the storms’ erratic paths. They can impact anything in their way, including residential and commercial HVAC systems. But insurance professionals shouldn’t assume a hurricane is the cause for all HVAC system damage during that timeframe because there are issues to look for and to be wary of following a storm.

 

Condensing unit takes the brunt

Hurricanes and tropical storms cause more costly damage than inland storms because of flooding from heavy rains and storm surges and damage from hurricane-force winds. A 2019 report from the Congressional Budget Office estimates that expected annual economic losses from most types of damages caused by hurricane winds and storm-related flooding total $54 billion for households, commercial businesses and the public sector.

Hurricanes, depending on their category, can have wind speeds of 74 mph to upward of 157 mph, according to the National Hurricane Center. It’s no wonder that wind is the main concern related to HVAC systems.

Condensing units on HVAC split-systems have multiple components prone to hurricane damage.

 

The condensing unit is the component most at risk for hurricane winds damage in split systems, which are the most common residential HVAC systems. The condensing unit is always outside and can be on a concrete or plastic pad, elevated on brackets, or installed on the roof. The all-in-one package units, which are most common for commercial properties, are also susceptible to wind damage.

The most minor wind-caused damage is dust and debris clogging the condenser coil, which surrounds the compressor on the condensing unit. This restricts airflow, which, over time, could impact the condensing unit’s efficiency. If the condenser coil aluminum fins aren’t dented, a policyholder can get them cleaned using a special cleaner and a hose. (Note for your insureds: Pressure washers and cleaners meant for bathtubs could cause more damage to the coils and should be avoided.)

The most common scenario with wind and condensing units, particularly for residential systems, is that the condensing unit could be blown over or pushed off its pad. The damage this causes are electric whip and disconnect pulled apart, cabinet damage, coil damage, or kinked or broken refrigerant lines. This may require an insurance carrier to settle for some equipment repairs, but a full replacement isn’t likely.

Wind can cause package units to fall to the ground and be damaged, frequently requiring replacement.

 

On the other hand, in commercial systems where package units are on the roof, the equipment could be ripped off and thrown to the ground. If this is the case, a full replacement is often needed, but adjusters should be mindful to ensure models are like kind and quality and pricing is in line with market rates.

Wind can also be the culprit related to another peril: foreign object impact because tree branches or other heavy objects can be picked up and damage all or part of the condensing unit. This can dent the malleable aluminum fins. If the condenser coils aren’t spine fin or microchannel coils, they may be able to be combed, which is considered a minor repair that can be completed in a matter of hours.

If the fins are torn, or a type that’s not able to be combed, bringing the policyholder to pre-loss condition still might not require a full replacement, though some components may have to be switched out. Cause of loss is frequently easier to determine with foreign object impact; although, it’s often more difficult to evaluate repair options and their cost-effectiveness.

 

A surge in water-related claims

Flooding is a frequent consequence of hurricanes either because of the onslaught of precipitation falling in a short time or because of the storm surge that can sometimes increase the water level by more than 30 feet along the coast. Standard homeowner’s insurance policies typically don’t cover surface water, groundwater or general flooding. On the other hand, water from wind-driven rain that causes damage to HVAC systems may be covered in some scenarios. It’s important adjusters know where the water is coming from to accurately handle the claim.

Flooding isn’t usually covered by homeowner’s insurance policies, but it can still cause major damages. (Credit: “Hurricane Harvey Flood Army,” by Andrewtheshrew /CC BY 4.0)

 

Water at the bottom of the condensing unit is typically not cause for concern; however, water up to the compressor may require some repair. Once water reaches electrical components, repairs are much more challenging, especially if it’s saltwater that causes corrosion. Horizontal air handlers or furnaces found in a crawlspace are more likely to be damaged because the rising water can reach the components much faster.

Ductwork, furnaces, and other indoor equipment could also be claimed for water damages, especially in circumstances where a roof is damaged or ripped off.

 

Maybe it’s a maintenance issue

With the influx of claims that occurs following a weather-related event, it’s easy to have a non-covered peril slip through, which could result in unnecessary claims leakage for the insurance carrier.

HVACi, which offers claim assessment support nationwide, analyzed the assigned claims from Hurricane Dorian, which took place Aug. 24–Sept. 10, 2019. The storm caused an estimated $1.5 billion in losses, both damages and economic, in the United States.

Clogged condenser coils are likely a maintenance issue, and not related to a hurricane.

 

According to the HVACi 2020 Annual Report, 59% of the systems claimed as damaged from Hurricane Dorian didn’t have hurricane-related damages. Of the 36% of claims reported as being wind damaged, only 11% of them had wind as the actual cause of loss. Nearly half of claims stemming from Hurricane Dorian were determined to be age-related wear and tear not typically covered by a policy. Adjusters should be mindful that wear and tear is just as likely a cause of loss as repercussions from a hurricane.

This year, forecasters have predicted more storms like Hurricane Dorian. While it’s easy to get overwhelmed with the influx of claims, insurance personnel should ensure they consider all the factors during assessments on HVAC system components before making settlements to ensure accuracy and that they are not creating unnecessary claims leakage.

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Find Cause of Loss in a Flash with This Guide

Annually, more than 25% of claims assigned to HVACi have lightning as the claimed cause of loss, but wear and tear or high voltage surge are more likely to be the actual peril that caused damage. This could affect how the insurance carrier will settle with the policyholder. Differentiate between these causes of loss more accurately with this guide that outlines frequent characteristics of HVAC system damages and whether they’re more likely to be related to lightning, high voltage surge, or wear and tear.

Fill out the form to get your copy to reduce the chance of you settling for the wrong peril again.

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Lightning, High Voltage Surge, or Wear and Tear? Be Able to Tell the Difference When Handling HVAC System Claims

Your policyholders are prone to blaming lightning when an HVAC system fails because of an electrical concern. In 2019, 26% of residential claims assigned to HVACi had lightning as the claimed cause of loss. But high voltage surge and age-related wear and tear are just as likely, if not more, to be the true culprits – and only one of those may be covered, depending on the property insurance policy. Adjusters shouldn’t assume lightning is the cause of loss based on a policyholder’s contractor and should rely on comprehensive assessment results to decipher which peril is related to the HVAC claim they are working on.

HVACi assessed hundreds of residential HVAC claims in 2019, but most of those claimed as having lightning damage were found to have a different cause of loss.

 

While more than a quarter of the residential claims assigned to HVACi had lightning as the claimed peril, it accounted for actual cause of loss in only 1% of the claims. On the other hand, high voltage surge was listed in the claims 10% of the time and was found to be the actual cause of loss in 18%. Wear and tear proved to be even more prevalent, being claimed in 3% and found to be the actual cause of loss in 32% of the claims.

Figuring out what caused the damage shouldn’t spark debate but be based on the facts of the claim. Here are some of the methods our HVACi team uses to tell the difference.

 

Differentiate Between the Perils and the Damage They Cause

Knowing what happened to an HVAC system’s electrical components starts with understanding the different perils and what resulting damage is common.

 

Lightning

Lightning is prevalent during summer storm months and is a naturally occurring electrostatic discharge formed by a charge imbalance. That occurs when clouds have a negative charge and are met by something with a positive charge, including tall objects on the ground or from other clouds. The result is a current passing between the two. Most lightning takes place within a cloud or between two clouds; therefore, damage by lightning hitting something on the ground is rarer.

The most severe lightning damage is caused by direct strikes to outside equipment and is evident by burning, charring, and melting. Lightning’s large amount of energy needs to exit equipment, which causes ghosting and arcing. Multiple components, including non-electrical ones, sustaining damage is a common byproduct of a strike, and there would be an obvious trail of visual evidence where the lightning traveled from an outside point.

Direct lightning strikes occur on outside equipment with evidence of burning, charring, or melting.

 

High Voltage Surge

High voltage surges are less powerful than lightning strikes, though they can cause a similar level of damage to HVAC equipment. Surges come from sudden excessive voltage lasting a few nanoseconds to several minutes. Enough of an increase can produce immediate damage on an HVAC’s electrical system. Switching or popping circuit breakers can also create small surges. Multiple small voltage changes could trigger similar damage over time, though that constitutes as wear and tear.

Surges could be a consequence of lightning striking an electrical line elsewhere; conversely, most surges occur when devices that consume large amounts of electricity, such as HVAC systems, generators, or other motors, are turned on or off. Offsite, transformer problems and power grid switching at electrical substations could also cause surges.

One difference between it and lightning is that a surge is confined to an electrical system and uses wiring as its path. High voltage surges don’t have enough energy to melt wires from inside out over long segments of wiring like lightning. Though multiple components may sustain damage, it isn’t visible and requires Ohm meter testing to verify.

Excessive voltage could cause immediate damage to an HVAC’s control board.

 

Wear and Tear

If damage takes place at the connections, it’s a good sign wear and tear is involved. The connections may be loose or have rust or corrosion, which could cause overheating. This can melt or char wire insulation over a long period of time. But lightning or surges wouldn’t affect connections.

Wear and tear damage takes place over time, compared to the other two perils that are instant. A means of testing it is by checking the refrigerant and coils. Acid is frequently misdiagnosed as a symptom of lightning or high voltage surge, but refrigerant can only become acidic over extended time due to moisture, mixed refrigerants, and other contaminants. Lightning can’t acidify the refrigerant in such a short time. Dirty coils are also symptoms of wear and tear versus damage from lightning or surges.

 

Frequently Damaged HVAC Components

Where damage is initiated may indicate the peril.

Split systems, which are the most common systems in residential claims, have some components that are susceptible to direct lightning strikes. In the condensing unit, these include the compressor motor, capacitor, contactor, and fan motor. Furnace components that are susceptible to indirect strikes or surges are the thermostat, furnace control board, blower motor, gas valve, draft inducer, condensate pump, and auxiliary heat pumps.

Package units, which are most used in commercial, can be more susceptible to lightning strikes and surges because all items are outside. Components at risk for direct strikes are the cabinet and fan grille, the condenser coil, the fan and fan motor, and the disconnect. Equipment prone to indirect strikes or surges are the compressor motor, blower motor, control board components, fan motors, gas valve, draft inducer, and disconnect.

 

Block the Electricity Flows

Policyholders can reduce their risk of electrical damages from lightning or high voltage surge using surge protectors. Lightning rods direct lightning to the ground to keep it from striking structures or other objects that couldn’t handle that amount of energy.

To protect against voltage surge, unplug electronics before the power is restored following an outage. Items likely to be damaged in a surge include consumer electronics; kitchen and small household appliances; home entertainment equipment; and the electrical components of HVAC systems, including sensitive circuits and control boards.

Policyholders can prevent electrical damages from lightning or surges by simply unplugging items before power returns during an outage. Photo Credit: Clint Patterson / CC BY 4.0

 

Don’t Risk Settling with the Wrong Peril

Assessing for which peril caused damage can be difficult. And settling with the wrong one may mean covering something that shouldn’t have been. Let the experts at HVACi help by completing the assessments for claims related to HVAC systems to ensure accurate results.

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Scary Story: The Wrong Compressor

Want a scary story that could keep you up at night? Have you heard the one about an adjuster settling a claim on such incorrect information that it leads to more damage? This isn’t an urban legend but a real claim that HVACi was called in for after the fact to find a more accurate resolution. You won’t believe what the policyholder had to go through or how much claims leakage it cost the insurance carrier. Fill out the form to read for yourself what went drastically wrong and how it could have been prevented.

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Hurricane Claim Case Study

It’s common knowledge that hurricanes can leave millions, if not billions, of dollars-worth of damages in their wake. But just because a claim says the damage was caused by a hurricane doesn’t make it accurate. This case study about one such hurricane claim illustrates how a policyholder’s contractor misidentified the true cause of loss and misreported a market value settlement amount. Fill out the form to find out how the HVACi team knew the hurricane wasn’t to blame so you can look for some of the same clues as you are handling claims.

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Just the Facts – How HVACi Puts its Words into Actions to Handle Insurance Claims Related to HVAC Systems

Just the Facts is HVACi’s tagline for a reason. It’s something we believe in and achieve from the moment insurance personnel put their trust in us to handle their assessments for claims related to HVAC systems all the way until we provide them final reports with our recommended claim resolutions.

HVACi operates using its proven process to ensure accuracy and objectivity for every claim. Among the ways we do that are by selecting experienced personnel, staying current with industry best practices and regulations, and peer reviewing our work to avoid error. These methods guarantee that we base our recommendations on facts to empower adjusters to make accurate and fair settlements for their policyholders.

 

Choosing Qualified Personnel

Our technicians are our eyes and ears at an insured’s property, thus we verify the people we send have the necessary skills and experience to perform the assessment. To even be considered for a job, technicians must have at least 5 years of experience, an EPA Type II or Universal Certification, and a valid state and local HVAC contractor’s license if required by area jurisdictions. We follow up to make sure these qualifications are kept up to date. They must also pass technical exams. We have an additional measure of requiring all technicians to pass criminal background checks. These steps help certify that the technicians have expert knowledge of the equipment they’ll be assessing and will maintain the high level of customer service you have come to expect from us.

Technicians must also follow HVACi guidelines against soliciting work from the insured. That includes trying to promote their businesses to make the needed repairs or replacements related to that particular claim or any future ones. Technicians are also not allowed to discuss their findings with the policyholder. As HVACi only recommends claim solutions and doesn’t have any decision-making authority, it would be inappropriate for anyone other than the adjuster to discuss the claim with the insured.

Our company’s technical team has hundreds of years of contractor field experience and forensic technician experience.  The technical team’s knowledge base in documenting inspections, servicing equipment, and repairing and replacing systems in both residential and commercial environments is what sets us apart in keeping to just the facts.

 

Staying Current with Industry Best Practices and Regulations

HVACi staff is cognizant that the industry has undergone changes as new products are released and new regulations are announced. Even with our wealth of experience, it’s impossible to stay accurate without continued education and staying up to date on trends, best practices, and rules.

We work hard to stay informed. And since we’ve done the homework for you, we want to share our knowledge.  Adjusters and other insurance personnel know to come to us when they have questions about various HVAC-related topics, including refrigerant regulations, even if their insured’s claim has been closed. We also regularly provide updated articles and resources as well as host webinars to teach others about the complex equipment we deal with daily.

 

Peer Reviews for Accuracy

Qualified personnel write each report for the assessments, but we don’t leave room for error.

Each claim assessment goes through a multi-level process, including peer reviewing, prior to being delivered to the adjuster. We analyze the data and draw conclusions before communicating our results. These are then peer reviewed for errors to make sure our final reports are polished and mistake-free. We also ensure our labor and equipment estimates are backed by industry standards and current values, thanks to our access to manufacturer databases.

Plus, if there are any follow-up questions, we have a resolutions team willing to reopen the claim file and offer more insight.

 

Going Forward

Next time you see our logo and the phrase “Just the Facts,” know that we wouldn’t have it any other way. Just the Facts incorporates HVACi’s commitment to knowledge, accuracy, and objectivity and is not just a saying – it’s our way of doing business.

Check out how our facts can make your settlements more accurate by filing a claim with us today.

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Residential Hail Claim Case Study

Hail is a common cause of peril for residential HVAC equipment because of the outdoor components that can sustain damage. However, often contractors recommend replacements that may not be the best option to return the policyholder back to pre-loss condition – at a cost that isn’t in line with market value. This case study illustrates how an adjuster sought HVACi’s help in determining if hail had damaged the policyholder’s HVAC system and to what extent. The result was the insurance carrier potentially avoiding thousands of dollars in claims leakage.

Fill out the form to find out what HVACi determined about the scope of damage and the difference in the contractor’s estimate versus our recommended settlement price. You’ll discover what we can do to stop unnecessary claims leakage from happening to you, too.

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Commercial Hail Claim Case Study

Think because one HVAC system has hail damage that they all do? That’s a frequent misconception that leads to multiple HVAC systems being listed on a claim regardless if they aren’t all damaged, especially on commercial hail claims. This case study on a commercial hail claim shows what happens when an adjuster assigns HVACi to thoroughly assess each of the systems to provide a full scope of damage and best practice solutions.

Any guesses how many of the systems in this claim weren’t actually damaged and how much potential claims leakage was avoided? Fill out the form to find out because the answer may surprise you.

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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.

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