Forecasters have already predicted that the 2020 hurricane season is going to be highly active, and that could mean major damage to commercial and residential HVAC systems. Analyzing what components could be impacted and the severity of the damage may be challenging for adjusters, and that’s why we’ve put together a webinar to help prepare you to handle these claims.
HVACi’s Hurricane Claims Preparation webinar provides valuable information to get you prepared, including:
The significance of hurricane claims with damaged HVAC equipment
A review of commonly claimed HVAC systems and components
Types of hurricane claims to expect with damaged HVAC components
A review of real-life hurricane claim scenarios
Watch our Hurricane Claims Preparation webinar recording by filling out the form provided.
Important: Pre-recorded webinars do not qualify for CE credit.
The Hurricane Claims Preparation Webinar has already occurred. You can watch the recording here.
Forecasters have already predicted that the 2020 hurricane season is going to be highly active, and that could mean major damage to commercial and residential HVAC systems. Analyzing what components could be impacted and the severity of the damage may be challenging for adjusters, and that’s why we’ve put together a webinar to help prepare you to handle these claims.
HVACi’s Hurricane Claims Preparation webinar provides valuable information to get you prepared, including:
The significance of hurricane claims with damaged HVAC equipment
A review of commonly claimed HVAC systems and components
Types of hurricane claims to expect with damaged HVAC components
A review of real-life hurricane claim scenarios
Important: Pre-recorded webinars do not qualify for CE credit.
Many of us are familiar with the most frequently used HVAC systems that force warm and cool air through ductwork throughout a building to maintain the preferred temperature over multiple rooms or large spaces. Though less common, there are times when a ductless system, including mini-split systems for single and multi-zones, may be the better choice for a property owner.
It’s important to learn the basics about ductless systems to better understand how to handle your next claim related to a ductless HVAC system.
What is a ductless system?
Ductless HVAC systems deliver air directly into a room or zone through minimal tubes and passageways. These mini-split systems have an outdoor condenser and an indoor evaporator with a blower section, which are connected by way of a 3-inch hole in the wall for power and communication cables, copper tubing, and a condensate drain line.
Single-zone mini-split systems typically allow someone to control the temperatures to an individual area. Multi-zone mini-split systems allow more than one area to have temperature control from a single outdoor condenser, without needing ductwork.
Ductless systems deliver air directly into a room or zone without the controlled air traveling through ductwork.
Advantages and disadvantages of ductless systems
Ductless systems have their advantages, including offering flexibility in where they are used, needing less wall space, and being more cost-effective than window air-conditioning units, space heaters, or electric baseboard heaters. Other benefits are that they are more energy-efficient because many of them use DC compressors with lower amp draws, are quieter, and are better for allergy sufferers because they reduce contaminant build-up and offer continuous air movement that improves ventilation.
The major disadvantage of ductless split systems is its initial cost compared to other options. Like any HVAC system, ductless systems also require some routine maintenance, including filter cleanings and getting rid of nearby dust and debris, to avoid malfunctions. Unlike some of the other portable options, mini-split systems are permanent fixtures so they can’t be moved from room to room or around the room.
Where are they used?
Older homes benefit from having ductless systems. Most older homes were not built in a way that can accommodate modern ductwork. Ductless systems preserve architecture and don’t need carved spaces for ductwork and vents. Plus, ductless systems offset energy loss.
Sunrooms and small spaces benefit from ductless systems as they take less wall space.
Garages, room additions, and places not connected to a property’s main HVAC system can use ductless systems.
Rooms with hot and cold spots can maintain a more even temperature using ductless systems.
Mini-split systems have outdoor condensing units, which make them susceptible to hail or other perils that traditional HVAC systems face.
Ductless systems sustain similar perils to their larger counterparts
Single-zone and multi-zone mini-split systems are still prone to similar damages as other HVAC systems with ductwork.
We studied data from the 2019 claims assigned to HVACi to consider causes of loss typical to ductless systems. High voltage surges accounted for more than a third of the mini-split system claims. The next two most prevalent causes of loss were hail, because of the outdoor condenser like a typical split system, and wear and tear. Repairs were frequently recommended for the hail claims.
As an adjuster, it’s important to understand a variety of complex equipment, including different types of HVAC systems.
Have a claim with a ductless system you need assistance with? HVACi can help by providing a comprehensive report with cause of loss and recommended settlements in a timely manner.
Ductless systems aren’t as commonly used as other types of HVAC systems, but what makes them unique is what you may need to know in order to handle claims that include them.
Our guide of 6 Things to Know About Ductless Systems provides a quick overview of what they are and how they work, where they are most likely to be found, and their advantages and disadvantages. Plus, we go over perils ductless systems face that may cause damage that’s likely to show up as a claim on your desk.
The following article on “Understanding the impact of federal regulations on HVAC claims,” written by Jay Dykstra of HVACi and StrikeCheck, was originally published on Property Casualty 360.
Regulations relating to some HVAC system components continue to be evaluated and amended as government agencies implement methods to reduce negative environmental impacts. Adjusters and other insurance professionals should be aware of the regulations, including those regarding refrigerant standards and efficiency ratings, in order to understand how they might affect claims and to avoid being misled by misinformation from contractors or policyholders.
Know the facts surrounding R-22
It isn’t a new regulation, but the January 1, 2020, designated date has passed for the complete phaseout of virgin R-22. Yet, the rules and facts continue to be distorted about the substance commonly referred to as Freon and used in air conditioners and refrigeration equipment.
The U.S. Environmental Protection Agency (EPA) regulation was initiated decades ago when the Montreal Protocol on Substances that Deplete the Ozone Layer took place in Canada in 1987. The concern over hydrochlorofluorocarbons (HCFCs) and their effects on the ozone layer led to amendments to the U.S. Clean Air Act in 1990, which included the phaseout of virgin R-22.
The regulation halts the production and import of most HCFCs, but it doesn’t prohibit their overall use in existing HVAC systems. Policyholders filing claims for full system replacements instead of for only necessary repairs simply because their current systems use R-22 are causing insurance carriers unnecessary claims leakage. Systems that use R-22 are still prevalent and can be repaired. Components for R-22 systems can and will continue to be produced for the foreseeable future.
It’s important to note that any R-22 removed from a system, with the intention of not returning it to a system owned by the same person, must be reclaimed by EPA standards and returned to the market. It cannot simply be vented into the atmosphere but must be recovered anytime it’s emptied. While production of virgin R-22 is not allowed, previously produced refrigerant and what’s been properly reclaimed is still legal and available for use.
In the event policyholders need to switch to components that use another type of refrigerant, a full system replacement may not be required. Purchasing a new evaporator coil and condensing unit and flushing the line set may often suffice.
The U.S. Environmental Protection Agency has joined a global effort to reduce negative environmental impacts from certain types of refrigerants, including R-22 and R-410A.
R-410A is not the final solution
The R-22 phaseout had contractors and manufacturers looking to a different refrigerant to replace it. R-410A is the current standard for residential and commercial HVAC systems in the United States and has been for a decade. But R-410A is likely not the final answer as a phasedown for this refrigerant has already begun.
The Kigali Amendment to the Montreal Protocol focused on substances that have high Global Warming Potential, including hydrofluorocarbons (HFCs). The United States and 196 other parties who supported the Kigali Amendment now require an 85% phasedown of the production and consumption of HFCs, including R-410A. That must be completed by 2036 for developed nations like the United States and 2046 for developing countries.
Adjusters should stay up to date with potential HVAC system regulation changes as the EPA, equipment manufacturers, and chemical companies determine the next standard refrigerant.
The Department of Energy regulates the minimum Seasonal Energy Efficiency Ratio for residential systems, including air conditioning (AC) and heat pumps (HP), based on location.
Location, system type affect residential energy rules
The U.S. Department of Energy (DOE) also has an interest in HVAC systems and how they work. The DOE uses the Seasonal Energy Efficiency Ratio (SEER) to regulate how residential systems operate under common conditions, particularly related to energy consumption. Higher efficiency systems have greater SEER ratings.
The standards have evolved and will continue to do so, though ample notice is given. The DOE first implemented energy conservation standards in 1992. It began with a standard of a 10 SEER rating nationwide for central air conditioners. The current SEER ratings were established in January 2015 and determine minimums based on system type and U.S. location. New split systems in northern states, for example, require a SEER minimum of 13; while for southern and southwestern states, the minimum standard is 14. For split-system heat pumps, package air conditioners, and package heat pumps, the national standard is a SEER rating of 14, according to the DOE.
Like the evolving requirements for refrigerant, the next SEER standards change is already in motion. Starting in 2023, all new residential central air conditioning and heat pump systems must meet new minimum SEER standards, according to the U.S. Energy Information Administration. The northern states will have to follow a SEER rating of 14 for straight cool split systems, and the southern states must raise standards to 15.
Insurance personnel should note that indoor and outdoor components should be compatible to ensure they can properly work together and overall system efficiency standards are met.
Efficiency is key for commercial HVAC systems
Commercial HVAC equipment, including air conditioning (AC) and heat pumps (HP), requires different standards depending on heating or cooling equipment.
Commercial systems have had the most recent change in efficiency standards. The current requirements took effect in January 2018 so that new systems are 10% more efficient. Rather than location, these new rules are based on the cooling capacity of the equipment (BTU/hr). Although they still differentiate between split systems and heat pumps, it goes even further by then splitting them between systems with electric resistance heat or no heating and all other types of heating, such as furnaces or boilers.
The Integrated Energy Efficiency Ratio (IEER) is used for commercial cooling equipment and is based on how the system operates under specific temperature conditions. The Coefficient of Performance (COP) measures heat pump efficiency by calculating the amount of heat created using 1 watt of energy, ranging from 1.5-4. The closer to 4, the better.
The second phase to further increase efficiency standards on commercial HVAC equipment is slated to take effect on January 1, 2023.
As regulations relating to HVAC systems and their components continue to change, it’s important adjusters and other insurance professionals stay up to date with them or seek the help of a knowledgeable third party to ensure claims are handled appropriately.
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.
The HVACi 2020 Annual Report found that nearly half of the commercial HVAC claims included hail-damaged equipment, but more than 80% of the claimed systems could return to pre-loss condition through some sort of repair.
Fill out this form to learn what types of commercial HVAC systems and components are most prone to hail damage and what can be done about it when it occurs.
The National Centers for Environmental Information notes that hailstorms can cause billions of dollars in damages during each severe event. Though the outdoor equipment on commercial and residential HVAC systems is susceptible to being hit with hail and often claimed, there isn’t a guarantee the results will warrant a full replacement.
Fill out the form to check out our Hail Claim Basics Guide that details what to look for in hail-related HVAC damage, what components are frequently damaged, and what repair options exist in lieu of a full replacement.
Hundreds of thousands of insurance claims are filed annually in the United States because of severe hailstorms that can cause billions of dollars’ worth of damage, according to the National Centers for Environmental Information (NCEI).
Texas and Colorado are the leading states for number of claims related to hail, an analysis by the National Insurance Crime Bureau (NICB) shows. Nebraska, Missouri, and Kansas rounded out the Top 5 loss states, according to the study that went from January 1, 2016, to December 31, 2018, and included nearly 3 million hail loss claims.
Each storm comes with a cost. A March 2019 hailstorm in the Dallas metroplex, for example, ravaged homes, vehicles, and businesses, resulting in roughly $1.6 billion in damages, according to the NCEI. Severe storms in June 2018 caused a total of $3.6 billion in damage to Colorado and Texas.
Package units and vent caps are frequently listed in commercial HVAC claims for hail damage.
Commercial properties commonly sustain hail damage, and HVAC systems are among the equipment that’s frequently damaged. We analyzed our 2019 commercial HVAC claims data and found that 46% had hail as a cause of loss. And in 2018, 41% of our commercial HVAC claims were related to hail.
Hailstorms are common, making it important to know how hail impacts commercial HVAC equipment and how to handle these claims.
HVAC Equipment Prone To Hail Damage
Commercial HVAC equipment, including ground and rooftop units, is susceptible to hail damage.
Package units, all-in-one heating and cooling systems that can vary in size, are the most common commercial HVAC system affected by hail because they have several more vulnerable components. Refrigeration units, including walk-in coolers, ice machines, and refrigerated preparation tables, are used at many commercial properties, including grocery stores and restaurants. Because of the condensing units outside, they are also liable to have hail damage. Exhaust systems remove unwanted heat and combustible gas from a home using fans and vents, and the external vent caps are also frequently damaged by hailstones.
Condenser coils are among the HVAC system components prone to hail damage.
Commonly damaged components of a commercial HVAC system include:
Condenser coils: The most prominent HVAC component to sustain hail damage is the aluminum fin-covered condenser coils. Hail can easily bend or dent them. Dents in HVAC condenser fins can range up to twice the size of hailstones. When the fins are damaged, they are more at risk of pressing against each other or against the copper coil and blocking the system’s air flow. If it gets bad enough, this could make the HVAC system work harder, increase its running time, produce inadequate cooling, and shorten the equipment lifespan.
Fans Blades: The fan assemblies in condensing and package units and the blades can also be dented or damaged by hail. Fan blades that are dented or broken in half could cause an imbalance that may damage the system over time because it can wear out bearings or destroy a motor by overworking it.
Vent Caps: Vent caps keep moisture, debris, and other items from getting into the system where air is being pushed out. Hail can harm the components made of softer metals. Dents are the most common damage, and they won’t necessarily disrupt functionality. However, safety concerns can arise in severe hail events if the vent cap was crushed to the point that air can’t escape, and carbon monoxide builds up. Metal vents are prone to corrosion and damage from moisture, wind, and hail.
Hail Damaged The System, Now What?
To prevent hail damage, policyholders can install hail guards, which protect condenser coils from hailstones. However, since many systems don’t have those, the results are dented, bent, or torn condenser coils.
The fortunate part is that hail damage doesn’t guarantee a replacement is needed. Whether it’s a rooftop unit or a system on the ground, most of the losses can be repaired.
Repair options exist before settling for a full-system replacement.
The methods for returning a system to pre-loss condition range from a simple repair all the way to a full-system replacement.
Comb the Condenser Coil — If the traditional tube and fin coil are dented or deformed, use a fin comb to straighten them to proper position through this simple, inexpensive repair option.
Replace the Condenser Coil — If fins are torn or are Micro-Channel or Spine Fin and cannot be combed, the next step is to purchase a new condenser coil.
Replace the Condensing Unit — If condenser coil is unavailable, a new condensing unit can be purchased.
Replace the System — The rarest solution is to replace a full system after a hailstorm, though it may be necessary if it is an all-in-one system or if the condensing unit replacement would cause a SEER mismatch with the indoor equipment.
Other hail-damaged components may not require any action to be taken. A dented cabinet on a package unit or a dented vent cap can remain as-is if functionality isn’t impeded. On the other hand, individual elements that are damaged to the point of causing other system malfunctions, such as damaged fan blades and crushed vent caps, likely must be replaced.
Hail can disrupt businesses across the country, leading to costly damages and insurance claims. It’s important for adjusters to know what to look for and how to handle them.
If you have a hail claim that includes a commercial or residential HVAC system, we can help. Contact HVACi to submit a new claim.
HVAC Investigators (HVACi) is the nation’s leading provider of HVAC and Refrigeration damage assessments thanks to its thorough investigations, swift cycle times, and actionable reports that
enable insurance carriers to settle claims quickly and accurately. The following case study describes a residential HVAC system that stopped working. The policyholder hired a contractor who quoted nearly $7,000 for a full system replacement, based on a misunderstanding of an Environmental Protection Agency (EPA) regulation. The adjuster handling the claim contacted HVACi for an objective onsite assessment that offered a definitive cause of loss and an accurate settlement resolution. When the adjuster received pushback, HVACi also provided additional resources to explain the federal regulation and why it wasn’t applicable to the claim.
Fill out the form provided to download a copy of our case study.
