Imagine walking into a basement covered in an inch of water. The policyholder who did was sure the furnace and ductwork located there were casualties of the flood. Luckily, the adjuster sought an HVAC system expert to verify scope of damage before settling the claim and learned cleaning was all the equipment needed to return to pre-loss condition.
HVAC system losses have varying degrees of damage, and adjusters need answers quickly. Fill out the form to read how HVACi helped this carrier ensure the claim was settled quickly and accurately – and how the team can do it for your HVAC and Refrigeration claims, too.
Policyholders in warmer parts of the United States may have a heat pump instead of a boiler or furnace. If air is less humid, they may opt to cool a space with an evaporative cooler. Regardless of what type of HVAC system it is, it’s likely that at some point a residential insured’s equipment isn’t going to function properly and will wind up in a claim on your to-do list.
Keep the Residential HVAC System Fundamentals eBook handy to refer to when handling these claims. You’ll have brief overviews and labeled diagrams of the most frequently used residential HVAC systems in one easy-to-read document.
System types include:
Split Systems
Package Units
Mini-Split Systems
Geothermal Systems
Heat Pumps
Boilers
Evaporative Coolers
You’ll also have a glossary of the key components and heating and cooling processes for split systems, which are the most widely used by residential policyholders.
Fill out the form to receive your copy of the Residential HVAC System Fundamentals eBook.
The following article on “Diving into claims data from a Texas winter storm,” written by Jay Dykstra of HVACi and StrikeCheck, was originally published on Property Casualty 360.
This time last year, many adjusters were still digging out from the hundreds of thousands of claims that resulted from Winter Storm Uri. By July, settlements had reached billions of dollars and a Texas Department of Insurance report stated there was an expectation to give $5.8 billion in payments to policyholders in Texas, where the storm was particularly destructive and led to half a million claims. Newly released data about some of the items included in claims from the storm pinpoints issues carriers should consider during the next extreme weather event.
Power outages, fallen trees, freezing conditions and other related perils caused many of the losses that occurred in Texas in February 2021. However, it is important to note that even if a cause of loss seems obvious, the peril is not always the reason for a failure. Additionally, everything included in these claims wasn’t damaged.
Adjusters relied on third-party assessment vendors, including HVAC Investigators (HVACi), for quick and comprehensive damage assessments of HVAC systems included in Texas storm-related claims. More than half of the HVAC system claims that adjusters assigned to HVACi had freezing conditions as the reported cause of loss, and 14% listed water, according to the CCG IQ 2021 Annual Report that provides data and trends about hundreds of thousands of property items carriers assigned CCG IQ’s family of brands to assess last year.
Both these condensing units had reported losses from freezing conditions in Texas; however, one sustained damage from water and the other wasn’t damaged at the time of assessment.
Neither freezing conditions nor water were in the top three perils that HVACi determined impacted HVAC systems included in Texas claims during this time. Instead, one-third of the assessed HVAC systems sustained damage from wear and tear, which is not typically a covered loss.
Heat pumps more than 15 years old are more susceptible to failures when the temperatures drop into the teens. A wear and tear determination is also common because policyholders will file claims citing a catastrophic event, even if the damage is unrelated.
Many claims included non-damaged equipment. Nearly 20% of the HVAC systems the company evaluated were not damaged at the time of assessment. Settling claims with assessment results of wear and tear or non-damaged risk creates unnecessary claims leakage.
Multiple HVAC system losses from the Texas claims also tied back to the widespread power outages and, of course, the weather. The CCG IQ 2021 Annual Report’s section on the Texas Winter Storm showed that 18% of HVAC systems sustained damage from a high voltage surge, 11% from freezing conditions, and 9% had a water loss.
HVAC systems have several electrical components, including the control board and thermostat, that can sustain damage from a sudden voltage fluctuation. These may be caused by power suddenly returning, among other reasons. HVAC systems can also withstand a certain level of water before major repairs or replacements are required.
Adjusters should know that even with the severe circumstances Texas faced last year, less than one-third of the HVAC systems HVACi assessed after the storm required a full replacement. More than half could be returned to pre-loss condition through repairs, and the rest did not require any action.
The next time there are a significant number of claims after a catastrophic event, adjusters should not assume equipment failures are the only reason for the problems. Verify the cause of loss and scope of damage before making an unnecessary settlement.
Jay Dykstra is the technical education manager for HVACi and StrikeCheck. He is responsible for the development, presentation, and curation of technical education content for adjusters and insurance claims professionals.
Lightning is one of the most frequently reported causes of loss listed on HVAC and electronics claims – policyholders reported it for almost 20% of HVAC systems and nearly 40% of electronics in claims that HVACi and StrikeCheck handled last year. Advancement in testing tools and verification reports have made it easier for adjusters to confirm or exclude these perils before settling a claim unnecessarily.
Topics include:
Lightning and surge claims significance
Lightning and surge fundamentals
Residential systems susceptible to lightning and surge impacts
How lightning and surges have appeared in claims
Watch our How to Handle Lightning and Surge Claims Without Guesswork Webinar recording by filling out the form provided.
Important: Pre-recorded webinars do not qualify for CE credit.
Residential policyholders use split systems more than any other HVAC system. Indoor and outdoor components make split systems susceptible to different perils.
More than 80% of the residential HVAC systems that HVACi assessed last year were split systems, according to the CCG IQ 2021 Annual Report. Among the reasons for their popularity are that split systems easily distribute conditioned air to a specific space, are efficient, and can offer versatile installations. However, with equipment housed both indoors and out, these complex systems are susceptible to impacts from multiple hazards. Adjusters should take note of which causes of loss policyholders report most often in claims – and which perils are verified during expert equipment evaluations.
Most Often Reported Causes of Loss
Not all claims have a known cause of loss. Many claims are filed without any perils listed. Adjusters who don’t obtain equipment assessments to determine cause of loss risk giving a settlement for non-damaged equipment or components impacted by a non-covered peril.
Policyholders frequently report lightning as the cause of a failure. When an HVAC system malfunctions following a major thunderstorm, insureds often assume lightning is the source of the loss. They may further assume their HVAC systems require a full replacement. Neither are typically true.
Less than 1% of split systems assessed each year have an evaluation result that confirms direct lightning. Furthermore, minor to moderate repairs will return most split systems to pre-loss condition, regardless of peril.
Extreme weather conditions often result in new claims.
Other commonly reported causes of loss are related to the weather, including hail, wind, or freezing conditions. While they could like obvious causes of loss, claims stemming from a winter storm that affected Texas in 2021 proved that not all claims following a catastrophic event included equipment that sustained damage from a covered peril.
Perils Verified to Impact Split Systems
Nearly half of all HVAC system assessments completed by HVACi were recategorized to a different peril from what policyholders reported or the claims had listed. Many comprehensive assessment results determined equipment failed because of wear and tear or weather-related perils.
Wear And Tear
Adjusters should know that a common cause of loss impacting split systems is wear and tear, which is not typically covered by insurance. Central air HVAC systems are designed to last 15 to 20 years, according to the U.S. Energy Department; however, extenuating circumstances could accelerate wear and tear.
This peril impacts indoor and outdoor equipment. Characteristics could include, but are not limited to, visible impacts, damage caused over time, failed connections, and refrigerant leaks.
High Voltage Surge
Though lightning is frequently reported, high voltage surge is more likely. A nearby lightning strike, electrical grid changes, high-power electrical devices powering on or off, power outages, and other events that cause voltage fluctuations in the electrical circuit could trigger it.
This HVAC system control board had a noticeable arc mark caused by a high voltage surge, though visible evidence is not always present for this loss.
Like wear and tear, high voltage surge impacts indoor and outdoor equipment. Characteristics that occur with high voltage surge failures include damage caused by electrostatic discharge, multiple affected components, and immediate malfunctions. Visible evidence of high voltage surge is not always present. Find out more about how to tell the difference between HVAC failures caused by lightning, surge, and wear and tear in this guide.
Weather-Related Perils
HVAC systems are susceptible to weather-related perils. Adjusters may see increases in claims with hail, water, or wind losses following a catastrophic event.
Hail can affect several outdoor components, particularly condensing units that have malleable fins protecting the refrigerant tubes. Hail impacts may be visible but do not affect HVAC system functionality. Minor repairs such as combing or replacing the condensing coil are typical methods to return equipment to pre-loss condition.
The cause of loss may seem obvious, such as a tree limb striking a condensing unit, water flooding a basement furnace, or hail striking condensing coil. Objective assessments verify the reported peril and determine the damage scope. Even if a more major repair is necessary, full replacements aren’t required in most scenarios.
Don’t Forget About Non-Damaged Equipment
The previously mentioned perils impact split systems, but it’s important to remember that not all equipment included in claims will actually be damaged.
HVACi determined that nearly one-third of the HVAC systems included in claims in 2021 were non-damaged at the time of assessment. Settling for these adds unnecessary claims leakage for the carrier.
Equipment evaluations can prevent that. They should be objective, data-driven, and actionable. The experts at HVACi help adjusters nationwide decide claim solutions through comprehensive onsite assessments. Reports note cause of loss, best repair and replacement recommendations, and market value pricing for available equipment without slowing down the claim process. Submit a claim to confirm a peril before making a settlement decision.
The Essentials of Settling Water-Related HVAC Claims webinar has already occurred. You can watch the recording here.
Floods, foundation leaks, sump pump failures, and roof leaks can cause major damages to homes and businesses. Among the items impacted are HVAC systems. By the end of the Essentials of Settling Water-Related HVAC Claims Webinar you’ll know about water’s impact to split systems, ductwork, and package units, among other components.
Topics include:
The sources of water that result in HVAC system property claims
HVAC systems and components most commonly involved in water-related claims
Water-related damages and whether they could be repaired or replaced
Real-life water-related HVAC claim scenarios
Important: Pre-recorded webinars do not qualify for CE credit.
Claims often include multiple items that need people with specialized knowledge to inspect them. The adjuster for the claim described in this case study sought HVACi’s help to determine if a flue pipe and HVAC system were damaged by lightning. When the insured complained of circuit breakers tripping, the adjuster asked the HVACi experts to get help from StrikeCheck team to add an electrical system evaluation to the assessment scope. StrikeCheck’s lightning verification reports added further data to verify the cause of loss and determine the best recommended steps for the policyholder and insured.
Fill out the form to read how HVACi and StrikeCheck can be used together for comprehensive assessments and actionable claim solutions without slowing down the claim process.
Lightning and surge are the most frequently reported or determined cause of loss for commercial and residential policyholders.
Better understand these two perils, what causes them and which types of equipment are most susceptible to surge and lightning impacts with the Lightning and Surge Impacts in Property Claims Guide.
The number of hail-related HVAC system claims increases substantially during the spring storms months, along with the number of claims for damages caused by wind and foreign object impacts. Don’t fall into the trap of unnecessary replacements for these claims.
Find out how to avoid unwarranted or inaccurate settlements during the Evaluating Spring Storm Damage to HVAC Equipment webinar.
Topics include:
Storm-related claims trends, including the percentage of claimed equipment that was non-damaged
A brief overview of HVAC system components most susceptible to weather impacts
Types of damages to expect and their potential repair solutions
Real-life storm claim examples and their evaluation results
Watch our Evaluating Spring Storm Damage to HVAC Equipment Webinar recording by filling out the form provided.
Important: Pre-recorded webinars do not qualify for CE credit.
What types of characteristics will HVAC system components have if they’ve been impacted by lightning, high voltage surge, or wear and tear? Adjusters can find out with this interactive guide, which breaks down certain criteria often found with these perils. These characteristics may include if impacts are visible, if more than one component can be affected, or if only electrical equipment will be impacted.
You’ll also learn key claim trends, such as reported vs. actual cause of loss percentages, and be quizzed on your knowledge of these perils.
Fill out the form to receive your link to the What to Look for in Lightning and Surge Claims Guide.
