If a contractor makes a repair and an HVAC system still doesn’t seem to be working properly, a policyholder and adjuster may take the contractor’s advice and think high-dollar replacement equipment is the next logical step.
Good thing the adjuster didn’t go on that assumption for this commercial claim! Fill out the form to discover the real story about this HVAC system and what HVACi recommended it would take to return it to pre-loss condition.
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.
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.
As the nation’s leading provider of HVAC damage assessments for insurance carriers, HVACi is expert at evaluating lightning damage to HVAC systems. When an adjuster handling a lightning claim involving HVAC equipment in northern Texas needed to verify cause of loss and scope of repairs, HVACi was there to help. This case study illustrates how bringing in HVACi claim experts saved the carrier over $20,000 and saved the insured from paying top-grade prices for builder-grade equipment.
To read more about this claim, simply fill out the provided form.
Determining if lightning was the true cause of loss to your insured’s HVAC unit can be a complicated task, particularly when lightning is one of the most frequently claimed perils. According to HVACi’s Annual Claims Report, last year Lightning was the most frequently claimed peril for residential assignments, although the actual cause of loss was commonly found to be High Voltage Surge or Wear & Tear. Lightning damage symptoms are often erroneously confused with other peril’s symptoms, making these types of claims particularly challenging to tackle. Our HVAC Lightning Damage Guide will assist you in determining if your insured’s HVAC equipment was truly damaged by lightning by highlighting visual evidence that commonly points to lightning damage and outlining the most common cause of loss characteristics between Lightning, Surge, and Wear & Tear damages.
For an even deeper dive into identifying Lightning damage to HVAC systems from other perils, check out our blog.
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.
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).
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.
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.