According to the U.S. Census Bureau, there were 132,452,405 homes in the United States in 2012. Considering the refrigerators, toilets and washing machines within those homes there is a lot of potential for water damage claims.
Donald Mikel, Jr., an engineering manager with Donan Component Testing Laboratory, provided tips on handling small claims relating to water loss at the most recent Property & Liability Resource Bureau conference held in Indianapolis.
While the tips he provided were specific to water loss applications, they could be readily applied to other types of losses.
He said the definition of a small claim can vary by region and company; however, they are usually between $5000 and $15,000.
He said there are many advantages to establishing a small claim subrogation program. These include:
- Increased claim volume with potential for greater net recovery;
- Increased efficiency;
- Enhanced customer service to policyholder;
- Supports return on investment/profitability;
- Improved skill set.
He offered the example of a water heater connector that failed. About six years ago, a trend was spotted when a supply line to a water heater failed due to what appeared to be bending stress. It was soon discovered that the polymer tubing within the connector was rated for a certain temperature, approximately 120-125 degrees. If the connector was exposed to hotter temperatures, it degraded and failed, Mikel said. He said that caused it to lose its rigidity and resulted in a tube that looked like it was bent. The end result was a manufacturing design defect that had good potential for subrogation.
An important takeaway – adding similar claims together can total a lot of money.
“The more you see something, the more you are going to be able to see a potential trend,” Mikel said.
Mikel pointed out that adjusters should be aware that certain labs may not have volume knowledge necessary to see a trend. He said it can be the difference between closing a claim with no subrogation recovery versus a collectible file.
Another benefit to volume, according to the Donan engineer, is that as the subrogation process is repeated and refined, adjusters and insurers will less likely have to deal with spoliation claims because preservation and evidence collection will improve.
The engineering manager recommended regular meetings between adjusters and subrogation department to discuss possible trends.
He also noted the common products that result in small claim failures involve:
- Supply lines;
- Sump pumps;
- Water heaters;
- Plumbing fittings;
- Washing machines;
- Solenoid valves;
- Water filters.
Lastly, Mikel stressed that post-mortem analysis is an important step in the subrogation process. It’s a good way to determine what went wrong with an unsuccessful subrogation recovery attempt.