Spotlight On Site Security

Does it matter what happens to a fire or other loss scene after the official investigation is over? Clearly, the courts have weighed in with their opinion that site security and continuity of evidence are paramount in any cases involving the defence of an insurance claim or subrogation.

Many remember the devastating blast that rocked a Toronto neighbourhood just before dawn on Aug. 17, 2008. A series of explosions ripped through the Sunrise Propane Industrial Gases plant, leaving two men dead and forcing thousands to flee their homes.

For insurance companies and claims adjusters, the work in these kinds of traumatic events is just beginning. Investigations must be conducted, policies need to be referenced and claims must be processed. In many cases, lawsuits also have to be defended.

One issue frequently overlooked in disasters is the security of the scene and the preservation of evidence for potential court proceedings.

Sunrise Propane is just one example of the many different types of events that require security and protection. It could be a four-alarm blaze at an industrial facility, a residential fire, an explosion at a multi-tenant condo that forces evacuations or a building collapse. No matter the cause of the event, protocols and procedures must be followed to ensure the scene is secure, evidence is protected and access to the site is closely monitored.

This involves a great deal more than simply boarding up a scene, posting “No Trespassing” signs or erecting a snow fence. Take the example of a recent fire that prompted the evacuation of hundreds of tenants. On Mar. 19 2009, 500 people were forced from their apartment building on Kingston Road in Scarborough, Ont. after an explosion in the main electrical room led to a smoky blaze. It was almost three months before residents were able to return home due to ongoing repairs.

The multi-tenant building evacuation illustrates a number of complex issues related to site security, such as:

• How is the scene protected continuously throughout the process of the Office of the Fire Marshall’s investigation and ensuing insurance company investigation?

• How should visitors be monitored to allow reasonable access for legitimate tenants and to prevent theft;

• How should multiple contractors/restoration firms be identified and recorded?

It is vital for insurance companies and loss adjusters alike to consistently rely on standard, recognized procedures to protect equipment, maintain continuity of evidence and prevent any further damage or theft. Trained, licensed professionals should be used to secure the site and ensure there is a smooth hand-off from official investigation to private insurance company and/or policyholder control.

NFPA 921: Standard of care

There should also be standardized protocols in place that require precise activity logs and comprehensive reports on the status of the site, as well as 24-hour activity communication with the loss site. Security professionals must be trained to identify suspicious visitors and vehicles and should have a guaranteed callback response policy, with toll-free access to adjusters or local authorities.

Some may think this is overkill, but there are several reasons why site security is so important to so many different groups. The first is NFPA 921 -the National Fire Protection Association’s Guide to Fire and Explosive Investigations. This is an investigative guide that was first written in 1992 and most recently revised in 2004. It recommends a “systematic approach” and “scientific method” be used in all fire investigations.

Although NFPA 921 is represented as a “guide” to assist fire and explosion investigators, the reality is that it has become the prime document upon which any fire investigation will be scrutinized. Most importantly, courts in the United States have now embraced NFPA 921 as the standard of care in several major cases, and a body of law has formed around these cases. There is increasing evidence that Canadian courts have also adopted this guideline for interpreting the proper approach to fire investigation.

One of the key aspects of NFPA 921 relates to spoliation of evidence. The NFPA defines spoliation as “the loss, destruction or material alteration of an object or document that is evidence or potential evidence in a legal proceeding by one who has the responsibility for its preservation.” Spoliation encompasses both intentional and negligent destruction of evidence. Dozens of legal cases in the U. S. have shown that the destruction or alteration of evidence applies not only to equipment, but also to the scene itself.

Another reason why site security is important involves subrogation. Securing the loss scene before any debris is removed or any repairs are performed can aid immensely in any potential subrogation action. A prompt investigation should then be conducted by an experienced investigator with expertise in the appropriate area. All potential subrogation targets should be placed on notice of the loss and advised of their right to examine the loss scene. Physical evidence related to the cause of the loss should be retained and photographed.

Continuity of evidence is key

The message for property insurers is the need to take quick, comprehensive and affirmative steps upon receiving a notice of loss to secure the scene and establish a chain of custody to protect evidence throughout the entire investigation. The main issue is continuity of evidence from start to finish. Properly securing a site also allows the insurance company to protect itself against potential further losses due to theft or safety and liability issues.

There are other parties that benefit from a properly secured site. Claims adjusters can carry out their investigation with confidence that there will be no surprises that could potentially compromise the adjusting of the claim. Just as importantly, a secure site can buy adjusters time to bring in qualified experts and investigators, with specialization in their chosen fields. For restoration companies, a secured site will translate into a clear identification and recording of sub-contractor access and protection of expensive on-site equipment from theft.

Policyholders are also afforded the security of knowing their belongings and valuables are safe from further loss. For insurance brokers and agents, this provides policyholders with peace of mind and can contribute to a stronger client relationship. Insurance companies that properly protect loss scenes also control the loss amount and, by extension, a broker’s loss ratio, reducing any potential negative impact on contingent profit commissions.

The ultimate test of integrity of site security at a loss scene lies with the courts. Judges have been increasingly scrutinizing the integrity of evidence obtained by insurers to defend claims, as shown in several high-profile cases.

In Mazza v. Hamilton Township Mutual Insurance Co., the court awarded a record-setting $2 million in punitive and compensatory damages against Hamilton Township Mutual Insurance Co. after the jury dismissed the insurer’s claim of arson and admonished its bad faith treatment of the claimant. The insurer had made several attempts to show gasoline had been used to start the fire at the plaintiff’s mushroom farm, but by the time it investigated the scene, the building had been gutted and the site was completely unsecured. This compromised the integrity of any evidence obtained.

In another well-known case, Whiten v. Pilot Insurance, a jury awarded $1 million (later reduced to $100,000 on appeal) to a woman and her family who lost everything they owned in a house fire. The award was largely to send a message to the insurer and the industry in general that protracted defence of a legitimate claim would not be tolerated. In turn, insurers were essentially put on notice that to effectively defend a claim, t
hey must produce properly collected evidence or face the penalty of a bad faith claim.

This is the reality of what can happen when loss scenes are compromised by poor security, altered evidence or incomplete investigations. The bottom line is insurers face far greater additional dollar losses from legitimate claims if the investigation process they follow is flawed or haphazard. This is easily preventable with a timely response to post-event site security and protection of evidence.

Perhaps nowhere does the old adage that “an ounce of prevention equals a pound of cure” apply more than in asset security and protection.

Robert Garland is vice president at A. S. A. P. Secured Inc.