Canadian Underwriter

The Bigger They Come

July 31, 2015   by Craig Harris, Freelance Writer|Craig Harris, Freelance Writer

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Building collapses. Mechanical equipment failures. Complex multi-vehicle accidents. The scope of large-scale and complicated loss events applies to a wide range of claim scenarios. Determining the root cause of these events is often a specialized task that goes beyond the skill sets of independent adjusters. So whom do they call? Forensic engineers.

“Though retaining and managing a forensic expert can add complexity, it also can supply the clarity necessary to promptly and fairly settle a claim,” notes John Goff, a senior general adjuster at Crawford and Company, who wrote an article on the subject for U.S.-based Claims Magazine called Rules of Engagement. “Forensic experts can add value in resolving three broad claim-related issues: causation, coverage and cost.”

Types of Losses

What are the most common types of claims that require the skill sets of forensic engineers? The response varies, according to sources (while there are other forensic specialists, such as accountants, this article focuses on forensic engineering).

“Forensic engineers are most often retained to investigate failed materials, products, structures or components that have caused personal injury or damage to property by not operating or functioning as intended,” notes Mazen Habash, president and consulting forensic engineer, Origin and Cause Inc. “Forensic engineers serve to validate the true origin and cause of a loss, providing clients with the information required to identify any fraudulent activities, subrogate the cost of damages from the responsible party, and/or pursue litigation.”

Much of the work that forensic engineers are required to do involves an exploration of the “unknown,” according to Richard Nellis, assistant vice president with EFI Global, part of the Cunningham Lindsey family of companies.

“The work typically includes a technical unknown that the adjuster needs an answer to,” he says. “There can be several reasons for this. The first reason is to determine the cause of the claim, so a decision on liability can be made. Is the claim a result of an insurable risk? If not, then there is no insurance and therefore no claim.”

Nellis notes that other factors come into play after causation. “Once the cause of the loss is determined, then the next question is, are there any contributing factors to the losses? Can the loss or a portion thereof be attributed to another party, such as subrogation? Finally, what are the costs of restoration? Are engineering services required to remediate the loss and minimize any future ongoing liability concerns? Forensic engineers can assist with answers to all of these questions,” he adds.

More specifically, claims that require the expertise of forensic engineers often involve issues related to building and construction, says Philip Sarvinis, managing principal at Read Jones Christoffersen Consulting Engineers.

“Typically, we get referred from adjusters and claims managers for situations with physical damage to building structures or building enclosures as a result of physical damage due to neighbouring developments or demolition, car impacts, building leaks, wind damage and overloading,” he notes.

The scope of loss scenarios can, however, extend to everything from bodily injury to building and vehicle fires to building mechanical (HVAC, plumbing, frost and water damage) to material failures to environmental spills to collision reconstruction, according to the forensic engineers at CEP Inc. Claims can also vary in size.

“The (types of losses) can include small run-of-the-mill claims with small budgets requiring some field work but little analysis,” notes Jean-François Goulet, a forensic engineer with CEP. “(They can also involve) medium size claims with some field work and analysis required but under budget constraints or… large claims where the engineer is given ‘free range’ to do research, testing, purchase tools and so on.”

Randy Henderson, who is in charge of client management at Arcon Forensic Engineers, notes that claims are often classified by type of loss and relevant discipline.

“Engineering firms tend to group losses by the engineering discipline: Biomechanical, Electrical, Fire & Explosion, Civil & Structural, Environmental, Mechanical, Collision Reconstruction,” Henderson observes.

“Adjusters and lawyers often describe the losses by the type: structural failure (basement, walls, roofing system), structural assessment (after a fire, impact or weather event), structural design & reconstruction, personal injury (can arise from slip, trip or fall, auto accident, product failure), liability (personal or product), fire loss (property – auto and structural). There’s often overlap with either methodology which makes strict categorization difficult,” he adds.

For Joseph Jakym, a forensic engineer with Roar Engineering, the deciding factor in when experts get involved in a claim is not necessarily size but determination of liability.

“Forensic engineers can be involved in varying sizes of losses, from small losses (examples include slight impact of motor vehicles and product liability) to large complex technical losses,” Jakym observes. “Generally, subrogation and liability are the driving forces behind engaging a forensic engineer. Insurers that are aware of their exposure to losses will try to mitigate their exposure by subrogating or defending potential liability claims.”

Claims Challenges

Certain types of losses can present a myriad of challenges to forensic engineers, according to sources.

“The matters that are especially challenging are the typical services that forensic engineers provide: fire investigation, structural collapse/damage assessments, vehicle accident reconstruction, material failures, and slip/trip and falls,” Nellis notes. “All of these require getting to the cause of the reported claim event.”

“When it comes to personal injury claims, we often get involved years after the original incident,” Henderson observes. “One of the biggest challenges with these files is incomplete details regarding the incident or loss of evidence that could be integral to the quality of the analysis. With some fire and structural damage claims, site clean-up or reconstruction may have already begun by the time we are engaged.”

For building and materials damage, Sarvinis reports that numerous factors can affect the proper determination of causation.

“The most difficult ones are those requiring us to decipher what is insurable damage as a result of an accident and what was caused by natural wear and aging of a building,” Sarvinis notes. “Our background and experience is the repair and restoration of natural building deterioration and age is the primary tool that assists us in accurately reporting the fact and providing the background to justify our opinion.”

It is not just the kinds of losses, but also the point at which forensic engineers are contacted in the claim investigation, the amount of time that has lapsed since the actual loss and any spoliation of evidence that can make things more complicated.

Henderson notes that “losses where there are a number of parties involved can be problematic in terms of coordination of experts for evidence inspection. In certain types of files, our engineers can be contacted well after an initial loss, and after examination of the site is impossible – this can make it difficult to determine causation.”

This lack of evidence often represents an obstacle for forensic engineers, according to Jakym. “The losses that are particularly problematic are matters in which we are provided with little evidence, often due to being retained long after the originally available evidence has been lost or destroyed,” he says. “If the adjuster waits too long to hire an engineer, the quality of the opinion that can be offered can be weakened significantly.”

The evidence issue can become especially onerous if the case proceeds to trial, Jakym adds. “Forensic engineering
is an extremely complex scientific field and requires a unique combination of skill, experience and technical expertise,” he notes. “The most challenging losses are those that end up at trial. The courtroom is a ‘sink or swim’ type of environment and if your hypothesis can’t withstand the test of a serious challenge then it will become readily evident at trial.”

“Regardless of the type of loss or level of severity, a vital component to any investigation is the integrity of the physical evidence available for investigation,” Habash observes. “When we walk into a scene, every single item in the room and its positioning tells the story of what actually happened. If something has been moved or manipulated, the challenge we most often face is identifying the missing pieces of the puzzle, piecing them back into the scope of the investigation, and establishing a clear picture of what took place. “

There are other potential hurdles in complex claims that may include “delayed investigation mandates, spoliation of evidence in fires due to official investigations and early remediation by emergency contractors and electricians or coverage issues (that) may be difficult to address for lack of cooperation from the insured,” according to Joel Turcotte, a forensic engineer with CEP.

In some cases, it could be a lack of coordination amongst adjusters that leads to undue delays. “(In some situations), cases keep being transferred from one adjuster to another with little or no communication between the adjusters,” notes Goulet.

Adjuster Opportunities

There are several tips that forensic engineers recommend to adjusters to aid in a thorough, complete and timely investigation. These extend to expedited contact of forensic engineers early in the process, selection of the proper qualified expert, securing of evidence (especially if other parties are involved, such as emergency responders or contractors) and clear lines of communication.

“Our suggestions for adjusters include – contain and secure the site as soon as possible, maintain integrity of any potential evidence, get an expert opinion as soon as possible, be specific as to what is required of the expert, specify what budget constraints or approvals are necessary and the turnaround time and type of report required, attend the site with the expert, process invoices as soon as possible,” notes Henderson.

“Call us early,” Nellis concurs. “Our practice is that phone calls are free. So call and discuss and then decide whether or not we can help. This also helps to minimize cost to the file, as information is critical and the best information will be found sooner rather than later. We want to base our decisions on the best available information and that is most easily obtained early in the process,” he adds.

For Habash, the phrase “time is money” sums things up well. “The longer it takes to secure a scene, the higher the probability of spoliation of evidence, which in turn lowers the probability of a quick, conclusive investigation, and extends the life of a claim,” he says. “My recommendation to loss adjusters would be to contact a forensic engineer as soon as possible.”

Evidence preservation is another critical component of the investigation stage for adjusters, according to sources. “It is vital to ensure that evidence does not get destroyed or altered,” Jakym notes. “Preserving evidence at the site will dramatically increase your chances at recovery. Recording and documenting the site and interviewing witnesses should all be completed as soon as possible so that this evidence is fresh and unaltered.”

However, evidence preservation may not be a straightforward process, especially in a large loss event that involves emergency responders and other personnel.

“Providing clear instructions to first responders to preserve the scene of the loss, until otherwise instructed by a forensic expert, is most certainly a recommended best practice,” Habash notes. “In line with this, another key best practice is preventing the spoilage of evidence by ensuring that the area or item of interest is secured and stored properly.”

“We are frequently told that an item has been moved to a contractor’s facility and when we arrive to complete our examination, the item is sometimes left outside to rust or is thrown in a pile of other evidence,” Habash continues. “If the chain of custody is not well documented, and if the item is not preserved and stored correctly, the success of a conclusive determination of causation may prove difficult to achieve.”

Additionally, the proper selection of experts plays a vital role in the successful execution of the claims handling process.

“(My) advice would be to make sure that your consultant is truly an expert in the field they have been asked to consultant on,” Sarvinis says. “A seasoned expert in all aspects or claims may not be the best choice over a specialized individual – if the claim relates to a building structure, your expert should be a structural engineer. If the claim is electrical in nature, the expert should be an electrical engineer.”

“Many adjusters will say that their cases rarely go to court, so they use quasi-technical consultants that will complete a superficial job for little cost and will never be able to defend their opinions at court,” Jakym notes. “The missed recovery opportunities are not easily accounted for because evidence gets buried and the claim gets paid. When every loss is classified as ‘undetermined’ than shoddy manufacturers and workmanship will always win the day.”

“It is recommended that the appropriate expert is selected for the loss in question,” Habash agrees. “Avoid the ‘jack of all trades’ type of forensic expert. This discernment puts an adjuster at a strategic advantage to accurately determine coverage and equips you with reliable documentation in the event the claim starts heading toward the path of litigation.”

A clear line of communication between adjusters and forensic engineers is also critical – both at the outset in the form of an assignment letter and in terms of ongoing interaction throughout the investigation.

In his article, Goff notes that: “While setting clear expectations may eliminate unnecessary back and forth between parties, additional dialogue during the course of the assignment is essential, particularly if the claim professional expands the assignment, changes a deadline, or adjusts the budget.”

“When using an expert, the adjuster typically needs to be even more proactive about file management than usual, and should diary regular contact with the expert. The more severe or complex the claim, the more often they should be talking,” Goff observes.

Forensic engineers at CEP agree with this assessment. The importance of ongoing discussions about budget, timeline, deadlines and difficulties are key to a successful working relationship, according to Jean-François Joubert, president and chief executive officer of CEP.

“Give feedback – If you’re unhappy about something, tell your expert. He or she wants to know,” Joubert notes. “Ask about cost-to-date from time to time. Your expert should keep you in the loop but when things get busy this sometimes gets pushed back.”

Forensic Trends

Forensic engineers can play an invaluable role in determining causation of often complex loss events. But how they are involved in the actual claims process may be changing in the future when it comes to subrogation, litigation – and even the relationship with adjusting firms. There has been ongoing debate in the industry about ownership ties of adjusting firms to forensic engineering companies. Some argue that this could taint the objectivity of expert opinion, particularly at trial.

“There appears to be a certain trend in consolidating forensic firms with large independent adjusting firms,” Joubert says. “Forensic engineers have to remain objective/unbiased. Forensic engineering companies and insurances companies would be better served if they remained independent of each othe

“True independence means that the forensic engineering firm has no ties to adjusting firms, insurance companies or insurance brokers,” Jakym notes. “A perceived bias at trial by a judge, whether it is justified or not, will end up hurting a case.”

Adjusting companies that have direct or indirect relationships with forensic engineering firms say that their separate management and ownership structures create proper lines of division and ensure that no conflict of interest or perceptions of bias exist. There has been no case law in Canada specifically related to alleged conflicts of interest and cross-ownership of adjusting and forensic engineering services.

Habash notes that other factors are coming into play when it comes to litigation strategies and the credibility of forensic evidence.

“As the Canadian insurance industry becomes increasingly litigious, we are seeing a very clever defense strategy being used,” Habash explains. “There has been a marked shift of focus on spoliation of evidence by counsel. In many instances, experts are not being challenged specifically on their technical opinion as they traditionally have been, but rather on the evidence from which they formed their opinion. The strategy is simple: if the integrity of the evidence can be brought in question, then the expert’s opinion can easily be discredited,” he adds.

Another trend is the focus on subrogation opportunities early in the claims process, according to Habash.

“We are seeing a huge shift in our industry, with an increased focus on exploring opportunities for subrogation,” he notes. “It seems our clients are realizing the value of completing a thorough and efficient forensic investigation on the front-end of a claim, rather than hiring a forensic expert months or even years down the road to piece things together.

“We predict that this shift of priorities – from price tag to quality of findings – will continue to grow in the Canadian market as insurers begin to see a higher return on investment for investigations that are initiated earlier on in the claims process,” Habash concludes.

For Nellis, trust is the glue that holds the working relationship between adjusters and forensic engineers together. “I expect that the future will continue with increased collaboration between service providers to the insurers,” he says. “The insurers’ goals will remain the same: to control cost and liability and close projects in an efficient and timely manner.”

“In my experience, clients don’t want surprises and need to know there is reliability and consistency of service with the company and individuals they choose to work with. Trust . . . will likely always be the key to long-term relationships with loss adjusters,” Nellis adds.

“Slowly, the engineers and adjusters are starting to realize that they are on the same team,” Sarvinis observes. “They are both starting to realize that understanding each other’s position and opinions and working together effectively makes the assignment run much smoother.”

For adjusters like Goff, the measure of how forensic engineers and adjusters can work together is in the nature of the agreement and the results achieved in a specific investigation.

“Done well, the work of a forensic expert can improve the claim experience and strengthen the relationship between adjuster and client,” Goff concludes. “Of course, the opposite also is true. Just as wise adjusters know when to involve an expert, they also know that mastering the rules of engagement with them can provide a fair and timely outcome for all.”