Unimpeachable Real Estate Experts

Posted by Mark B. Mooney on Friday, April 27, 2012

Emergency Preparedness Should Include Planning for Claim Subrogation

Having investigated over 2,300 fires and several dozen water-related emergencies, I am continually amazed how many property owners ignore these perils. While the incidence of fire may seem low, this is no reason to ignore the risk. For when fires do occur they are devastating to both people and property.

But my focus here isn’t the property operator whose negligence may be so egregious that his insurance company denies covering losses. I am writing to the property manager who has diligently complied with health and safety codes – but has failed to consider how to recover losses from third parties if a calamity does occur. I suggest you step-up your risk management game – from prevention to planning for claim subrogation.

Let’s say an apartment building has a fire. The tragedy takes the lives of a mother and child. Their survivors seek recovery from the owner and the management company. Let’s say the investigator determines an electrical appliance ignited the fire. As that investigator I would ask who owns the appliance and then make every effort to determine who manufactured it and whether it had been properly maintained or recently repaired. There may have been a manufacturing defect. Perhaps a repair was negligent. In other words, the property owner and manager may be able to seek relief from someone in addition to the insurance company.

You may ask why this is important if the property is insured. Because insurance policies contain recovery limits and exclude an amount of recovery called the “deductible.” Deductibles can exceed $25,000. The policy limits may not be adequate to cover wrongful death claims. A subrogation attorney can assist in recovering the deductible, any losses beyond policy limits and possibly recover additional expenses not covered by the policy.

Maintaining complete and accurate records of the purchase, maintenance, and repair of appliances and other equipment significantly increases the chances of recovery through subrogation. As a fire investigator, I will first seek this information from the property manager.

For example, say an electric clothes dryer is involved in ignition of a fire. Let’s say ACME Appliance Company manufactured the appliance, Regional Maintenance conducts regularly scheduled maintenance on the appliance, and Bobby’s Appliance Company made repairs on the appliance. There are three parties who might be collectively or individually responsible for the fire. Presuming the appliance isn’t so damaged to preclude forensic investigation, I may be able to determine who is responsible. Having access to accurate records of purchase, maintenance, and repairs will help me determine responsibility.

I suggest property managers keep accurate business records both on-site and at another safe location such as the off-site management office. Property maintenance and equipment maintenance should be conducted on a regular basis. Appliances and equipment should be maintained following the manufacturer’s guidelines. Make sure newly installed appliances and equipment are installed as directed by the manufacturer. Make sure your maintenance providers are competent and insured.

Establishing a risk management approach to emergency preparedness will significantly improve your chances of recovering from catastrophe.

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