- a water damage claim by dispatching one of your restoration vendors to the loss site. Two months later, you receive a call from the assured about a mold problem due to improper repair (the vendor has no experience or training relating to mold, or
- a roof leak claim. A month later, the assured complains of additional damage which should have been discovered during the additional inspection and repair, or
- a water damage claim in an upstairs bath. During repairs, your restoration contractor rips out the ceiling without realizing it contains asbestos, and the company doesnt have an asbestos certificate.
The above examples illustrate what can happen to carriers having to reopen claims and pay substantial sums on claims they thought were closed. In most of these cases we advised our clients to subrogate against the vendors.
Could these situations have been prevented? Yes.
In the process of subrogating these claims, I asked my investigative vendor, SE Research to check the credentials of the vendors, to discover the background relating to licensing and permits which would have indicated they were properly trained and certified for the restoration they were contracted to perform. In 90% of the reopened cases, we found derogatory information which, had the carrier known earlier, would have resulted in the carrier or assured hiring qualified vendor.
Due diligence would include a review of all licensing, certifications, training, permits, disciplinary actions, history and prior litigation.
As an attorney, I have found due diligence is the key to prevent these additional losses. Just as a life insurance carrier performs due diligence on the proposed insured as a form of proactive loss prevention, I feel Property and Casualty carriers need to perform due diligence on their vendors to prevent additional losses on claims.