Subrogation & Recovery Law Blog : Insurance Subrogation Lawyer & Attorney : Cozen O'Connor Law Firm : Property Damage & Insurance Commentary

As its name suggests, the National Fire Protection Association’s goal is to protect against fires. It is therefore not surprising that the number of fires involving corrugated stainless steel gas tubing over the last few years has caught the NFPA’s attention. In the fall of 2009, the NFPA formed a CSST Task Group. The Task Group was entrusted with the job of taking a closer look CSST’s potential for failure when confronted with energy from direct and indirect lightning strikes. The CSST Task Group has now met, submitted a report and has been discharged.

Only time will tell, but the CSST Task Group report may have a far ranging impact in both the construction and CSST industries. First, one of the main issues that the Task Group reviewed was whether bonding of CSST, as set forth in the present edition of the National Fuel Gas Code (NFPA 54), was enough to prevent lightning-induced CSST fires. The Task Group reports that it sought research supporting the continued use of the current CSST bonding requirements of NFPA 54. To this end, the Task Group specifically asked manufacturers of CSST to provide research performed by them on their behalf in this regard. The information the Task Group received in response was of “limited value” and “did not provide enough information to ascertain that the proposed bonding remedy will provide adequate protection from lightning induced surges.” The minutes of the Task Group meeting further reveal that at least one of the members observed failed CSST gas lines even in instances where the CSST was bonded per NFPA 54 and the manufacturer’s recommendation.

As a result of the Task Group’s work, the NFPA has decided that further review of CSST is warranted before the next version of NFPA 54 is published in 2014. Among other things, the NFPA is now looking to validate whether bonding of CSST is an adequate solution to the lightning exposure problem or if there are other alternative methods of installation that will make the product safe. 

Could this be the end of CSST as means of delivering gas products? Or, could this be the start of a movement to make CSST a genuinely safe product? The NFPA appears serious about making sure this product is safe. An Action Report dated June 23, 2010 concluded with these words of warning: 

Over the next full revision [of NFPA 54] currently scheduled to be in the Annual 2014 revision cycle, the industry and others advocating the continued use of CSST in gas piping systems shall validate the safe use of the product through independent third-party validated research and testing that can be reviewed and evaluated by the standards developers in a timely way… [I]t is incumbent upon the manufacturers or others promoting the use of CSST in gas piping systems to provide independently validated and reliable technical substantiation demonstrating the CSST can safely be used. If such substantiation is not provided, the Technical Committee on the National Fuel Gas Code must consider prohibited the use of CSST in NFPA 54. In addition, should the issues not be reasonably addressed by the end of the next full revision cycle, Annual 2014, the Council may take action as it deems appropriate up to and including prohibition of the use of CSST in NFPA 54.

For many who have already lost their homes due to lightning-induced CSST fires, these developments have already come too late. But for now, NFPA appears poised to act. Hopefully, we all will be safer for it.

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The old saying “the devil is in the details” has particular application when trying to prove a contents claim to opposing counsel or at trial. Insurance policies provide for actual cash value and replacement cost value and, with limited exceptions, the law provides for cost to repair or replace unless it exceeds fair market value. A typical claim will usually involve hundreds of individuals items purchased over a number of years that all have to be accounted for and properly priced.

Normally the homeowner, alone or with the help of a public adjuster, compiles a list and hopefully provides the relevant information relating to the item, purchase date, price, condition before the loss, and condition after the loss. The company or independent adjuster will have checked that list or prepared his or her own list. In some cases, however, all of the information may not have been obtained originally or the other side disputes one or more of the above.

While outside help may not be possible for several of the items above because that knowledge belongs exclusively to the insured, there are certain resources to consider which may assist in supporting a contents claim: (1) online data bases of historical products; (2) information from national retailers, internet participants, and distributors; (3) a highly specialized evaluation team; and (4) the ability to have multiple specialists simultaneously on a claim.  The list is not exhaustive, but may assist in ascertaining values for hard to find items and, ultimately, proving that the claim being submitted is reasonable.

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On July 13, 2010, the Appellate Court of Connecticut affirmed a $664,373.02 verdict issued by a trial court sitting non-jury in 2007. Utica Mutual Ins. Co. v. Precision Mechanical Services, Inc. The case arose from a fire at the Commons Condominium Complex in Branford, Connecticut. An employee of the defendant was installing a shower diverter in one of the units. He was a licensed plumber soldering pipes when he ignited insulation in the wall. In November of 2007, the trial court, sitting non-jury, awarded Utica Mutual $664,373.02 after three days of trial.

On appeal, defendant argued that plaintiff failed to offer expert testimony regarding the standard of care, improperly excluded defense experts, and plaintiff did not sustain its burden of proof on damages. The three judge appellate panel rejected each contention. With respect to the first issue, the court determined that the question of whether a reasonable person should operate a torch within the vicinity of combustible materials did not go beyond the field of the ordinary knowledge and experience of the fact-finder and therefore held that expert testimony was not required to determine if the defendant’s performance complied with the requisite standard of care. The trial court allowed one defense expert to testify, but then refused to consider the testimony when deciding the case. The defense expert testified that the damages had been greatly enhanced by the lack of fire stops in the condominiums. The appellate court held that the trial court reasonably concluded that it should not consider his testimony or any evidence that the fire spread due to an alleged lack of fire stops, given the defendant’s failure to apprise the plaintiff of its claim through an affirmative pleading. The defendant had not raised contributory negligence as a defense in its answer or any other pleading.

With respect to damages, the appellate court found that Utica Mutual had presented the testimony of its insurance adjuster, who had more than fourteen years of experience in the profession, and was sent a written form by the public adjusters representing the Commons that detailed line by line the areas that had to be repaired. Utica’s adjuster had also retained a contractor to determine the scope of the damages. The contractor prepared a final report that concluded that the repair costs were $676,842.67. Utica paid the Commons $664,373.02 because of the insured fire loss and received a subrogation receipt from the Commons stating that amount had been paid. The Connecticut Appellate Court determined that such evidence afforded a sufficient basis for determining with reasonable certainty that the plaintiff’s damages were $664,373.02. The court also awarded 6% interest from July 9, 1997, when Utica Mutual received the subrogation receipt. The decision represents a complete and total victory for the subrogating carrier.  

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Subrogation professionals should be aware of a recent opinion in New York where computer fire modeling utilized by the defendant's expert was held to be inadmissible.   In Santos v. State Farm Fire & Casualty Co., No. 000790/07 (N.Y.Sup. Ct. Jun. 28, 2010), a trial court held that the defendant had not presented sufficient evidence that computer fire modeling was generally accepted as reliable in the fire investigation community. 

In larger fire losses, computer fire modeling can be a useful tool that fire experts use to assist in evaluating hypotheses related to fire origin and fire spread.  Fire modeling is also used for illustrative purposes, such as presenting an origin and cause investigator's opinions to a jury.  Although they can be helpful, fire models have their limitations.  NFPA 921, the recognized guide for fire investigations, cautions: "[t]o conduct valid modeling and testing it is important that the investigator gather data that is as accurate and complete as possible."  Fire models are generally only as good as the accuracy of the data that is used in the model. 

The Santos decision is surprising in light of the fact that several federal courts have held that fire modeling is reliable.  For an expert opinion to be admissible in federal court, the opinion must pass the rigors of the Daubert standard.  In federal court, expert testimony must be both relevant and reliable, which entails a preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and can be applied to the facts at issue. 

In state courts in New York, expert opinions must pass the Frye test, which is viewed as a more liberal standard than Daubert.  Under the Frye test, expert testimony based on scientific principles or procedures is admissible only if a principle or procedure has gained general acceptance in its specified field.  Here, the court found that the defendant only presented evidence that computer fire modeling was generally accepted in the regulatory and design community, but failed to meet the burden of demonstrating that modeling is generally accepted in the fire investigation community. 

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All of us in the subrogation and recovery business are well acquainted with product manufacturers attempting to have claims thrown out of court on technical legal grounds. Almost every product liability case now involves such challenges.  Recently, a federal district court judge soundly rejected General Electric Company’s (G.E.) attempts to do just that in Louisiana. The opinion was both interesting and important because the Court did not accept G.E.’s attempts to disqualify a competent expert or narrowly construe the Louisiana Products Liability Act (“LPLA”).

On February 27, 2008, a fire damaged the Denham Springs, Louisiana home of Thomas and Janice Campbell. The Campbells were insured by Louisiana Citizens Property Insurance Group (“Citizens”). The local fire marshal concluded that the fire started in a G.E. range. Citizens retained Ted Kaplon, an electrical engineer. Mr. Kaplon also determined the fire started in the range but could not identify a specific defect. The parties also disputed whether the Campbell range was subject to a recall for “faulty wiring.”

After the lawsuit was filed, G.E. filed motions to exclude the expert opinion of Mr. Kaplon and for summary judgment. G.E. contended that Mr. Kaplon was not qualified to render an opinion concerning the defective condition of the range and how that defect caused the fire because he did not conduct any testing or rely on literature to support his opinions. The Court determined that he qualified as an expert by his education, training, and experience, which included: bachelor’s and master’s degrees in electrical engineering; registration as a professional engineer in Louisiana and six other states; testimony as an expert in several courts including the Middle District of Louisiana; investigation of between 3,000 and 4,000 fire scenes over thirty years to determine the origin and cause of fires, including hundreds of kitchen fires involving ranges; and his investigation conformed with NFPA 21, a guideline for investigating fires promulgated by the National Fire Protection Association (“NFPA”). His testimony was based on sufficient facts because he visited the fire scene, examined the evidence, and issued a detailed report. He also based his testimony on widely accepted and apparently reliable methods, specifically the standards promulgated by the NFPA. Mr. Kaplon was not offered as an expert in the LPLA, electric ranges or their alleged defects, but was offered as an expert in fire investigation and causes.

G.E. also moved for summary judgment under the LPLA because Citizens did not present any evidence of the specifications or performance standards for the range and because Citizens could not show how the range or its wiring deviated in any material way from those specifications or standards. The Court determined that Louisiana law interpreting the LPLA clearly allows Citizens to prove the range is defective through circumstantial evidence. There was no reason why Citizens could not use circumstantial evidence in order to make the inference that a product was unreasonably dangerous when that product left G.E.’s control. This inference shifts the burden of proof to the manufacturer such that the manufacturer must prove that the product was not defective when it left the manufacturer’s control. Citizen did not need to conclusively exclude all other possible explanations for the fire, it only had to show the unlikelihood of other reasonable explanations. Since Citizen did not offer any evidence as to a design defect or inadequate warnings, the Court granted the summary judgment motion as to those claims but denied the rest.

This case is an example that selection and retention of qualified experts who perform thorough investigations is critical in fighting off technical motions from manufacturers in product defect cases.

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