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

If you live in the southwest, then you have probably looked into different ways to keep your house or business cooler without raising you air conditioning bills.  One solution which has increased in popularity over the past couple of years is the installation of a reflective radiant barrier. Radiant barriers can be used in residential, commercial, and industrial buildings. Radiant barriers reduce summer heat gain and winter heat loss, which helps lower heating and cooling costs.  The potential benefit of attic radiant barriers is primarily in reducing air-conditioning cooling loads in warm or hot climates.

The two most common types of radiant barriers on the market today are radiant barrier coatings and radiant barrier foil coverings. Radiant barrier coatings (latex paint mixed with aluminum) are typically sprayed on the underside of the roof decking. Radiant barrier foil coverings usually consist of a thin sheet or coating of a highly reflective material, usually aluminum, applied to one or both sides of the substrate. Common substrates include kraft paper, plastic films (scrim), cardboard, plywood sheathing, and oriented strand board. Reflective radiant barrier foil products can be installed between the roof sheathing and attic floor insulation, in wall cavities, and around door openings, water heaters, and pipes.

While the potential benefits of radiant barrier foil coverings are well known and advertised, the potential risks are much less well know. It should come as no surprise that the aluminum laminate used in the reflective radiant barrier covering is an excellent conductor of electricity. When grounded, through incidental contact with the homes grounded electrical lines, plumbing lines, junction boxes or recessed light fixtures, it can effectively conduct electricity throughout the entire attic space. Because reflective radiant barriers are installed either on the attic floor or between the roof sheathing, the potential exists for them to become energized through contact with exposed or damaged residential wiring, as well as through a direct lightning strikes on the chimney cap, metallic roof penetrations, attic vents, and flashings. When a radiant barrier becomes energized and current begins to flow through it, intense heating can occur at the connection points. The intense heating at those connection points has the potential and often does ignite the various combustible substrate materials upon which the aluminum is mounted or laminated. The greater the amount of current flowing through the system (i.e. typical 120v residential wiring vs. lightning), the greater the risk of fire.

Over the past year, we have identified a number of radiant barrier fires with good recovery potential.  It should be noted that radiant barrier losses are not always easy to identify  because they can occur virtually anywhere along the energized radiant barrier foil, not just at the point where it becomes energized.  That being said, we continue to work closely with our experts to identify, understand and evaluate these losses.  If you believe that you have a loss potentially involving a radiant barrier, Cozen O'Connor stands ready to assist in evaluating all aspects of the loss for third-party opportunities.

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Following up on our report of July 9, 2010, Cozen O'Connor has learned that the National Fire Protection Association (NFPA) has issued tentative interim amendments to three of its standards, banning the use of antifreeze in sprinkler systems in new construction of residences and in the dwelling unit portions of other occupancies.  As previously reported by our blog, the NFPA, in conjunction with the Fire Protection Research Foundation, tested antifreeze solutions in sprinkler systems with varying percentages of glycerin and propylene glycol.  Those tests were followed by additional testing and research which concluded that antifreeze solutions with concentrations of propylene glycol exceeding 40% and concentrations of glycerin exceeding 50% have the potential to ignite when discharged through automatic sprinklers.  Based on these results, NFPA has determined that antifreeze solutions of propylene glycol exceeding 40% and glycerin exceeding 50% are not appropriate for use in residential fire sprinkler systems.  NFPA's Standards Council, the body that oversees the NFPA standards development process, has issued amendments to NFPA 13, Standard for the Instillation of Sprinkler Systems; NFPA 13D, Standard for Installation of Sprinkler Systems in One- and Two-Family Dwellings and Manufactured Homes; and NFPA 13R, Standard for Installation of Sprinkler Systems in Residential Occupancies Up To and Including Four Stories in Height.  For now, and until any further action by NFPA consensus standards committees, NFPA sprinkler standards prohibit the use of antifreeze in new residential fire sprinkler systems.

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In response to the growth of the wind turbine industry, insurance carriers have introduced a number of insurance products tailored to this industry. Principal coverages include protection of those individuals responsible for the design, construction, erection, commissioning and testing of wind turbines. Coverage can also be provided for all risks of loss, destruction or damage to the wind turbines or the property where the wind turbines are erected. Policies also exists for business interruption or loss of profits should the wind turbines stop operating, as well as for protection of the wind turbines while in transit. Finally, it is not uncommon to see policies related to environmental "clean up" costs, or protection for all equipment, tools and personal effects of those contractors responsible for erecting wind turbines.

Obviously, the wide variety of coverages available are a direct reflection of the key risks that a wind energy program can present. From installation problems to start-up delays, there are several potential problems which can lead to first-party insurance claims. The most common property damage for wind farm underwriters involves lightning damage. Lightning strikes can cause significant fires if the wind turbine's lightning protection system is not installed or maintained properly. Besides lightning strikes, failure in the electrical installation of wind turbines can also lead to fires. Other common problems that may present fire hazards in wind turbines include the failure to protect hot surfaces inside the wind turbine (e.g., the generator and gearbox mountings), work related to the repair, assembling and maintaining of wind turbines (e.g., welding, cutting or soldering work) and the build-up of internal combustible materials such as foam sound insulation or oil in the gearbox or hydraulic system.

When presented with a claim involving damage to a wind turbine, there are a number of third-party issues that must be evaluated. First, was the loss caused by a lightning strike or some other technical defect in the electrical or mechanical systems? If the damage was caused by lightning, it is crucial that the adequacy of the lightning protection system be examined. The appropriateness of the protection system, including design, installation and maintenance must be evaluated, especially since third-parties were most likely responsible for those tasks. If there was some type of problem with the electrical or mechanical systems, it is important to evaluate whether the electrical system complied with applicable code and provided an approved method of controlled shutdown of the operating system, as well as whether the electrical system was routinely inspected by qualified professionals on a recurring basis. To the extent the electrical and mechanical systems performed as intended, it still may be necessary to evaluate internal materials in the turbine to determine whether the materials used were combustible when either non-combustible or low-flammability materials were available (thus contributing to the rapid spread of what was originally a modest internal fire).

As wind farms continue to proliferate, coverages available for constructors, manufacturers, owners and land owners will continue to increase. In reviewing wind turbine losses, a basic understanding of how wind turbines work is important, as is an understanding of the most common type of wind turbine failures and the contributing factors. Should you be involved in underwriting wind farm programs and experience a major loss, Cozen O'Connor stands ready to assist in evaluating all aspects of the loss for third-party opportunities.

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On December 1, 2010, Federal Rule of Civil Procedure 26 will be amended to exempt draft expert reports and certain categories of attorney/expert communication from discovery. In practice, this amendment will liberalize the communications your attorney can have with your testifying expert and reduce expenses that are incurred to comply with the Rule as it is currently written.

Current Rule
Under the current version of Rule 26, along with a written expert report a party must disclose “the data or other information considered by the witness in forming [his opinions]”. That “other information” would essentially be everything the expert read, looked at, or wrote down. Practically speaking, parties go to great lengths to conduct phone conferences with their testifying experts so nothing will be put in writing. In many cases a party will hire separate “consulting only” experts to assist in development of case theories. As written, the Rule has become a situation of form over substance.

Amended Rule
The amendment to Rule 26 requires that only the “facts and data considered by the witness” is discoverable. The Rules Committee has specifically stated that a primary purpose of the amendment is to extend the work-product privilege to draft expert reports. It will also allow for more natural communication between attorney and expert.[1] Under the amended rule, an attorney and expert will be able to speak and email much more freely about the development of the case and craft a report that truly captures the substance of the expert’s opinions.

In Subrogation Practice
In a subrogation case, experts are widely used. Expert reports are often prepared early on so the handling adjuster has something in writing for the file. Under the current Rule, the problem with the pre-litigation expert report is that as new or additional facts are developed through discovery, the report becomes obsolete or even incorrect. It is always challenging to receive a case with good subrogation potential but a poor expert report. You are forced to either hire a new expert (who likely will not have the benefit of firsthand information gathered when the loss was fresh) or produce the damaging report. Discovery of the early draft provides an opportunity for opposing counsel to impugn the credibility of your expert in deposition or trial. The Rule as amended can add value to an otherwise strong subrogation case, as well as save expenses by not having to jump through hoops to comply with the Rule as it is currently written.

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