Tornadoes and resulting property loss: how to prepare

March 27, 2024

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The wrath of a tornado — a narrow, violently rotating column of air usually associated with thunderstorms — can cause catastrophic damage spanning more than a mile wide and 50 miles long. Small objects can be turned into projectiles, trees can be uprooted, and home roof coverings can be uplifted, detached and fly off. An especially devastating tornado — which can carry wind speeds exceeding 300mph — can throw cars, rip walls from solidly constructed homes and even blow entire structures into the distance.

As tornado season slowly approaches for certain U.S. regions — early spring in the Mid-Atlantic, the Southeast and along the Gulf Coast, followed by May and early June in the southern Plains — property owners should not only prepare physically, but also understand tornado risks, its consequences and related insurance implications.

Tornadoes and property loss 

Tornadoes are more than a regional concern. Though certain regions are commonly associated with tornadoes — such as the “Tornado Alley” of the Great Plains or the Southeast’s “Dixie Alley” — they have been reported in all 50 states. Increasingly, they appear to be occurring in locations they hadn’t previously, while occurrences are also expanding into historically less-active winter months. In effect, populations that are inexperienced with these natural disasters, along with their property, will face unprecedented risk.

Tornadoes are among the most violent atmospheric storms that exist and can cause immense structural damage to properties. In 2022 alone, more than 1,300 tornadoes hit the U.S., which collectively caused $700 million of property and crop damage and as well as 25 deaths, according to the National Ocean and Atmospheric Administration (NOAA). Each individual tornado racked up, on average, $685,000 of damage.

These storms are unique in their sudden nature. Unlike a hurricane that can be tracked for days as it approaches, tornadoes simply form when conditions are favorable — and there is little-to-no time to prepare. Although a tornadic event will not typically generate the massive volume of claims as, say, a widespread hailstorm, destruction that accompanies affected areas is often spatially concentrated and catastrophic. It is not uncommon to see a swath of severely damaged homes, while property 100 yards away sits unaffected. 

Components involved in a loss

A claim is often handled by a dedicated loss adjuster who remains the insured’s point of contact from first notice and through the claims process until the claim is considered complete. After adjusters conduct damage assessments and submit a full-captioned report to the insurance carrier, they determine what resources are needed to restore the property to pre-loss condition, and often engage a range of professionals. 

A building consultant will aid in estimating the damage of a commercial property, for example, and if a business interruption (BI) is involved, a forensic accountant can be authorized to begin resolving the BI claim. Engineering service providers, such as EFI Global, can assess structural soundness, while contractors from Sedgwick’s repair solutions division can complete temporary repairs that protect property from further damage.

Due to the layers of desecration tornadic activity can cause, related claims are typically multifaceted, complex and can extend through long durations of time. If a residential home or commercial warehouse is partially destroyed, there are comprehensive procedures to repair and restore the property to its pre-loss condition. There will be several phases, including multiple inspections: the initial inspection, additional inspections with expert involvement, the monitoring of repairs, and a final inspection before concluding the claim.

Well-kept communication is integral — between the insured and the adjuster, as well as between the adjuster and the property’s insurance carrier. It’s critical that each claim is handled with a caring, empathetic touch.

Heightened urgency

Severe weather events, particularly tornadoes, involve circumstances that create heightened stress and urgency. If the homeowner avoids physical injury during the event, they may still have sustained psychological trauma — on top of the property damage and potential loss of treasured personal items. Those affected by a tornado’s destruction need immediate reassurance that they’ll overcome the devastation.

To that end, it is critical that adjusters provide a quick and immediate response — within the same day, wherever possible. It is their job to instill confidence in the insured that they are taken care of and will continue to be throughout the claims process. Contact should occur immediately to put the insured’s mind at ease, as should visiting the loss site to inspect the scope of damage. 

When did the adjuster make contact? How soon after did an inspection follow? How efficiently was the first report submitted? For a commercial property, how quickly is the BI payment received, so the claimant can get back to business? Not only do insurance carriers track this information to ensure optimal service is being provided, but the insured is wondering too; these questions are integral to the insured’s timeline of life’s return to normalcy. 

Of equal importance, adjusters should walk the insured through the various parts of the claims process — step by step. Knowing what comes next can provide a critical sense of comfort and assurance to an insured who just lived through an unforeseen event.

Capacity to respond

It is impossible to perfectly pre-arrange staffing for weather events, as storms often change course, defy predictions and in some cases occur without warning. As multiple catastrophes can happen simultaneously in different areas, capacity must be expansive to meet customers’ immediate needs. It is particularly beneficial to engage an organization with a nationwide network of experts. Sedgwick has adjusters scattered country-wide who are at the ready when disaster strikes.

Learn more:

  • Visit the CAT resource center to explore Sedgwick’s catastrophe (CAT) planning and response solutions, including temporary housing, contents and inventory, repair, engineering and more. 
  • Check out EFI Global’s website to learn about their 24-hour CAT response services.

Troy Dowdy, Senior Vice President – Mid-Atlantic Region, Sedgwick, and Tony Baddour, Vice President – Mid-Atlantic Region, Sedgwick

Cyber business interruption claims: the unique challenges of the digital realm

March 20, 2024

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Asia is home to more than half of the world’s internet users. Businesses are leveraging Asians’ online activity to make inroads to new and existing customers, create new products, and make processes more efficient. The benefits of this opportunity are accompanied by unique risks not addressed by traditional business interruption (BI) insurance policies. However, they can be managed with BI cover from standalone cyber policies. 

As we move from the physical to the digital realm, cyber BI claims present unique challenges –some familiar, some different, and others dramatically different from traditional BI claims. 

The familiar

As with all insurance claims, a causal link between the incident and the loss must be established. This is known in traditional BI as the material damage proviso. Cyber BI policies are similar, but instead of damage, cover may be triggered by an actual or suspected compromise to a policyholder’s IT systems. For losses to be covered, they must flow from an insured incident. 

The types of cover that both traditional and cyber BI policies provide are also quite similar. Cover may be provided for on a gross revenue or gross profit basis and on the basis of increased costs of working. The aim, therefore, is to place the policyholder in a position but for the cyber incident. These incidents can be either malicious (say, a data breach or malware) or otherwise (perhaps due to accidental acts or omissions). The challenge, as always, lies in isolating the loss solely to that caused by the incident.

The somewhat different

Some subtle differences are noticeable when considering losses under a cyber policy. The indemnity period for a traditional BI policy typically starts when a physical loss occurs. However, with cyber BI policies, the start depends heavily on the policy wording; it could be the assessed time of a system compromise, or the time a security incident report is made. This is subject to the expiry of a defined waiting period (i.e., time deductible), usually about 12 hours. While this sounds like a short time, it may prove to be a costly eternity for an online retailer during a major sale like on Singles’ Day. 

Cyber BI policies generally have maximum indemnity periods of about three months, which is significantly shorter than the 12 months we commonly see in traditional BI policies. This reflects the shorter nature of many cyber incidents, which can be resolved faster through, for instance, a backup restoration. However, it can be challenging to identify and rectify the point of failure in a complex IT system, despite having the assistance of a dedicated incident response team. 

The very different

Since the underlying assets are intangible in nature, some major differences arise. Here are two worth considering: 

  1. Ransomware attacks

While not new, ransomware attacks have become increasingly prominent and complex, making it more likely that a business may face disruptions. Data may be stolen or access to it blocked (or some combination thereof), with the extortionist threatening to release, destroy, or block access to confidential data unless a payment is made. The average ransom in 2023 was reported to be US$1.54 million, nearly double 2022’s figure.

In certain instances, paying the ransom may seem the cheapest and most effective option. Some policies even indemnify a policyholder for such payments. The final decision on whether to make a payment lies with the business — but, should they pay?

While it may be tempting to give in to the demands in the hopes the data is restored quickly, the evidence does not support this. Approximately one in four that pay never recover their data, and even if some data is recovered, most organisations take more than a week to recover from a ransomware attack. There is also no guarantee of an end or resolution to the attack — a point echoed by the 48-nation Counter Ransomware Initiative that strongly discourages such payments. Payments could also serve as a source of funds for criminal activities and provide further incentive to commit future attacks. 

Businesses must decide whether it’s in their best interest to decline making a ransom payment. Should insurers support the decision not to pay, cover would generally extend to recovery costs and any loss of revenue directly resulting from the attack.

As ransomware attacks may be financially costly and cause significant downtime, it would be sensible to proactively prepare for such an incident. These measures may include:

  • Ensuring backups and redundancies are in place and current
  • Conducting regular IT audits
  • Mandating strong passwords and multi-factor authentication
  • Conducting regular IT training and education
  • Developing incident response plans that can be mobilised quickly if needed 

Such plans are only effective if they involve the efforts of the whole organisation.

  • Reputational damage

Following a cyber-attack, public perception of the targeted company may be affected — particularly when sensitive customer data is compromised. Customers may question the company’s ability to protect their personal information, leading to a loss of trust and loyalty. Service outages can also cause users to switch to a competitor promoting its reliability.

Many cyber BI policies provide cover for reputational damage, reimbursing insureds for financial losses arising directly from the incident. Cover for reputational repair costs may also be available to hire PR consultants to mitigate the effects of adverse publicity. The difficulty lies in measuring and attributing the loss of current and prospective customers to the incident. Further, since many cyber policies have short maximum indemnity periods, the ongoing reputational damage beyond this period would not be covered by the policy. 

The jury is still out on whether news of cyber incidents has become so commonplace that a business’s reputation is indeed damaged. People tend to view businesses holding a high degree of trust as more susceptible to reputational loss. An online bank, for example, would be more prone to reputational loss than an online retailer. 

As with ransomware, a proactive approach to managing reputational damage may be more effective and efficient than a reactive stance. In addition to the measures listed above, the cornerstone should be clear and effective stakeholder communication — key to rebuilding trust and defending reputations. 

Conclusion

Cyber BI claims share some characteristics with their traditional BI counterparts, but the digital realm raises some unique questions. When a business is faced with a cyber BI loss, it’s critical to engage a trusted partner with expertise in the nuances of cyber BI claims to help them mitigate its wide-ranging impact.

Learn more — read about Sedgwick’s forensic accounting services and business interruption capabilities in Asia or email [email protected] for further information

Gerald Cheang, Senior Manager, Forensic Accounting Services, Asia

Navigating strata insurance challenges: how Sedgwick empowers owners and managers for building resilience

March 13, 2024

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Strata insurance plays a crucial role in safeguarding the interests of property owners within a shared building or complex. As the complexities of property ownership increase, so do the challenges faced by owners and strata managers in ensuring adequate insurance coverage. In this blog, we delve into some of the biggest concerns that owners and strata managers encounter regarding strata insurance and explore how Sedgwick is actively addressing these concerns to support the strata community.

The rising cost of strata insurance

One of the primary concerns for owners and strata managers is the rising cost of strata insurance. In recent years, the insurance landscape has undergone significant changes, leading to increased premiums and, in some cases, reduced coverage or no coverage. The challenge lies in finding comprehensive insurance solutions that are both cost-effective and provide adequate protection for the diverse needs of a strata community. Sedgwick understands this challenge and works closely with strata managers to identify tailored insurance options that strike the right balance between coverage and affordability.

The complex nature of strata insurance

Another pressing issue is the complexity of strata insurance policies. Owners and strata managers often grapple with the intricacies of these policies, which can be filled with jargon and technical terms. Understanding the scope of coverage, exclusions, and limitations is crucial for making informed decisions. We simplify the process by providing clear and concise information, guiding owners and strata managers through the claims management process and ensuring they understand policy applications and the underlying decisions relating to policy response. This transparency fosters trust and empowers the strata community to make informed choices regarding their insurance needs.

The unfortunate rise in underinsurance

The risk of underinsurance is a persistent concern in the strata community. Owners and strata managers need to understand the value of their property to ensure it is adequately insured for the correct value. Although it isn’t the owners and strata managers who determine the value, they can decide how much to insure their property for based on the recommendation and valuation of a qualified and reputable expert. Underinsurance occurs when the valuation of the property is incorrect and is lower than its actual market value leading to inadequate coverage in the event of a claim. We address this issue by conducting thorough property valuations and risk assessments. By accurately assessing the replacement cost of buildings and common areas, we help ensure that strata communities are adequately insured, mitigating the risk of financial loss in the event of a covered incident.

Navigating policy and regulatory changes

Strata communities are also grappling with the challenge of navigating the evolving regulatory landscape. Changes in legislation and insurance regulations can have a significant impact on strata insurance requirements. Owners and strata managers may find it challenging to stay abreast of these changes and ensure compliance. We remain proactive in monitoring regulatory developments, providing timely updates, and guiding strata communities through any necessary adjustments to their insurance policies. This proactive approach ensures that strata communities remain in compliance with the latest legal requirements.

The looming threat of natural disasters

Natural disasters and climate-related events pose a heightened risk to buildings and structures, making resilience a top priority. Owners and strata managers are increasingly concerned about the potential impact of extreme weather events on the properties they own or manage, which is why we collaborate with strata communities to implement risk mitigation strategies, such as property retrofitting and disaster preparedness plans. By taking a proactive stance on risk management, we help ensure strata communities enhance their resilience to potential hazards.

The claims process can be a source of anxiety for owners and strata managers. In the aftermath of an incident, the timely and efficient processing of insurance claims is crucial for restoring normalcy. We pride ourselves on our streamlined claims management processes, leveraging technology to expedite the assessment and settlement of claims along with minimising the disruption for strata communities, allowing them to recover and rebuild promptly.

In addition to these concerns, the strata community often faces challenges related to building maintenance and repairs. We recognise the importance of preventive measures in reducing the frequency and severity of claims and by partnering with strata communities to implement robust maintenance programs, we help enhance the longevity and durability of buildings, ultimately reducing the risk profile for insurers.

Our support to the strata community

Our commitment to the strata community extends beyond insurance services. We actively engage in educational initiatives, providing resources and training to strata managers and owners. By fostering a culture of awareness and preparedness, we empower the strata community to navigate the complexities of property ownership with confidence.

Strata insurance is a critical component of protecting the interests of owners and strata managers in shared properties. Sedgwick addresses the biggest concerns of the strata community by offering tailored insurance solutions, simplifying policy complexities, preventing underinsurance, staying abreast of regulatory changes, enhancing resilience to natural disasters, streamlining the claims process, and supporting proactive building maintenance. Through its comprehensive approach, we play a pivotal role in helping the strata community navigate their building concerns, fostering a secure and resilient environment for property owners.

Learn more > explore how Sedgwick is helping the strata community navigate their building concerns here.

Edwina Feilen, Manager, Business solutions, Australia

Building repair cost review – October to December 2023

March 6, 2024

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Each quarter, the quantity surveyors from Sedgwick’s repair solutions team review the building and construction market to understand the primary drivers of cost and ensure that our rates remain fair and competitive. This report provides an overview of the current situation and looks at factors that could affect insurers’ building repair costs in the months ahead.

Click here to read the full commentary paper.

Navigating marine cargo risks and liability implications

March 1, 2024

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In the marine claims industry, very little is perceived as straightforward. No matter where goods are produced around the world or the manner in which they’re shipped (by sea, land or air), challenges will inevitably surface.

Transferring cargo and liability implications

Let’s say you log into the Amazon app, search for a tablet and submit the order. There are quite a few individual factors that play a role in getting that device from your cart to your doorstep. The process might start in Kenya, where the copper is mined to construct the device. Then it might be transferred to China, where the assembly process takes place, before it’s transported to storage, with as many stops as necessary in between. The tablet must then be sent to an Amazon distribution or fulfillment centre, before finally making it onto a vehicle and arriving on your doorstep. 

But who’s considered liable for the goods during each step of that process? There’s a slew of complex factors to assess, and a range of parties involved, including the legitimate owner of the goods, the owner of the warehouse where the goods are stored mid-transit, and the carriers or others involved with physically transferring the cargo, among others. And each of these parties likely maintains their own nuanced policy coverage.

At some point in this tenuous process, ownership of that cargo — electronics, or whatever it may be — transfers. But where? At the warehouse, in the carrier’s possession, or your doorstep upon being delivered? It’s only through investigating the direct cause of the loss and circumstances surrounding the event that a determination can be made regarding which entity carries the risk of that cargo, and subsequently, who should receive payment in a cargo claim. 

Maritime and transport risks

A myriad of risks could inhibit the shipping and transit of commodities. Traffic accidents, such as collisions, can severely damage cargo, a common occurrence. Events can prevent cargo from being delivered, or unintentional damage can occur. Cargo thefts or hijackings can be carried out by criminal syndicates or other third-parties mid-transport. Anything that has the potential to damage a load of cargo is a viable risk.

Warehousing risks in particular are a significant — and growing — concern in the marine industry. The facilities where goods are stored could flood, for example, or theft could occur at the hands of an on-site subcontractor. One cargo theft analysis found that warehouses and distribution centres are the top targeted location type among the global supply chain, with car-parks coming in second. 

Whatever it may be that causes the loss, it will need to be established whether the warehouse keeper holds the liability for those goods, or not.

Many parking areas designated for lorry drivers exist in the UK, but few will advertise that their facilities are secure due to security risks. Drivers should be meticulous about choosing their parking location and ensure it’s as secure as possible to minimise risk of theft. Additionally, hauling organisations should conduct a comprehensive vetting process before hiring each driver. An employee who has nefarious ties would have first-line access to identifying high-value, attractive cargo and/or facilitating its theft. Cargo that’s particularly attractive should be transported same-day, if possible, rather than a higher-risk overnight journey.

Key factors of an investigation

In the event of a loss, a special investigation must occur to begin moving the claims process forward. An adjuster must be present on the ground to assess all aspects of the loss and collect all available information and evidence. Adjusters seek to establish liability at the time of the loss event, sift through the wide-ranging laws and compliance requirements of relevant locations, determine if negligence or nefarious activity took place at any point during the cargo-handling process, review documentation, assess the condition of the damaged goods or work to recover goods that were stolen, and deploy risk mitigation tools to minimise the possibility of future losses.

Learn more: Find out more about Sedgwick’s global network of marine specialists and marine claims operations solutions in the UK.

Parisa Kheradmand, Marine Surveyor and Major and Complex Loss Adjuster, Sedgwick

Managing a large and complex property fire claim

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This blog is the first installment in a series where our property experts highlight recent claims. In part one, we discuss our response to a devastating fire. Stay tuned for the second blog focused on a flood catastrophe, which is coming soon.

Claim details

On 3 January 2018, a devastating fire erupted at a prominent meat processing and export building . The fire inflicted extensive damage to the property, halting all production. The disruption to the business was anticipated to extend up to two years, invoking the maximum indemnity period (MIP) stipulated under the business interruption (BI) insurance coverage. The incident presented numerous challenges, including the need for heavy mechanical equipment to excavate debris and perform partial demolition, and work stoppages due to scorching temperatures exceeding 40 degrees Celsius.

Responding to the challenges

In response to this dire situation, Sedgwick swiftly mobilised a multidisciplinary team of experts. The team comprised experienced quantity surveyors, design and project management engineers with specialised knowledge of the meat production industry, and in-house forensic accounting specialists. Notably, both Sedgwick’s experts and the insured’s appointed advisors collaborated closely to ensure a unified approach — fostering transparency and expeditious progress.

Sedgwick’s forensic accounting specialists played a pivotal role in analysing the business interruption component of the loss. They projected the best-case costs and compared them to potential outcomes if the claim were allowed to run its course. This data — coupled with comprehensive pricing for material damage costs — enabled constructive discussions regarding the reinstatement options for a greenfield site with the insured and their advisors.

Meaningful outcomes

Throughout the process, a collaborative approach resulted in a proposal to settle the claim at an early stage. Doing so offered a substantial discount compared to the projected cost if the claim were fully pursued. This arrangement provided several advantages for the insured, including immediate peace of mind, increased flexibility in allocating proceeds, and the ability to focus on managing their business rather than dealing with protracted insurance claim procedures.

For insurers, this approach allowed them to cap the claim at a level well below its potential magnitude, thus avoiding significant ongoing costs associated with managing and adjusting such a highly complex claim. The successful resolution of this case demonstrated the immense value of a dedicated team of more than 20 major loss and forensic accounting specialists working collaboratively throughout the entire claim process.

Moreover, insurers’ prompt and effective support enabled the insured to concentrate on proactive measures aimed at mitigating their losses. Remarkably, this claim, one of the largest and most complex property fire claims in Australia’s history — involving a consortium of Australian and London market insurers — reached an amicable and appropriate settlement in just under seven months. This outcome benefited all stakeholders, including the insured, their insurers, and the broader local community.

This case study example underscores the importance of a coordinated, expert-led response to large and complex property fire claims. It showcases how collaboration, transparency, and early settlement discussions can lead to favourable outcomes, even in the face of substantial challenges. 

Stay tuned for the second blog in this series where our experts will highlight a recent flood catastrophe. 

Tony Morgan – National executive loss adjuster 

Developing workers in the evolving EV sector

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Regardless of line of business, the way people learn and grow in their jobs is changing. Development is a valuable approach, going beyond training in preparing people for more than just the immediate requirements of work. Flexible learning encourages longer-term critical thinking, helps build resilience, and opens new pathways for growth.   

As various industries rapidly change, up-to-date knowledge and skillsets must be taught to the workforce’s next generation to meet growing demands. Within the electric vehicle (EV) sector in particular, the development of standardized educational materials and an informed, highly trained workforce is of critical importance.

Establishing a competency standard for EVs

As innovative EV technologies continue to emerge, standardized safety and maintenance techniques must be established. Unlike those for internal combustion engine (ICE) vehicles, there are not yet recognized, standard best practices for estimators or technicians who may work on an EV — and more specifically, perform ICE to EV conversions. 

The mounting importance of this conversation has been gathering steam. Legacy EV — an entity that’s part of Electric Vehicle Technician Education Council (EVTEC), the committee that developed and proposed the first-ever EV standards — has even been engaged in recent conversations with the administration on EV technology at the White House.

All the hardworking instructors that provide training on EV technician skills need a universal education task front to rely on for guidance, and manufacturers want standards for their products, as well. A standardized education system would support the regulations/standards in place across the globe, while enabling international collaboration and market growth in the EV space.

Training should be flexible, evolve continuously 

Training is especially important due to the unique characteristics EVs possess. Specialized knowledge is required when working on things like advanced battery technologies and high-voltage systems. Without adequate training, technicians are unable to properly service not just the vehicles themselves, but they can’t easily adapt to every new technology, specialized car part or charging infrastructure that surfaces.

For repair shops, particularly small ones, it can be difficult and expensive to acquire and carry certain specialized parts, and new manufacturers routinely pop up with new models that need to be integrated into existing standards. Education and training should be reviewed and revised regularly.

The bottom line

For the widespread global adoption of EVs to succeed, there must first be a solid instructional foundation, and a well-trained workforce with an ever-evolving knowledge base at the ready to solve technical challenges, provide reliable services, and ensure customer satisfaction. 

At Vale Training, whether it be fleet managers, insurers, estimators or repair facilities learning to implement high voltage and EV training and safety practices in their workplaces, or insurance adjusters learning to properly evaluate property damage following catastrophes, we aren’t just training people for today — we’re developing them for the future. 

Learn more — Vale Training, a Sedgwick company, is equipping the next generation of claims specialists with the expertise necessary to meet industry challenges. Vale is part of the EVTEC board, has been training auto estimators for more than 70 years and introduced the EV and hybrid course several years ago to establish a standard for writing an EV estimate.  Vale’s partnership with Legacy EV is specific to the technician audience. Visit the website to learn about the range of online courses, career consultancy services and certifications offered, including EV courses hosted in partnership with Legacy EV. 

Navigating traditional engine issues and failures 

February 14, 2024

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Traditional engines, the mechanical heart of everyday vehicles, have evolved significantly since their inception in the 19th century — and today, they’re the considered the backbone of the automotive industry. But what happens when they cause complications or fail altogether? In this blog, I’ll explore how traditional engines work, the intricacies of their functioning, the potential for their departure from the market, and how liability adjusters can help investigate the cause of their issues or failures. 

Traditional engines in motion

Engines consist of several key components, each playing a crucial role in the combustion process. The cylinder, piston, connecting rod, crankshaft and camshaft are fundamental to a traditional engine’s operation. The engine cycle involves four stages: intake, compression, power and exhaust. During compression, the piston moves upward, compressing the air-fuel mixture that has been brought into the combustion chamber (intake). Ignition follows, propelling the piston downward and generating power. Exhaust then expels the spent gases.

There are several components, which, if not addressed properly, can pose additional risks to engines.  

  1. Engine formation and camshaft’s role: Engines come in different formations such as in line or V shaped, and all have a camshaft that plays a major role. It controls the opening and closing of the engine valves, regulating the intake and exhaust processes. This orchestration is essential for optimal engine performance. 
  2. Engine oil circulation: Engine oil is the lifeblood that ensures smooth operation. It lubricates moving parts, reducing friction and preventing wear. The oil circulates through the engine, guided by the oil pump, providing critical protection to components like bearings and the camshaft.
  3. Timing belt, pistons and connecting rods: The timing belt synchronizes the camshaft and crankshaft, ensuring precise engine operation. Pistons, connected to the crankshaft via connecting rods, move within the cylinders and convert linear energy into rotational force.
  4. Potential engine failures: Engine failures can result from various issues. Oil contamination or restriction can lead to worn or damaged bearing shells, particularly big end bearings, causing friction, heat build-up, and potential engine destruction.
  5. Cooling system and turbocharging: To manage the intense heat generated during combustion, engines incorporate a cooling system. Coolant circulates through the engine block, absorbing heat and dissipating it through the radiator. Turbochargers enhance performance by compressing fresh air, increasing oxygen levels for combustion.
  6. Fuel injector issues: Fuel Injector spray patterns must be precise for efficient combustion. Defective injectors can damage components or even cause engine failure.

Are electric vehicles the future? 

The worldwide shift to electric vehicles (EVs) — while slow but steady — introduces a paradigm shift. Electric cars rely on electromagnetism for propulsion. Batteries store and release energy, powering electric motors. This departure from traditional engines aligns with an eco-friendly and sustainable future that many organizations and individuals have steered towards.

Engines are intricate marvels of engineering that power our daily lives. From their historical roots to the intricacies of their components, understanding how engines work is key to both maintenance and investigating an engine’s issues or why it has failed. As technology advances, the emergence of electric vehicles showcases the industry’s commitment to innovation and environmental sustainability. Whether internal combustion or electric, engines remain the driving force propelling us into the future.

Liability adjusters take the wheel 

After work is done on an engine, problems may surface that lead to the vehicle owner seeking someone to blame. In many cases, this allegation of negligence is justified, but not on all occasions. Sedgwick’s specialist team of liability adjusters have the knowledge and experience to thoroughly investigate engine issues or failures, and to determine if a legal liability exists and if a customer’s public liability insurance will respond. 

Learn more > Read our liability brochure or contact [email protected].

Commercial claims involving injuries or fatalities

February 12, 2024

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As major loss adjusters, one of the most significant aspects of our career is producing a positive outcome for all on a claim. In many cases, this means that the impacted business was returned to its pre-loss state with their insurance policy having responded and delivered without complications. On the flip side, there are downsides to working in this field. One being that we do handle claims that involve serious injuries and, at times, fatalities. During these unfortunate incidents, acting with empathy is essential. 

Whilst the insurance claim becomes a secondary focus, there is often a linked catastrophic effect on the insured business as a consequence of the incident. There could be significant monetary sums at risk with linked factors, such as job security for the insured’s workforce and, indirectly, to employees of those in their supply chain. The claim must still be prioritised and taken care of. 

In this blog, we’ll discuss how an injury or fatality affects the handling, timescales and progress of a major loss involving property damage and business interruption. We will also shed light on some of the issues affecting liability covers. 

Dealing with delays

In some cases, adjusters may not be permitted access to parts of the loss location until authorities such as the police, fire services, crown office and the Health and Safety Executive (HSE) complete their enquiries. This leads to significant delays in assessing the extent of damage, advising insurers of reserves, implementing loss mitigation measures and, importantly, undertaking enquiries required to consider policy liability such as compliance with applicable endorsements and warranties. Delays and linked denial of assessment/inspection of evidence can also hinder subrogation enquiries. 

One scenario that is all too familiar is when a government agency removes and retains a key item as evidence — say a machine which exploded — until their investigation and potential court case is complete. What this means for the claim is that the extent of the damage to the machine might not be known and also hindering the insurer who may needto understand why it exploded before they can confirm acceptance of policy liability. Similar considerations apply to CCTV footage showing the cause of damage and other critical policy liability information. The time period until the subject items are made available for inspection, if at all, can sometimes be several years. The issue to address is how the claim can proceed, as it’s often unreasonable for a policyholder to wait for the item or information to become available to insurers. 

Allowing insurers to make an informed decision on policy liability is the goal, but it’s not always achievable. As a result, they may experience a significant delay in the acceptance, increased property costs and losses or a diminishing business interruption (BI) Maximum Indemnity Period (MIP).

Managing media attention 

In some circumstances, there will be unwanted albeit not unexpected media attention on the incident. Direct approaches are often made to loss adjusters for commentary while on site. Loose comments and inaccurate press reports can appear, which cause confusion and sometimes paint a false impression on, for example, the circumstances of an incident, the housekeeping of the business and the cause of damage. At Sedgwick, our experts have experience handling losses of sensitive nature, including potential media exposure.

Whilst no one can foresee or should expect a claim to involve an injury or fatality, business interruption MIP’s should always be generous and allow for claims not always moving at the pace “normally” expected.

Considering cover 

Where cover for statutory defence costs features in the policy (and it typically does), it is imperative that policyholders benefit from the urgent instruction of a specialist solicitor. This specialist can support them in the face of statutory investigations and create a legally privileged framework, as well as the instruction of appropriate experts to examine and preserve evidence. This ensures that their position is protected relative to any potential prosecution, which could have serious financial and reputational repercussions for the business, and in extreme cases result in action taken against individuals under the terms of the Corporate Manslaughter and Corporate Homicide Act 2007. For that reason, when an incident of this nature occurs, it is no exaggeration to say that, other than the emergency services, a policyholder’s first call should be to their liability insurer.   

Somewhat frustratingly, after the insurer acts promptly to protect their policyholder, a clash between their interests may follow. This introduces a scenario whereby a solicitor whose fees are being paid by the insurer obstructs their ability to fully investigate and understand their policyholder’s liability in the event of a claim. This is borne out of the legal privilege curtain required to protect the policyholder’s investigation and ensure it can be conducted in an objective fashion without risk of its findings being used as evidence against them.    

In this scenario, it is necessary to work as closely as possible with the policyholder and solicitor to secure copies of factual documents that do not require protection from privilege, as well as any information that can be provided in the course of discussion. It is typically with the assistance of the solicitor — who will be in contact with the likes of the police and HS — that access can be obtained to evidence that has been seized during the course of their investigations.   

Early, critical actions aside, in the event of a claim that must be settled, it is to be expected that significant damages will feature, with some notable jurisdictional differences. Navigating these types of issues across the different classes of cover requires skilled and experienced adjusters. Sedgwick’s major loss teams have unparalleled capacity to support on a nationwide, multi-jurisdictional basis.     

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Monitoring modern vehicle thefts

February 9, 2024

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With personal convenience comes potential vulnerability. The evolution of vehicle security began with a mechanical lock and key. This soon evolved to include a factory alarm system, before the industry moved to a key with a coded transponder chip. Then came the shift to a push-button start with an RF fob (remotes that transmit their signals using radio frequency) and coded transponder signal. Today, some vehicles even have a start command when it’s detected that a driver is seated.

Despite these security advancements, the United States is seeing near-record levels of vehicle thefts, which continue to increase, according to a report released by the National Insurance Crime Bureau (NICB). The report stated that nearly 500,000 vehicles were reported stolen nationwide in the first half of 2023, marking an increase of more than two percent compared to the first half of 2022. Insurers should remain vigilant, and take proactive and commonsense measures to help deter theft, such as to never leave your keys or key fob in your car, always lock doors and roll up windows, and never leave valuables in plain sight.

The evolution of vehicle thievery

With each evolution, the security system’s vulnerability has been pinpointed, exploited and weaponized to defeat it — allowing the vehicle to start and move without the factory cut keys or fobs.

In the past, vehicles depended on mechanical exterior door and trunk locks. A single or double cut metal key blade was used to operate the lock. In 60 seconds, thieves were able to pick, rake or destroy the lock mechanism — allowing access to the vehicle and the ignition’s switch drive mechanism. Even in 2020, some vehicles used no other security than a side cut metal blade to start the vehicle’s engine, enabling thefts to be carried out that much quicker.

Transponder-based security systems

A transponder, short for transmitter-responder, is an electronic device that receives a radio signal and automatically transmits a different signal. Within these systems, a programmed transponder chip is in the bow of the key or the FOBIK (smart key) housing. Each chip contains a security code specific to the vehicle it’s assigned to — much like a vehicle’s unique VIN number. The security codes and key cuts are stored with the vehicle’s manufacturer and can be accessed by properly credentialed locksmiths through a third party administrator as needed. 

There are several upsides to utilizing mechanical keys with programmed transponder codes, namely that two to four security systems must be manipulated to drive the car. The mechanical lock or attached ignition switch needs to be defeated to allow the electrical system to run, and the manufacturer’s anti-theft transponder-based engine inhibit system needs to be bypassed or recoded to accept the perpetrator’s code. If the vehicle is equipped with a steering lock, the mechanical linkage needs to be disabled. And in some cases, the transmission shift lock needs to be overridden or disabled.

Another common system is the FOBIK, a fob with an integrated key, that’s been around since 1996 and became more common in 2006 model vehicles. Unfortunately, the signal transmitted by the remote keyless entry command can be blocked by any device capable of transmitting a signal of a specific frequency, including numerous common devices such as garage door openers or Wii tennis rackets. Flip keys are another type of fob that uses a metal key to start the vehicle, which do not continuously transmit a signal.

But chip keys have several drawbacks. The mechanical ignition lock can be picked or physically destroyed, and vehicles with on-board programming capability can be reprogrammed with no special equipment required, in just 30 minutes. As far as flip keys go, most can be cloned in an exact duplicate, thus, the vehicle accepts the code(s) as it would for the original key.

Still, transponder-based key systems largely offer higher levels of protection, enhanced reliability, and unlike a physical key that can be stolen or copied with the intention of gaining unauthorized access to a vehicle, a key fob can be quickly  reprogrammed by a professional automotive locksmith in only a few minutes. The same technology is being used by thieves to clear your key code from the vehicle and program their fob with a new code allowing the vehicle to start. It is critical every insured learns about their vehicle’s own key system and its subsequent vulnerabilities, and considers these factors when choosing a vehicle to use, rent or purchase.

Remote start systems

Vehicles with remote start security systems have extra layers of protection embedded. Doors must be closed and locked before the engine is allowed to start, and if the engine runs for 15 minutes it automatically shuts down. Additionally, if unauthorized entry is made through a door, the system shuts the engine off. If a person enters through a broken window, as soon as the brake pedal is depressed to move the shifter, the engine shuts down too.

Smart keys are great for their convenience: just a push of a button to start the vehicle if the key signal is within three feet of the interior receiving antenna. Entering the locked vehicle requires the smart key to be within a specific distance of the door handle, minimizing the probability of theft. And, if the vehicle was started with a proper smart key, it can be driven without the presence of that key, but will not restart once shut off without the proper security code.

Opposite to the common misconception that the use of a remote starter will increase chances of becoming victim to vehicle theft, remote systems can actually help prevent it. Remote starters’ commonly built-in features such as automatic locking and auto-shutoff ensure a high level of security and safety precaution.

The investigation: determining if a vehicle is stolen

An insurance fraud investigator within a special investigation unit (SIU) would first lock down the insured’s statement of the occurrence and perform extensive research on the case. The investigator performs thorough examinations of the lock mechanisms and tests the vehicle’s security systems. They use resources such as diagnostic computer scanners to detect any anomalies in the various systems and use key-read resources — i.e. information recorded within the key including mileage recorded, last date and time used, how many keys are programmed and more.

The use of Berla technology, specialized hardware and software that retrieves the information stored in a vehicle’s infotainment system — a system of components that offer a range of comfort and safety functions, including radio and navigation — is critical. All vehicle events are recorded. This can include starts, stops, doors opening or doors closing, hard acceleration or braking, and dates and times of each individual occurrence. 

Depending on the vehicle’s specific infotainment system even information on connections to the vehicle — phones or Bluetooth devices along with their unique identifier number — can be obtained. Phone connections not only reveal the phone’s contact list, but also call logs, dates, times and locations where each call was made, and where the phone was when a call was received or missed. 

Navigation and track logs may be available as well, that keep tabs on the vehicle along an entire route of travel on a particular date. Of course, acquiring this type of data from the vehicle infotainment system, or the event data recorder information, requires the written consent of the vehicle owner.

Looking forward

Despite the growing sophistication of anti-theft and engine inhibit systems, any vehicle can be stolen. A 2022 Cadillac, for example, can be placed into reprogram mode using a paper clip. 

Regardless of the means a person uses to commit a theft, proper investigation and research can determine if a vehicle was stolen or if some other motive — a mechanical failure, accident, or DUI, for example — was behind the claim. As vehicle claims reach the billions each year, more cooperation between agencies will be paramount in minimizing vehicle thefts.

Some of these concepts were presented at the 2023 International Association of Special Investigation Units (IASIU) Annual Conference in Dallas, Texas.