Strategies for pursuing subrogation against wildfire damages.
By Anthony Livingston
Each year, wildland fires scorch millions of acres of brush and timber, damage tens of thousands of homes and commercial properties, cost federal and local governments billions of dollars in suppression efforts, and cost insurance companies hundreds of millions in property insurance proceeds. Unfortunately, as has occurred already this fire season, wildfires also take many lives and injure many people each year.
According to the Insurance Information Institute, there were 63,312 wildland fires in 2014 alone that burned over 3.6 million acres in the United States. Over the 20 years from 1995 through 2014, fires, including wildfires, accounted for 1.5 percent of insured catastrophic losses, totaling about $6 billion in damages. Although wildfires in 2013 and 2014 burned less than the average amount of land (approximately 4.3 million acres and 3.6 million acres, respectively), wildland fires consumed over 10 million acres in 2015, according to the National Interagency Fire Center.
Accordingly, with the western U.S.’s primary fire season in full force throughout the summer months, it is imperative that insurance professionals and attorneys vigilantly investigate and evaluate property losses caused by wildland fires for potential avenues to subrogation recovery. Through quick mobilization of subrogation personnel to a wildland fire-related property loss; effective collaboration with other insurers and their subrogation representatives; the joint use of experts and consultants; and the joint pursuit of any subrogation claims, insurance professionals can investigate, evaluate, and even pursue recovery in subrogation effectively and efficiently while sharing and saving significant costs.
Causes of Wildland Fires
There are many causes of wildland fires, both natural and human. Natural causes of wildland fires include, but are not limited to, lightning that strikes trees or natural features, such as rocky peaks, sparking a smoldering fire that eventually transitions into a flaming fire; lightning that strikes power lines or other electricity transmission equipment; spontaneous ignition of combustible vegetation; and volcanic activity emitting superheated ash and lava that contacts combustible vegetation. Of these, lightning is by far the most common cause.
As to human-caused fires, wildland fires can be ignited by incendiarisms; campfires being left unattended, improperly extinguished, or unsafely contained; discarded smoking materials; fireworks; controlled burns that escape the planned burn area; and outdoor debris burning.
Additional ignition sources for wildland fires are related to events concerning electricity transmission equipment, including transformers, that fail and drop flaming, sparking, or hot material into combustible vegetation; overhead power lines contacting and igniting trees; arcing between adjacent power lines brought into accidental contact with one another; and fallen wires. Construction equipment, machinery, and motor vehicles also present viable ignition sources, as hot combustion engine components can contact fine surface fuels and superheated exhaust particles can be accidentally ejected from an engine and deposited into surface fuels, causing them to catch fire.
Subrogation Opportunities
Some of the aforementioned sequences in which a fire ignites or spreads may present viable avenues for subrogation. For instance, there have been cases pursued against electric utility companies (and their contractors) for failing to maintain adequate clearance between trees or other vegetation and their power lines, causing the power lines to arc. In those cases, molten arc material fell into the underbrush below and ignited it. Other instances that may present a viable avenue for subrogation include negligent operation of combustion engines or construction equipment in or near dry vegetation or workers improperly discarding smoldering smoking materials into dry, combustible vegetation.
Another theory of liability for damages caused by wildfires is that the fire intensified and spread due to the defendant’s negligence. In Dealers Service & Supply Co. v. St. Louis National Stockyards Co., the defendant failed to, among other things, prevent the dumping of combustible materials and the growth of weeds on its property despite being aware of open fires on its property. In Dealers, the defendant “had not assigned anyone to supervise the vacant land…had no system of maintenance for the property…and had never cut the weeds on its land.”
Although the cause of the fire was never established in Dealers, firemen indicated the fire started in the weeds and spread to the plaintiff’s building, aided by a wind from the west. In concluding that the evidence supported holding the defendant liable, the court reasoned that there was sufficient evidence of nonfeasance in that the defendant “having authorized the dumping of inflammable material failed (1) to take the precautions necessary to prevent damage to plaintiff’s property; (2) to inspect the premises…; and (3) also failed to cut the weeds or otherwise make a fire break between its premises and that of the plaintiff.” The court ultimately held that the trial court had improperly granted summary judgment in the defendant’s favor. While the typical case for recovery relating to a wildfire would pertain to the fire’s ignition, a fire’s spread may also present an opportunity for the subrogating insurer.
Wildland Fire Investigation
Wildland fire investigation is quite different from the investigation of structure fires. Structure fire investigators typically begin a scene examination from the area of least damage and work to the area of most damage. In contrast, skilled wildland fire investigators typically conduct their examinations in the opposite manner, beginning with the area of the most damage and working to the area of the least damage. This allows the investigator to examine fire progression indicators to arrive at a general area of origin and, eventually, a specific area of origin.
A typical specific area of origin is no larger than five feet by five feet, although it may be larger, depending on the fire progression indicators found in the general area of origin. The specific area of origin is the area in which the ignition source ignited the first materials involved in the fire.
After a wildland fire origin-and-cause expert has identified the fire’s specific area of origin, the investigation may then involve the employment of such specialized consultants as electrical engineers, fire behavior and spread experts, experts in combustion, arborists, metallurgists, and experts in the fields that may be involved in the fire’s specific ignition sequence—for example, experts in the field of utility distribution and transmission, vegetation management, construction, or heavy machinery operation. The investigation may also involve the use of technology-based forensic tools (such as LIDAR and other imaging instruments), fire modeling programs, meteorological data, and sophisticated GPS tools to identify potential ignition sources and modes of failure and to determine the fire’s ignition sequence.
Efficient Investigation and Pursuit of Subrogation
The first key to an efficient investigation and the pursuit of subrogation recovery is to determine whether a subject loss was the result of a wildland fire and to quickly mobilize wildland fire origin-and-cause investigation resources. Just as with structure fires, the faster an investigation can commence, the better.
Evidence and scene conditions can quickly change in any fire case where the fire itself physically destroys evidence, but this is particularly true in the case of catastrophic wildland fires. In these cases, many agencies and hordes of personnel respond to support suppression and recovery efforts; additionally, extreme weather may occur, and efforts to repair and restore utilities are even more expedited. Thus, it is imperative that wildland fire origin-and-cause investigators and subrogation representatives become involved at the outset to document the scene of the fire’s origin, tag and extract evidence, interview witnesses, and undertake various other investigative activities.
The next key is to collaborate, to the extent possible, with other insurers and representatives of individuals who were injured by the fire and whose interests may be aligned with the subrogating carrier. As discussed above, the disciplines of consultants that may be involved are many, as are available investigative tools, and the costs associated with employing these resources can be very significant. In addition, if litigation were to ensue, the costs associated with wildland fire litigation can be quite substantial. Accordingly, quickly identifying other similarly situated potential claimants and coordinating a joint investigation and recovery effort where these expenses can be shared can save many thousands of dollars in expenses in any given case.
After identifying other similarly situated claimants, it is important to determine the extent to which the law protects communications between claimants who are jointly investigating and prosecuting a claim. The contours of such protection, if any, offered by each jurisdiction will likely differ. It is thus imperative that each member of the group of potential claimants enter into a joint prosecution agreement that not only sets forth each claimant’s share of the costs associated with the subrogation pursuit, but also entitles communications between the claimants to the maximum amount of protection the law allows in the jurisdiction in which the litigation will take place. Finally, once the investigation identifies parties to which the fire’s ignition may be attributed (or other circumstance that could support a subrogation claim, such as the fire’s spread), it is imperative that the subrogation professionals involved in the investigation quickly place such parties on notice of the investigation and involve them. To the extent possible, joint scene and evidence examinations should be coordinated with all interested parties, including potential subrogation targets, just as with structure fire investigations. Attention should be paid to the same types of spoliation issues that arise in all fire cases.
A skilled subrogation engineer with experience in wildland fires can assist with each of these aspects of a claim. Having investigated many prior wildland fires, established prior relationships with other investigators, attorneys and subrogation professionals to aid in a collaborative effort, and gained the legal expertise to guide an investigation and the subrogating carriers’ recovery efforts, skilled investigator will be standing by with a database of lawyers, consultants with specialties and experience to aid with the investigation from beginning to end.
Over the past 25 years, wildfires have caused more than $10 billion (in today’s dollars) in insured property losses in the United States, with the majority of losses occurring in the western United States. Losses from wildfires have been increasing as urban expansion continues to penetrate into previously undeveloped forest, chaparral and grass lands, areas at high risk of wildfire.
Nearly 40% of new home development in the western United States is occurring in this “Wildland Urban Interface” (“WUI”), putting more insured property at risk every year. Wildfire losses arise under a variety of causes. Typically, these wildfires are considered natural disasters, or events caused by human intervention through individuals with no means of providing payment for the extensive damages caused by their intentional or careless conduct. However, the causes of some of these wildfires create opportunities for subrogation recovery, including fires involving electrical distribution lines, controlled burns, faulty equipment, or other scenarios where a potential defendant with large financial means may be responsible for causing the fire.
The wildfire group within Metropolitan is made up of investigators who are experienced with, and have a specialized knowledge and expertise in handling catastrophic wildfire losses. The members of the Wildfire Group are experienced in working with the appropriate lawyers and handling and managing the unique issues that arise with these large catastrophic losses. The investigators have handled wildfire losses in California, Arizona, Nevada, Utah, New Mexico, Montana, Colorado, Texas, and Washington. We have recovered in excess of $260 million for insurers from wildfires in the western United States. The Group members are familiar with the groundwork and legal work necessary to develop and pursue these complex and diverse subrogation claims. The Wildfire Task Force maintains a group of qualified experts in wildfire investigation, spread, and ignition sources, as well as experts in the field of utility distribution and transmission lines, metallurgy, and other engineering practices necessary to document and establish a wildfire claim.
