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Last Post 05/05/2012 9:22 PM by  Atfulldraw
Structural Engineering and Architectural fees
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Leland
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04/30/2012 2:16 PM

    I am continuously surprised by the muddled thinking many adjusters have regarding the coverage of architectural and structural engineering services. When we have an earthquake in California this will become an issue and I think it deserves some thought. Adjusters who work in other states may be familiar with building departments that have very minimal requirements. That doesn't mean a California insured is not entitled to be compensated for something that would not be required in another state.

    First I would like to make a list of all the different things architects and engineers can be hired for, with my analysis of coverage for each:

    Architects and engineers can be hired to:

    1) Determine "what happened" ie cause of loss. This expense is generally an investigative expense for the carrier. If the insured incurs this expense it is not covered by the policy. It would be an expense the insured incurred to "prove up" their loss, not an expense actually necessary to repair their property.

    2) Determine the extent of damage. Again, this expense is generally an investigative expense for the carrier. If the insured incurs this expense it is general not covered by the policy.

    3) Prepare drawings and calculations for replacing the existing damaged framing or other structural items. In California these drawings are required by the city before a building permit can be issued. In California, it is generally not possible to simply verbally explain that the same design of framing is being replaced. Drawings and calculations are required even if the structure is being rebuilt exactly as it was. For framing damage it is customary to have an architect prepare drawings although some cities will accept plans from draftsmen. The structural engineer must provide calculations and his stamp with a license number. Since the presumption is generally that most structures were built with permits and drawings, courts in California have held that these are normal and reasonable expenses the carrier must pay. I suppose it might be theoretically possible for a carrier to argue that an extremely old structure or bootleg structure was built without permits and therefore the carrier doesn't owe for architectural drawings and permits. This argument might hold some water. However, it is rare to find buildings so old that no architect was involved and no permits were required. Even if it can be proved that no permits were pulled it still would likely be a covered expense, but that is another discussion beyond the scope of this post. It is common sense that a tract home built in 1960 was built with architectural drawings and building permits. Requiring  the insured to prove that such a house was built 50 years ago with these costs is ridiculous, unprofessional,  and probably bad faith.

    4) Prepare drawings and calculations to install new structural elements to bring the structure up to new codes.  This expense would be covered under any code upgrade coverage. If the architect's work is a combination of #3 and #4, the adjuster can apportion the costs between the two coverages, or if there is no code upgrade coverage, the portion of the work necessary for the upgrades can be denied. In many case the adjuster can simply call the architect or engineer and ask what portion of the total fee was for the code upgrade work vs. non-code upgrade work.

    5) Provide an opinion regarding what the reasonable price should be for the necessary structural engineering work, or an opinion on the correct method of repair. This would be an insurance company investigative expense, or if paid by the insured, it is not generally covered. This may occur when the insured has hired an apprently over priced architect and the insurance company is an agreement to pay the reasonable fees. The adjuster can hire a competing expert merely to give an opinion on what a fair price for the services would be. The insurance company expert doesn't need to actually do the engineering, look at causation etc. He just needs to say what a fair price is for preparing the documents.

    In my opinion the adjuster needs to carefully consider what an engineer is being hired to do, if the carrier authorizes an engineer expense. Telling an engineer to simply provide a report is unprofessional. Why should the carrier pay good money to learn something they already know or things that are not in dispute? For example if the carrier already agrees that the damage is due to wind racking the structure, it is probably not necessary to pay the engineer for a causation analysis. Maybe what the carrier needs is an analysis of the extent of the damage; an opinion on the repair method; or an estimate for what the architectural drawings and engineering calculations would cost. When hiring an engineer it is important to identify what he is being hired to do.

    Adjusters are often afraid of appearing to unduly influence an engineer. In a case where a causation analysis is needed, there is a simply solution. The assignment can be worded like this:

    "Please inspect 1122 Main St. and determine the cause(s) of the damage. Please report any evidence that the damage was caused by wind. Please report on any evidence that the damage was not caused by wind. Please report evidence of any other causation or contributing factor, if any".

    By asking the engineer for both evidence that might result in a denial, and for evidence that would presumably result in coverage, there is no undue influence on the engineer.

    When the insured or insured's contractor hires the engineer it is also important to identify what he is doing. If the engineer is doing the work required by the city to get a permit to fix the house like it was, then that work is generally covered by the policy.

    If the insured's engineer is providing consulting and opinion to fight the carrier on a causation question, that work would generally not be compensable.

    If the insured's engineer is doing both, the adjuster might need to apportion the bill into a covered portion and a portion that is denied.

     

     

     

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    Leland
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    05/02/2012 7:02 PM
    I decided to do some more research on this issue by not just relying on my own experience but asking other people in the claims business so I could be sure my opinion is correct. I made some phone calls to structural engineers, contractors etc. and learned that it is possible in some rare cases in Southern California that a structural engineer won't be required when a car damages a wall of a house.

    Here's what I learned:

    Generally in Los Angeles City and County structural engineering documents will be required, with rare exceptions, when framing is damaged by a car.

    Generally in any California city if there is any kind of "retrofit" (drilling holes in the slab to epoxy new seismic bolts; doing some kind of special framing tie in to effect joist repairs for a second story, etc) then the city will require structural engineering documents.

    I spoke to a structural engineer with many years of experience and asked him what percentage of time a California city would not require structural engineering documents in cases where a car has hit a framed wall. His answer: "zero".

    However I also spoke to a contractor who told me he had recently replaced a wall in Newport Beach CA that was hit by a car and didn't need engineering documents. Sometimes this can happen, but it is rare. That same contractor also told me that in cases where any kind of retrofit is needed an engineer will be required. That contractor has years of restoration experience and also has a California masonry license.

    Another contracor I spoke to said that regardless of whether the city demands structural engineering, it is normal good business practice for the contractor to hire their own engineer, to ensure that the work is done correctly and reduce liability for faulty construction. In his view, 90% of the insurance restoration contractors follow this prudent business practice, making the structural engineering costs a customary and reasonable part of the repair cost in Southern California, regardless of whether a city demands engineering or not. He also said that in 100% of the cases where seismic bolts are damaged cities will demand structural engineering. He said in a few cases where the damage is very minor a building inspector might not demand a structural engineer but he will get one anyway. That contractor has 18 years of experience including being president of one of the largest restoration contractors in Southern California.

    According to a structural engineer I spoke with, in the City of Los Angeles it is generally required that an assessment be made of the percentage of damage. Under 10% strength lost, a wall can be rebuilt as before. From 10% to 50% strength lost, the wall must be brought up to current code (ie. shear panel must be installed). Over 50% loss of strength the affected wall and any other walls running in the same direction and walls within 5 feet need to be brought up to code. Only a structural engineer is allowed to make the determination of the percentage of strength lost. Only a structural engineer can make the repair plan. This procedure is specified in the LA City building code.

    The City of Glendale, for example, does not have this procedure specified in their building code, but they follow the basic idea, requiring a structural engineer in every or almost every case. Other cities are similar- they don't always have the rules spelled out in the level of detail that Los Angeles has, but they follow similar procedures.



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    ChuckDeaton
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    05/02/2012 7:36 PM
    Leland, the question is less what a California city requires, but more what the instant insurance policy covers. And the legal responsibility of an auto owner as defined by California law and case law.

    From almost any perspective, third party liability claims and first party property claims (earthquake) are horses of a different color....................LOL.
    "Prattling on and on about being an ass with experience doesn't make someone experienced. It just makes you an ass." Rod Buvens, Pilot grunt
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    ChuckDeaton
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    05/02/2012 7:43 PM
    "1) Determine "what happened" ie (sic) cause of loss."

    What Do I.e. and E.g. Mean?
    I.e. and e.g. are both abbreviations for Latin terms. I.e. stands for id est and means roughly "that is." E.g. stands for exempli gratia, which means “for example.” "Great. Latin,"
    "Prattling on and on about being an ass with experience doesn't make someone experienced. It just makes you an ass." Rod Buvens, Pilot grunt
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    Leland
    Advanced Member
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    Posts:741


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    05/02/2012 8:06 PM
    Chuck- the car hitting the house and earthquake are both first party claims. I understand from your phone call that smart Arkansanians always go after the driver and his insurance and I appreciate that. Those Arkansanites avoid having their rates go up and can claim their plants and trees, as well as the house, with no deductible subtracted.

    But in California when a car hits your building it is a first party claim because a) the driver has no insurance, or b) the car was stolen c) the minors driving it ran off and are nowhere to be found (after they ran back one time to retreive their cell phones) or d) the accident was a multi-car accident and the car that hit the house was not at fault, because another car hit it first or e) the car at fault hit so many things (2 buildings, one telephone pole, one streetlight, 3 parked cars...) that there is a "limits issue" with not enough money to go around and the victim has to make a 1st party claim to get paid.

    So both earthquakes and cars hitting walls are 1st party claims in California. We just do things different out here.

    But thanks for the Latin lesson. I only threw that in to look smart and look where it got me.
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    dcmarlin
    Member
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    Posts:110


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    05/03/2012 1:25 AM
    Leland,

    Good outline on experts.

    If the carrier hires or authorizes the expert to determine the cause, investigate subro, assist to develop the scope of repairs; this is an expense to the file.

    If an insured decides to hire an expert for his purposes this is not a covered item in most cases.

    If the city requires plans or drawings such is part of the damages or indemnity payment.
    Gimme a bottle of anything and a glazed donut ... to go! (DLR)
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    Atfulldraw
    Member
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    Posts:88


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    05/05/2012 9:22 PM
    Posted By ChuckDeaton on 02 May 2012 07:43 PM
    "1) Determine "what happened" ie (sic) cause of loss."

    What Do I.e. and E.g. Mean?
    I.e. and e.g. are both abbreviations for Latin terms. I.e. stands for id est and means roughly "that is." E.g. stands for exempli gratia, which means “for example.” "Great. Latin,"

    I think Chuck is trying to tell you that you used the correct term, but forgot the periods and the comma following the "i.e."

    Your usage was correct.
    Rod
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