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Recall date: JULY 17, 2014
Recall number: 14-233

Name of product:
USB car charger adapters, power adapters and 8-pin charger cables.
Hazard:
Improperly mounted plug blades, and inadequate electronic circuitry create a fire and electrical shock hazard to consumers.
See full article at CPSC

The following is a response by a  CCAI member regarding the Electrolux Dryer Fire article that was posted on July 8, 2014.

 

I appeared in Federal Court in San Diego this year as the plaintiff’s witness in a subrogation case against Electrolux dryers.  The fire occurred in Fallbrook, CA 2008.  It involved a two story single family residence with the washer and dryer located on the second floor.  I was called to the scene to investigate the fire.

When I arrived, the Electrolux dryer was in the front yard and the top had been opened by the fire department.  I did my usual exterior and interior inspection and arrived at the laundry room.  The fire was confined to envelopment of the laundry room; with smoke damage extending out the laundry room door.

I inspected the room for all signs of ignition and found none.  I looked at the dryer exhaust.  I interview the insured and proceeded to the front lawn to inspect the dryer.

The dryer had very defined plum and burn patterns indicating the area of the fire’s origin within the dryer.  The Electrolux dryer cannot be accessed from the rear and therefore I did not remove any interior parts.  I took all necessary photographs.

The adjuster was on hand, and we discussed removal and storage of the dryer.  The adjuster said he would take charge of the dryer and make arrangements for storage.

When I was in trial, the defense attacked me, because I did not take photographs of the dryer exhaust on the side of the residence, second story.  Further, I did not photograph the interior of the exhaust line to see if it was plugged with lint.  I testified that the dryer exhaust opening, within the laundry room, appeared to be clear.  I testified that the dryer was the area of origin, and something within the dryer was the ignition source.  Not good enough.

The defense’s position was that the insured did not call a professional and have the lint removed; the dryer would need to be dissembled.  They also contended that the exhaust line may have been plugged with lint and thus lint backed up within the dryer further adding fuel and ultimately igniting.  The jury did not find enough evidence to suggest a design flaw with the dryer and therefore ruled in favor of Electrolux.

The trial I was in marks the fifth trial that Electrolux has won.  They claim the design of the dryer does not cause fires.  I strongly suggest that if anyone is investigating a dryer fire and especially Electrolux, be prepared to run a camera snake the full length of the exhaust line and take as much of the exhaust line as possible to be preserved as evidence along with the dryer.  In this case, I could not have taken the exhaust line without tearing into the wall.  However, even though the Electrolux dryer was the ignition source, the jury believed that Electrolux was not liable for the fire.

See Electrolux article here

Recall Date: July 10, 2014
Recall Number: 14-228

WASHINGTON, D.C. - Consumers should stop using this product unless otherwise instructed.  It is illegal to resell or attempt to resell a recalled consumer product.

Name of Product: Power adaptor/chargers (promotional giveaway)

Hazard: The adaptors can overheat, posing a burn hazard.

Read full recall report at CPSC

In the new issue of NFPA Journal®, President Jim Shannon said the Association will focus on the leading causes of home fires, including cooking. "We also need to continue to push hard for home fire sprinklers. That's still a large priority for NFPA, and we plan to work very aggressively in 2014 on our residential sprinkler initiative," he said.

Read more...

U.S. Fire Administration

Electricity is a basic part of residential life in the U.S.  It provides the energy for most powered items in a contemporary home, from lights to heating systems to television.  Today it is hard to imagine a residence without electricity.  It a part of our homes and our activities that most of us take for granted.  We rarely think how powerful electricity is.

Yet, using electricity can have dangerous consequences.  Electrical fires occur frequently throughout the U.S., causing injury, claiming lives, and resulting in large losses of property. From 2009 to 2011, an estimated 25,900 residential building electrical fires were reported by U.S. fire departments annually.

Read more...

Electrolux dryers are dangerously vulnerable to catching fire, according to complaints, consumer reports, and recent lawsuits.  Allegedly, some electric and gas models of Electrolux dryers contain a defect that allows lint to build up in areas unserviceable to owners and close to a heat source, posing a heightened risk of fire.  At least one previous lawsuit also points to a possible bearing failure that causes the drum to move and make contact with the rear heating element, creating sparks which may light lint and other flammable objects.

Read more...

November 10-12, 2014 Training Seminar

CCAI Training Seminar November 10 - 12, 2014  - Click here  for the registration form
Information about the seminar is coming soon.
 

Practical Approaches for Recouping Good Faith Payments

Larry-Arnold-article

by: Larry Arnold

Faced with growing losses, insurance companies are focusing on fraud management and implementing risk mitigation controls, while at the same time remaining cognizant of their duty of good faith to policyholders.  So what happens when an insurer makes good faith payments on legitimate elements of an insurance claim but subsequently uncovers fraud in other elements of the claim?  Is the insurer entitled to recover all monies paid as part of the claim?  Or only the amount paid in reliance on the insured's misrepresentations?

Previously, there was no clear answer.  It was safe to assume that an insurer could recover monies paid on a claim under the right circumstances – the difficulty occurred when trying to recover payments made prior to the established fraud date.  For example, in California, the insurance code states, “If a representation is false in a material point, whether affirmative or promissory, the injured party is entitled to rescind the contract from the time the representation becomes false.”

Recent trial court rulings in favor of insurance companies, however, are changing the claims landscape.  These rulings will impact the way insurance companies handle genuine claims that are subsequently tainted by fraud, encouraging them to be proactive in recouping good faith payments.

Steps for Recouping

What options do insurance companies have to recoup these payments?  There are several avenues available.

Deny the Claim. When the SIU has completed a claims investigation and determined that an insured has breached the policy by materially misrepresenting facts, the claim can be denied – even the legitimate part.  Appropriate cases should be referred to law enforcement for prosecution.  In addition, the insured has a duty to present and prove the merits of the claim.  Failure to cooperate with insurance company representatives can independently result in denial of the claim.  This includes an examination under oath (EUO), which plays a key role in obtaining information.  Typically, the named insured (or others, as dictated by the policy) is required to submit to an EUO as a precondition for claims settlement.  Failure to do so can result in denial of the claim.

Void the Policy. An insurer may void or cancel its policy in the event of material misrepresentation or concealment of facts by the insured.  This includes fraudulent claims.

Litigation. If a policy is voided for fraudulent claims, insurers must then decide whether to sue the insured to recoup payments - even legitimate ones.  One advantage with litigation is that it allows for pretrial discovery process, including depositions and the ability to subpoena documents previously unavailable during the claims process.

A Case in Point

A recent case illustrates that insurance companies are entitled to recoup good faith payments when fraud is uncovered.  Here is some background on the case.

An insurer issued a fire insurance policy to the owner of a dry cleaning business located in Southern California.  A fire destroyed the business, so the owner submitted claims for replacement equipment, debris removal, damage to customer goods and loss of business income.  Based on these claims, the insurance company paid the owner $527,000.

However, during the insurance company’s investigation of additional claims, a forensic accountant uncovered inconsistencies in a laundry services contract submitted as part of the owner’s claim for loss of business income.  As a result, the owner was asked to sit for an EUO.  The owner declined and withdrew his pending claim.  The insurer then declined the claim, rescinded the policy and sued the business owner to recoup all loss payments.

At trial, evidence and witness testimony was presented that showed the owner had falsified the laundry contract and also inflated amounts paid for replacement equipment, debris removal, and payroll, among other items. Attorneys argued that the insurer was entitled to full recovery (payments made before the fraud occurred) for several novel reasons, including:

  • The outcome in Perovich v. Glen Falls Insurance Co. (9th Cir. 1968), where the court ruled that an insurer “may recover money paid in reasonable reliance on its insured’s fraudulent claim.”  The court held that the insurer was entitled to recover the full payment made under the policy.
  • Compelling the insured to return only a portion of the money would circumvent the purpose of the fraud statutes and create bad public policy.  The insured’s fear of losing even the legitimate claim payments should deter him from committing fraud.  An insured who knew he could recover the “honest” claims would be incentivized to calculate the risk of getting caught into his claims submission, determining that some things are worth lying about.

Though portions of the claim were legitimate, the judge ruled in favor of the insurer and its decision to rescind the fire insurance policy.  The insured was ordered to repay $452,064, which represented all payments less monies paid to customers who lost clothing in the fire and the policy premium.

Implications for Insurers

This decision is important as it reinforces the rights of insurance companies not only to decline a claim when fraud is uncovered but also to rescind a policy and sue the insured to collect good faith payments.  Previously, the law was not clear about what happens to monies paid as part of a legitimate claim, when fraud is discovered in a separate area.  It is now clear that fraud in part of a claim translates to fraud in the entire claim.

Claims managers should have an open discussion with claims adjusters and SIU team members, with the goal of establishing a claims review protocol that outlines what to look for and what to do if fraud is suspected.  This is critical, as claim adjusters are the first line of defense against fraud.  Once fraud is uncovered, insurance companies should not hesitate to consult with an attorney and pursue the insured in order to recover monies already paid.  In the end, both insurance companies and policyholders will benefit by reducing the high cost of fraud.

Larry M. Arnold, P.C., is a senior partner at Cummins & White, LLP.  He can be reached at (949) 852-1800, This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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