Navigating Lightning Damage Claims by Using Forensic Analysis

How many times have you received an invoice that says:

Lightning Damage to Alarm System $5000.

Glaringly, aside from the charge, there are no details whatsoever about which part of the costs are related to materials and which to labor, and many in the insurance industry never question these charges; they just pay the claim. Additionally, the estimate, invoice, or bill is devoid of any details regarding the listing of the equipment damaged by lightning, including the equipment manufacturer’s name and model number for each item. Significantly, the unilateral failure of alarm contractors to provide any details to insurance claim professionals on these claims is not fortuitous, in that without details, it is impossible for any claims professional to know the “what, when, where, who, and why” of the claim. The Forensic Analysis of Lightning Damage Claims should also be used for phone systems, video surveillance systems, digital video recorders, network video recorders, and access control systems.

Since 1980, we have investigated Lighting Damage Claims across the country and have found in many instances that, because an insurance company is involved, the costs of these claims can be anywhere from 500% to 2000% percent more than what the competitive pricing is in the marketplace of “like,” “kind,” and “quality.”

In other words, the estimate for a Lightning Damage Claim for Alarm System Equipment should never dramatically increase just because an insurance carrier is paying for the claim, but that is what is commonly found to occur. Given that, in order to help combat this deception, instead of just continuing to accept a “no details” estimate, invoice, or bill based on a Lighting Damage Claim, adjusters should demand that they receive the original contract in order to reveal what the initial installation costs were for the system and then these costs can be compared to what the control panel costs are on the Lightning Damage Claims.

Amazingly, we have often found that Lightning Damage Claims for replacement of just the control panel cost more than installing the entire alarm system. In other cases, we have found that the system was upgraded, so it is not of “like,” “kind,” and “quality.” Moreover, in other circumstances, the alarm system is wireless, so the contention that somehow Lightning damaged a wireless system defies logic in that there is no path for the lightning to travel to damage the alarm system equipment, compared to a hard-wired alarm system that connects to the AC power in the home and the premises phone lines. It is also important to obtain the costs of the labor portion of the work.

Here are some examples of what should be requested and examined in all Lighting Damage Claims to Alarm System Equipment

• The original System Contract.
• A listing of each item of equipment that is claimed to have been damaged, and an itemized cost of each part, the labor time, and the cost per hour. Sometimes the costs include items that are included with the purchase of the equipment.
• Determine if the replacement of the Alarm System is an upgrade compared to what the original system provided. By way of example, the original system had alphanumeric keypads or key switches, and the new system will have iPad-style touch screens.
• If the quote states complete system replacement is needed because the equipment manufacturer is out of business, verify if other equipment manufacturers’ control panels are compatible with the existing system, so the entire system does not need to be replaced.
• Determine if the System is Hardwired, Wireless, or Hybrid
• Determine if the sensors are hardwired or wireless and if there is any evidence of lightning damage.

The Lightning Damage Claims Institute™, through IDS Research and Development, Inc., provides a nationwide flat rate service to assist claims professionals in verifying that the cost of these lightning damage claims, as to labor and materials, aligns with industry standards, and what the competitive costs are for replacing the originally installed equipment and systems, and as to other issues that come up in these cases and claims.