Marine Investigations

What Is An Investigation?

For our purposes an investigation is an effort to determine the cause or circumstances leading up to a casualty.

The majority of insurance investigations are so mundane as to not be even referred to as such, as nearly all claims are investigated to some degree.

Some marine surveyors assigned by the insurer to handle a boat or yacht claim may understand their role only to assess damages and create an estimate.

Others will understand their role to determine the facts that lead to the cause of the casualty, particularly when such claims where the cause may be questionable.

There are hundreds of insurance companies that provide insurance for boats, but only a relative handful that specialize in marine insurance.

The effect of this means that there are very many company claims people that assign claims to marine surveyors who themselves know little or nothing about marine losses.

In all too many cases, these claims personnel don’t know what to expect from the surveyor they hire, and vice versa.

This leads to the all too common situation of the blind leading the blind, leading to subrogation cases later offered up for litigation in which an adequate investigation was not performed.

With large dollar losses, the need for a good investigation is more obvious, but with smaller losses, this point is frequently overlooked.

At this point it is important to realize that the laws of many states specifically require that the insurance company conduct a “reasonable investigation” of questionable losses.

This is mandated as much for the protection of the policy holder as it is for the insurer since the payment of claims ultimately affects all policy holders whose premiums pay those claims.

It is a gross misunderstanding of the general public that it is “insurance companies” that pay claims. True, insurance companies write the checks, but the money comes from policy holders.

Since most marine casualties are referred to surveyors, it naturally follows that only the surveyor is in a position to make judgements about investigations, whether a loss requires only a cursory or major effort.

Throughout my career I have found myself in the position of having to make judgements about whether I thought a cause of loss was worth pursuing or not.

Such judgements come down to a matter of whether the dollar amount of loss justifies the additional cost of investigating, combined with a judgement of whether there appears to be promising evidence.

In other words, there are always those cases in which it becomes apparent that there is unlikely to be any good evidence available at a reasonable cost, and if the dollar value of the claim is low, then it is probably not worth making much of an investigation.

In actual practice, most claims work is assigned for the purpose of appraisal of damage since in many cases the claims adjuster is not aware that the cause of loss is not ordinary, or that an investigation may be needed.

If the surveyor is uncertain about what his client expects, or he is pretty certain that his client doesn’t know, then it becomes his job to educate the client.

When the client is not an insurer, but perhaps a boat owner or some other interest, it becomes even more critical that the investigator fully brief the client about what should or should not be done, what he can and cannot do.

Marine surveyors are not always the right choice for all types of losses, particularly fire and theft of vessel claims where someone with specialist expertise is needed, someone who may or may not be a surveyor.

In fact, very few surveyors are qualified to conduct fire investigations, and very few building fire investigators are qualified to investigate boat fires.

This will be discussed in detail in Chapter 8 Fire Investigation.

What distinguishes ordinary claims work from an investigation is when it becomes necessary to deal with causation in a separate report.

While most surveyors do not do it this way, it is my opinion that casualty investigations should always be addressed in reports separate from those that deal with damages.

Standard property adjuster reports typically include issues of cause in one report. The marine investigation is a specialty and reports can be lengthy and complex, so it is best that they be kept separate.

Types of Casualties

The most common types of casualties or case work the marine investigator encounters include, in no particular order:

As one can see from this list, there is no shortage of opportunities. Of course no investigator can be expert in all these area and his own personal preferences will lead him toward those areas to which he is best suited.

Some types of work naturally support others, or lead to other types. In addition, the investigator is often led into new areas by the needs of clients so that over time, and by necessity, he has been motivated to educate himself on a broad range of issues.

Our knowledge is also greatly expanded by what we learn from those experts we hire to assist with investigations such as metallurgists, chemists and engineers of all sorts, the same way as police investigators do.

Fraud is such a common element in insurance investigations that, did it not exist, there wouldn’t be much need for investigators.

Estimates range anywhere from 20 to 50% of most types of claims that are wholly or party fraudulent, resulting in losses up to a hundred billion dollars annually¹.

Furthermore, it is usually wrongly stated that these losses are born by the insurance industry; it is not the insurance companies that suffer 90% of these losses but you and me and everyone who pays insurance premiums, for the cost of this fraud is passed directly onto the policy holders through higher costs.

There are many elements of fraud and the following is a short list:

(Footnote)

1. Based on Insurance Industry Association estmates.