HVAC Claims: Repair vs. Replacement

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1 HVAC Claims: Repair vs. Replacement Curtis M. VanNess Field Operations Manager Outline Brief history of HVAC How do HVAC systems work? Types of systems and equipment Causes of failure Repair vs. Replace Donan s Forensic Technicians

2 What is refrigeration? Willis Carrier 1902 designed a humidity control system Refrigeration is defined as the mechanical means of removing heat from one location to another. The purpose of an HVAC system is to lower humidity levels. Humidity is the amount of water vapor in the air. Water (condensate) is a by-product of these processes. 3 How does cooling work? Common Components Compressor Outdoor fan motor Blower motor Coils Thermostat Capacitors Contactor

3 Types of HVAC Systems Split Systems Package Units Rooftop Units (RTU) Subtypes Heat Pump and Air Handler AC and Furnace Combination AC only 5 HVAC Installation Overview

4 HVAC Failures Causes Weather lightning, hail, wind, etc. Mechanical Normal wear Poor Maintenance Dirty coils Dirty filters Improper Installation Water Common component failures Compressors Control boards and thermostats Capacitors Blower or fan motors Refrigerant leaks 7 Lightning-induced Power Surge

5 Lightning-induced Power Surge Direct strikes are rare. Too much current flows through the wiring. An electrical short to ground occurs. Isolated point of failure, spontaneous event. Failure can be visual or measured with meters. Rarely are there multiple component failures. 9 Evidence of a Direct Strike

6 Collateral Damage Is there evidence of a direct strike outside? Was there collateral damage in the home? What are some common indicators? Garage door openers, laptops, TVs, phone, cable, etc. Power surge causes immediate recognizable effects: The HVAC system will not turn on or cool at all. It will not continue to limp along and then fail in the future. Circuit breakers can be tripped Electronics are far more susceptible than HVAC compressors. 11 Collateral Damage vs. Cause of Failure 679 Projects: Collateral Damage was Reported 2444 Projects: None Reported Other 11% Operational 8% Warranty 3% Operational 5% Other 13% Warranty 4% Power Surge 43% Wear 35% Power Surge 30% Wear 48% Collateral damage is not a conclusive indicator for solely determining the cause of loss to HVAC systems

7 Cause of failure results Hail 5% Manmade 2% Maintenance 2% Warranty 3% Leak 1% Improper Repairs 1% Declined 1% Installation 1% Operational 5% Mechanical 8% Wear 32% Cancel 10% Power Surge 30% 13 Why do we need to destructively test compressors? Wear 46% Power Surge 54% It is required to determine the cause of the loss. It could fail by power surge, mechanical damage, normal wear, or acid contamination. 32% of the time we cut the compressor open and about ½ the time it is found to be caused by power surge

8 Destructive Testing The compressor has internal mechanical and electrical components to inspect and test. 24 Compressor failure analysis 4 types of failures: 1) Power Surge 2) Wear and Tear

9 Compressor failure analysis 3) Acid Contamination 4) Mechanical 17 Compressor terminals Rust and corrosion are not caused by a lightning-induced power surge

10 External Heat Source 19 Catastrophic Failure (fire) Capacitor failure: This type of failure can be caused by a power surge or if the compressor has mechanically failed. This unit will be replaced

11 Other causes of failure Animal damage Poorly maintained 21 Repair vs Replace Red Flag 1: The parts are not available or they are damaged beyond repair. Parts are available and these systems can be repaired. Compressors can be changed. Red Flag 2: SEER Rating Regulations. The new 14 SEER regulation (not a mandate against repairs). Dry charges are going away. Red Flag 3: The Availability of R-22 Refrigerant. R-22 is still available for purchase; the HVAC industry recycles used R-22 refrigerant and cleans it for future use. The current cost of R-22 is $325 for 30 pounds. Red Flag 4: Acid in the Refrigerant System. Acid is caused by improper repairs or poor maintenance practices. It forms over a period of time and it is not a spontaneous event. Acid can be cleaned from the system for a reasonable cost

12 Options 1. Is the unit under manufacturer s warranty? a) The adjuster should always ask the homeowner this first. The insured s technician should have first identified the damage and then checked to see if it is included under the warranty. b) Most warranties are 5 years with an option of 10 years if the owner completes a registration card. c) Contractor cannot void a warranty because of his findings. 2. Repair the damaged component. 3. Replace the condenser unit with a dry-charge unit. 4. Replace the condenser unit and interior coil. 5. Replace the entire HVAC system. 23 Cost difference Unit Replacement Cost (average size is 3 ton) R22 13 SEER Outdoor Unit (dry-charge) $3,500 - $4,500 R410A Outdoor Unit and Indoor Coil $4,500 - $5,500 Package Unit $4,500 - $5, SEER System $6,000 - $6, SEER System $7,500+ Component Repair Cost Capacitor $125 - $200 Control Board $300 - $400 Thermostat $145 - $250 Compressor $1,600 - $2,

13 System Replacements What warrants unit or system replacement? Age of the system 15+ years old 14 SEER Regulation (repair is still an option) System damage: example is the refrigeration system has been exposed to the elements for an extended period of time Fire or soot damage Contractors want to sell new systems every time because this will increase their revenue while also reducing the number of repair call backs. A poor repair can do harm to a business, so many contractors will not risk certain repairs. Good HVAC companies have excellent customer service and repair technicians. 25 The HVAC Service Technician Why do HVAC service personnel prefer equipment change outs over compressor replacements? 1. HVAC technicians are also sales representatives. 2. Many receive a bonus for each service call turned into an equipment change out. 3. Some receive a percentage of their sales. 4. Equipment change outs are 3-4 times more profitable than a compressor replacement. 5. An equipment change out and a compressor replacement take approximately the same amount of time but equipment change outs are 3-4 times more profitable than a compressor replacement. 6. Installation personnel do equipment change outs whereas service personnel do compressor replacements

14 HVAC Forensic Technicians Trained and certified using a program developed by mechanical and electrical engineers. Work only for Donan and perform no service work for other firms (W-2 employees). Our employees will not permanently repair the unit because we must stay unbiased in order to give the conclusive opinion. The technician will temporarily get the unit running to show the insured the unit is able to be repaired (when possible). All reports are peer reviewed. Quality control system is in place. The reports are published within 24 hours of the site inspection date. 27 Onsite Failure Analysis Determine which component(s) has failed. Use visual observations, meter readings, amp draws, gauge measurements to determine causation. Photographs prove the failure

15 HVAC Field Forms 29 Commercial HVAC Claims Destructive testing on a chiller barrel Cooling tower

16 Coverage Area 31 Contact Donan Online at Office: Mobile:

17 Donan professionals frequently create and distribute articles on a variety of topics relevant to the property insurance industry that contain a wealth of information. To receive our expert content: Sign up for our monthly enews at donan.com/newsletter/ Follow Us on Social Media LinkedIn linkedin.com/company/donan Facebook facebook.com/donanengineering

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