It is no secret that the hearth, patio, and barbecue industry is in the fire business. Products from this industry are some of the only products that intentionally introduce a flame inside a residence or in close proximity to it. Because of this, manufacturers, distributors and service companies in this industry are often on the receiving end of a notice of potential claim or notice of inspection.

These notice letters are typically sent out by plaintiff’s attorneys following a fire loss. Sometimes the fire only caused property damage. Other times, the fire may have caused personal injury or, in some instances, death. Regardless of the outcome, if your business receives a notice letter, it should not be ignored.

Increasingly, plaintiff’s attorneys have opted to cast a wide net when deciding which entities to put on notice. From the plaintiff’s perspective, they do not want to risk the possibility that a potentially liable party was left off the distribution list. Such a situation would open the door for that party to argue that critical evidence was destroyed and they were not given an adequate opportunity to inspect the fire scene. To avoid this situation, the distribution list typically includes any and all parties that could potentially have any liability for the loss, no matter how remote that possibility may be.

There are specific pro-active steps that should be taken when a company receives a notice of potential claim or inspection. The recipient of the notice letter should immediately notify their liability carrier and advise them of the accident.  This serves two purposes.  First, it satisfies the notice requirement contained in most commercial general liability policies.  Second, it allows the liability carrier to start investigating the loss and potential exposure
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Sometimes companies may be apprehensive to notify their liability insurer of the potential claim or inspection. The rationale most often expressed is a fear that insurance premiums will rise. While increased premiums are a possibility depending on the insurer’s underwriting practices and the facts surrounding the fire, the potential consequences of not notifying your insurer are much greater. The company risks losing its insurance coverage if it fails to notify its liability carrier and is subsequently sued. This could leave the company responsible – instead of the insurer – for the defense costs and any damages assessed against it.

Once the insurer is notified of the potential claim, it will initiate an investigation into the loss. As part of this investigation, the liability carrier may hire an attorney for the company and retain certain experts to investigate the loss and defend the company. These activities fall under the insurer’s duty to defend.  The attorney, although hired by the liability insurer, is the company’s attorney. The attorney’s fiduciary and ethical duties flow to the company, not the insurer. This attorney should be an experienced litigator and familiar with the laws and regulations that apply to the specific business or product at issue. For hearth, patio, and barbecue businesses, this would include a familiarity with NFPA 54, 58, 211, or any other standards that may apply. 

The nature of the accident involved will dictate the type of consultants that should be retained.  Typically, the earlier a consultant is retained, the greater access that consultant will have to the evidence affecting the claim.  Retaining appropriate counsel and hiring qualified experts should be completed as soon as possible once the notice letter is received.  This is especially true in cases where the loss is great.

Additionally, depending on the type of fire loss at issue, it is possible that various federal, state or local authorities will have already begun to investigate the matter.  The larger the accident, the more likely it is that governmental investigators will become involved.  The government investigators, however, are not necessarily engaged to assign fault for an accident.  Rather, they are more concerned with determining whether any laws or regulations were violated in causing the fire.  As a result, the business should not rely on the government investigators to determine the origin and cause of the fire. 

The above steps are necessary even if the business believes that a claim has no merit.  Fire scenes can change very quickly. The scene is affected by many issues that alter the evidence. First, the fire itself drastically changes the scene and destroys evidence. Second, the fire suppression efforts to put out the fire further alter the scene. Finally, the parties investigating the loss may also affect the evidence. Due to these factors, the earlier your defense team can gain access to a fire loss site the better.

Insurance companies are experienced in addressing fire loss claims. As a result, they should be viewed as a partner. The insurer will take the necessary steps to protect your business.  The business, its insurance company, retained experts, and the attorney form a legal team designed to defend and protect the business’ interests.  Communication and cooperation among all members of this legal team is imperative to successfully defend against a claim.
While a notice of potential claim or inspection can cause a company great angst and concern, the company should not handle the issue on its own. The likelihood of a successful defense increases greatly when the liability carrier and other members of the defense team are brought into the fold early. An early and aggressive defense is the best strategy to limit a company’s exposure.

Eugene M. LaFlamme is a partner at McCoy Leavitt Laskey LLC, a national defense firm specializing in fire and explosion cases. He specializes in the defense of companies involved in the hearth, patio, and barbecue industries. Eugene has spoken numerous times at the HPBExpo and NCHPBA annual conferences on various legal topics that affect the industry. He can be contacted at elaflamme@MLLlaw.com or (262) 522-7000.