Expert Reports: Insurance Disputes and Subrogation

Tony Sykes of IT Group looks at some recent insurance disputes and suspected fraudulent claims and discusses a number of areas where hi-tech expertise can be of assistance.

As IT experts most instructions we receive from lawyers are in relation to IT disputes and whether software or systems are fit for their purpose. We also get instructed regularly in intellectual property disputes particularly with regard to software copyright and IP theft.

The combination of our IT consultants and our fully equipped forensic IT facility also means we offer a range of services to Insurance companies and their lawyers when fraud is suspected.

The personal injury “cash-for-crash” style claims are well understood now and techniques including mobile phone tracking and analysis, social network unravelling and metadata analysis of photographs have all combined to reduce the spread of this drain on insurance funds and a commonly cited reason for high motoring insurance premiums.

We have recently added Sat Nav interrogation and forensic analysis to our arsenal of forensic tools and this has been instrumental in dismissing “ghost” accident claims by showing that the vehicle was nowhere near the alleged crash scene at the time of the reported “accident”.

At the other end of the insurance spectrum, when large software systems fail or cause outages or loss of service, we are noticing an increased interest in the need to analyse the cause not just for a potential subrogation claim but also because the terms of the insurance premium deductible can be significant when software (or computer hardware) fails a number of times in quick succession. Not only is the root cause analysis vital to apportion blame, but opinion on whether there was one outage or two may support a view that there is one deductible or two. When deductibles can be as high as several million pounds, this is an area where intense scrutiny and robust analysis is sought by both the Insurer and the Claimant.

The attacks on the World Trade Centre in New York in 2001 brought the matter of whether there was one incident or two into sharp focus. More than a decade later, there are still a number of schools of thought and opinion is still divided on this most shocking of events.

Defects in software can be functional or non-functional. Actual “bugs” present an immediate challenge. There are schools of thought that say no bugs are acceptable and in some controlled applications this may be right but with the explosion of software enabled products and the invasion of Microsoft, Apple and Google operating systems into a multitude of devices, from the ubiquitous mobile phone to the data-centres in Canary Wharf, it is no longer possible to support the tenet that software has to be free of defects to be fit for its purpose. But if a defect is known about but not yet addressed it is reasonable to assume that a risk analysis has been done and the presence of the bug has been determined to pose an assessed threat. If that then in turn leads to an outage and some form of loss leading to a claim, is the root cause the bug or the decision to leave it unattended? Is the root cause simply a poor risk assessment?

Non-functional software defects can also be the cause of an outage. Software that either cannot handle a peak load or that causes a blockage leading to similar effects may not contain a bug but may just be poorly written. The incorrect response to an incident may lead to an outage where, had the response either by a person or by some additional software or hardware been more appropriate or faster, there may not have been a loss. Under these and other similar circumstances, the establishment of the correct root cause may be vital in determining blame and, if the problem seems to have reoccurred over time, in establishing whether there was one root cause or more than one unrelated event.

With many larger software suites operating from multiple platforms sometimes across continents, it is possible that a single bug could cause outages in a number of locations thousands of miles apart and possibly insured under different policies and jurisdictions. Proper root cause analysis is essential but may only be a small part of a much more complicated assessment.

IT Group specialises in Insurance and Loss Adjustment consultancy, together with subrogation and civil dispute work as expert witnesses. For more information contact us on 0845 226 0331 or email