Truth is in the Details ™

The Case of the Elevated Invoice

Synopsis:
“You’d better be sitting down when you read this” applies frequently to invoices for repair of damage to elevators. While elevators are expensive machinery, and repair teams are among the highest-paid tradespeople, there are often surprising other reasons why elevator invoices are “elevated”.

Background:
Murphy’s Law No. 147 states that when there is a water leak in a building the leaked water will flow directly to the elevator. Regulations regarding elevator damage inspection vary widely by state but the governmental elevator inspectors are the Authority Having Jurisdiction (AHJ) and their decisions regarding required repairs subsequent to a damage event are all but incontestable. While state or city elevator inspectors used to actually perform post-damage inspections, it is common today that the inspections are performed by Qualified Elevator Inspectors (QEI) who are usually employees of elevator service companies. The AHJ merely reviews and signs-off on the QEI’s damage assessment, thus lending the force of government to what is otherwise only a contractor’s proposal, and opening the door to numerous problems for the property insurer.

Assignment:
TI is frequently requested to determine the actual extent of damage and commercially reasonable cost of repairs due to a covered loss incident.

Analysis:
Perhaps most benign is the case where, after a damage incident, the QEI includes all deficiencies in the elevator in the proposal, including items of normal wear and tear with the loss related damage. While no one argues that elevator safety should be compromised, paying for items of routine maintenance is generally the responsibility of the owner, not the insurer.

Another common occurrence is that where one or more of multiple identical components is damaged the QEI will condemn all of them, and sometimes all of them in multiple elevators when actual damage only occurred to one or a few in a single elevator.

The Case of the Elevated InvoiceWorse, sometimes entire major elevator components are condemned without any showing that they were even contacted by water, much less damaged by it. As an example, a new electronic elevator control cabinet was condemned without any showing that a single drop of water had entered the cabinet, and its associated new electronic elevator motor drive cabinet was similarly condemned. A third-party QEI working for another insurer inspected and confirmed TI’s findings, but the contractor and AHJ would not relent. Or, in another case, hoist and governor ropes were condemned at a replacement cost over $90k when there was no evidence that they had been contacted by water, and no evidence of physical damage of any kind.

Even though most elevator service companies are very large, sophisticated international organizations, pricing and invoicing errors are surprisingly common. In one case, a single question as to why a proposal cost was so high resulted in an immediate price drop of over $50k with no change in the proposal itself. Or, PDF documents which represent spreadsheets listing labor hours simply don’t add up, with the purported total hours significantly overstating actual hours. Or, there are errors in calculating labor cost. In one case the error was over $60k and, in another, the labor invoiced was more than $70k greater than the labor supported by employee daily time records.

The most effective way to avoid excess costs of elevated elevator invoices is to request a site inspection at the time of loss to determine actual damage and to have service provider labor and material costs analyzed.

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