Written by Pete Fowler and Paul Mason. Published 8/4/2025 in CLM’s Flagship Magazine, "Under Investigation: The fundamentals of property claims investigations and the role of SMEs".
The Fundamentals of Investigating Property Damage and Premises Liability Claims with Subject Matter Expert Help
Introduction
“If you can't describe what you are doing as a process, you don't know what you're doing.”
- W. Edwards Deming
For this article property claims include all types of building or real property damage claims: water or fire damage; catastrophic events; construction defects; slip, trip, and fall; habitability; landlord-tenant; premises liability; and anything that might make someone sad or mad enough about building or buildings to file a claim or initiate litigation. Paul is a claims manager within an insurance carrier and Pete is the founder of a subject matter expert (SME) consulting firm. We wrote this to memorialize “the fundamentals” of investigating claims with the aid of one or more SMEs. Paul wants to hand this to his team members and say, "This is what you should expect from SMEs you hire." Pete wants to say, "This is what claims professionals expect."
Working Backwards
"If you can't explain it simply, then you don't understand it well enough."
- Albert Einstein
At the conclusion of a successful SME assignment, regardless of size, claims professionals deserve a presentation, in less than five minutes, that is graphic-intensive, correct, clear, concise and precise, that includes:
(A.) an overview of the situation;
(B.) all the information that is and is not available;
(C.) what they’ve done;
(D.) what they think (opinions or hypothesis) including answering "How much?" and "Who is responsible?"; and
(E.) what they recommend.
Five-minutes is a quick fly-over, so the SME needs to be able to drill backwards into underlying details. If it takes them 45 minutes to get to the point, then they "... don't understand it well enough."
The Fundamentals
"The expert in anything was once a beginner, mastering the basics through relentless practice."
- Helen Hayes
Master claims professionals and SMEs can make magic with expertise developed through the proverbial 10,000 hours; but first the fundamentals must be mastered. The fundamentals in football are blocking & tackling; in music, scales and rhythm; in carpentry, measuring and cutting. This article is for colleagues with less than 10,000 hours served, and for their managers and mentors. When we structure evidence in the following way, we increase "muscle memory," decrease waste, and enable the mind's magical pattern recognition.
The fundamentals for SMEs are: (1.) Understand the scale of the assignment; (2.) gather, organize, summarize, and understand 100% of the available evidence; (3.) conduct onsite investigations; (4.) explain the physicality of the property and what happened before, during, and after this claim; (5.) define the scope, methods, and costs of repairs; (6.) if applicable, assign and/or allocate responsibility. All SME work should be: (7.) correct, clear, concise, precise, and objective (our pneumonic is C3PO); (8.) graphically intense because a picture is worth 1,000 words, and a good diagram is worth 1,000 pictures; (9.) performed with "forensic" level professionalism (explained below); and (10.) "coverage aware."
Coverage analysis is a critical part of the process from beginning to end, and well beyond the scope of this piece. Before hiring an SME the claim professional should analyze coverage and explain concepts and policies to the SME, as necessary. Coverage analysis pertains to the policy(ies) the claim professional is adjusting a claim under, but also includes a recognition / understanding of other types of insurance that may come into play related to the ultimate disposition of the claim. "Coverage aware" SMEs understand insurance basics and the context for the current investigation. They recognize that this level of knowledge is enough to be dangerous and they don't offer opinions beyond the sphere of their expertise.
SME work should be performed at increasing levels of depth, with explicitly agreed upon deliverables and hold-points at each level where SMEs present their work, so claims professionals can manage the spending of the right amount of time and money, at the right time. We recommend the following project plan analysis levels:
Level 1 Initial/Desktop Investigation (usually 4-10 hours).
Level 2 Preliminary Investigation (+/- 8-80 hours).
Level 3 Investigative Analysis (+/- 60-160).
Level 4 Detailed Analysis (+/- 100-200).
Level 5 Final Analysis (200+).
We don't move from one level to the next without explicit agreement, because in claims, no one likes surprises.
Often, at the conclusion of a Level 1 analysis, the claims professional has all they need to pay and close the claim. But some times the Level 1 recommendations include further work including onsite investigations, testing, evaluating testimony, scope and cost estimates, and even delivery of expert testimony in deposition, arbitration, or trial.
Claims vs. Litigation
"Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser—in fees, expenses, and waste of time."
- Abraham Lincoln
Put simply, insurance claims professionals are obliged to investigate claims. This sometimes involves hiring a SME. The majority of property claims are completed transactionally in the normal course of business; but any one of them could end up in litigation. Therefore claims professionals need to be "litigation aware," which is similar to SME "coverage awareness." When a SME is hired to aid in investigating a non-litigated claim, we call the SME a "consultant." Work by a consultant (inspections, reports, scopes of work, estimates, etc.) becomes part of the claim file and may be discoverable in litigation.
Unfortunately, Abe Lincoln's recommendation to make peace is sometimes met with unreasonable demands. When this happens we either give a bully our lunch money or prepare to support our contrasting opinions with "forensic" professionalism.
The grey area between transactional and litigated claims is where professional judgement is required to balance costs and risks, and where "litigation aware" professionals shine. High risk claims often have a lawyer hired early, who then hires the SME. Periodically Pete's firm gets hired by a claim professional, we conduct our investigation, draw conclusions that are not flattering to the insured, and they ask us for a written report. In conversation we discuss their first hiring a lawyer, to whom we might send the report, so that it remains privileged. They usually thank us for our "litigation awareness."
Most cases settle, either pre litigation or prior to trial in a litigated matter. There are the occasions, however, where a case proceeds through a trial or arbitration. Because of this, litigated cases need to be treated with care. Claim professionals should work with attorneys to ensure that qualified experts have been vetted and retained at the outset. Strengths and weaknesses of the claims at issue should be critically analyzed by the expert, and discussions between the expert, the attorney and the claim professional should occur. Experts should clearly understand the scope of their retention and execute their work on that basis. The aim is to obtain enough information to properly evaluate the value of the claim at issue, and hopefully arrive at a settlement. If resolution cannot be reached, the expert deliverable should serve to benchmark the claim to the “true” value of the exposure.
Forensics
"We have an obligation to dissent."
- Marvin Bower, McKinsey & Co.
When the claim is in litigation a lawyer is hired first. The attorney should hire the SME, and all correspondence should run through the attorney. A SME becomes an "Expert" when they are disclosed as such by a lawyer during litigation; prior to that they are a "consultant." In most jurisdictions, an Expert's file will be subject to review by the opposing parties prior to SME testimony. If the SME consultant is never named an expert, their work will likely remain privileged, never to be seen by the opposing parties. This is why it may be beneficial to have both consultants and experts retained.
Regardless of claim status, all SME work should be conducted at the level of "forensic" professionalism that a judge would allow to be presented, based on the rules of evidence. SMEs should use reliable methods, applied reliably. The work must be systematic and objective to determine the cause, extent, and circumstances, and the documentation good enough for presentation in testimony. There are innumerable investigative standards, but they typically follow some version of the scientific method. Generally, they include (1.) Observation (2.) Hypothesis Formulation (3.) Testing the Hypothesis (at minimum seeking contrary evidence) (4.) Analysis (5.) Conclusions (6.) Recommendations.
SMEs must show their work. Just like in math class, simply getting the answer right does not earn the student an A+. SMEs have to show how they came to their conclusions. All work should be performed conforming with a reliable forensic protocol. The foundation stones of a good analysis can be shown to clients, key players, judges and juries. Good, systematic work is persuasive.
SME ethics are beyond the scope here, but we need to acknowledge that SMEs are sometimes hired by attorneys to give opinions that are helpful to their client, as opposed to being purely for investigative purposes. If an SME sells helpful opinions regardless of the evidence, this is NOT forensic. To avoid surprises, SMEs should hypothesize as early as possible, and share these with the client. If the SME can't help, then the billing should be kept to a minimum. The American legal system is based in advocacy so SMEs should not be upset with an attorney for zealously advocating. Pete leads a growing business based on a reputation for having integrity and telling clients the truth; this is proof that the market rewards these virtues and they can live in harmony with attorney advocacy.
SMEs must always be open to integrating new evidence and revising their conclusions when the evidence is compelling. Attorneys from all sides will argue an SME should reconsider their opinions to benefit their client. The SME is obliged to consider the arguments and evidence thoughtfully. Sometimes the attorney is right or partly right, because of something they knew that the SME didn't. Sometimes they are wrong. In the former the SMEs opinions should change and in the latter, they should not. Telling claims and legal professionals what they want to hear, rather than objective opinions based on evidence, is SME negligence.
File Analysis
"Data! Data! Data! I can’t make bricks without clay."
- Sherlock Holmes
By "file" we mean 100% of the available evidence: Interviews, statements, testimony, documents, reports, photos, video, inspections, testing, legal documents, etc. When a SME's file is a mess and they can't find what they need to support their arguments, people lose faith. When the file is professionally collected, organized, indexed, summarized, and analyzed, and the SME can quickly find, reference, retrieve, and share everything, people think this person has their act together, and the assignment is safe in their hands.
Human ability to understand a large "pile" of evidence is strongly influenced by the organizational scheme. If evidence from disparate sources is in a physical or digital pile, it's tough to understand. When they are organized into a sensible file, it can read like a story; transformed from data into usable information. Someone reading evidence organized from numerous sources can be the first person to genuinely understand the situation. As an SME having worked on thousands of litigated matters, Pete has had this experience many times. When this evidence-based understanding is shared, then others can easily understand, and contentious matters can move toward resolution. If we organize evidence in a consistent way across all our different property claims, deep expertise can be developed in a shorter time because the human mind is an amazing pattern recognition machine. Deep expertise by SME's and claims professionals leads to great decisions.
Onsite Investigation
“You see, but you do not observe.”
- Sherlock Holmes
Determining the origin & cause of a property claim can be a critical part of the evaluation, especially when there is litigation or the possibility of subrogation (when the insurer pays the claim and pursues others for reimbursement).
Before onsite investigation work includes gathering evidence and information that will aid in the observations and documentation. This might include maps, plans, satellite or aerial images, photographs, statements or testimony, contracts, invoices, and more.
During an onsite investigation careful observation and work ethic are most important. There should be 25-100 photographs per hour. Sketches and diagrams with dimensions can be key.
After a forensic onsite investigation the photographs and notes should be processed so a user can read through documentation like a story. People who were not there should be able to understand and rely on the documentation, even for testimony. Transcribing field notes for each photograph deepens understanding and enhances the value; unannotated photographs can be confusing.
The SME must explain what the investigation MEANS. Sending raw data, expecting a client to interpret it, is negligence. Often, the data is made into graphics that move the client from the big picture to the details, while maintaining orientation. If anyone gets lost, the work is not excellent.
Scope & Costs
"Don't ask the barber if you need a haircut."
- Warren Buffett
It is not uncommon to come across people with scant construction experience who are taught to use "estimating software" to determine a claim's value. These tools combine defining the scope of work and costs into a single step. This is fantastic for small, transactional claims where a few percentage points of difference are not worth the high cost of hiring SMEs to define the scope and costs of remediation.
Professional cost estimators with identical scopes of work, like they are in plans and specifications for public construction projects, commonly come within 2-5% of one another. So why do contentious claims have estimates 2-5 times one another? The primary reason is scope differences, meaning, what is actually wrong and what is the actual fix. The other, to a lesser degree, is dramatic differences in costs.
Some insurance professionals prefer "free estimates" from preferred contractor/vendors. Warren Buffett's admonition reminds us to align incentives. If someone does something that costs them money, "for free," then they are accounting for the costs somewhere else. When costs are hidden they are impossible to manage. Large claims often involve complex construction projects. To specify the correct scope of work, one or more SMEs are generally required. If the scope is not defined precisely, then the costs are likely to vary widely.
"Claims & litigation aware" cost estimating SMEs can compare and contrast various estimates in a way that everyone can understand. It requires the SME to translate scope of work differences into clear graphics, small words and short sentences. And there is the math, which confuses many people.
Conclusion
“Quality is never an accident; it is always the result of intelligent effort.”
- John Ruskin
Professionals should have high expectations of one another, whether co-workers or when one is a vendor. To successfully manage the work of an SME on a property claim, the claim professional should define what good performance looks like, in writing, make sure everyone agrees, then compare performance to that standard. The SME should make their clients feel safe by executing a "forensic" investigation adhering to the fundamentals, including communicating correct, clear, concise, precise, and objective observations and opinions.