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Food Corporation with supermarkets in four states affected by catastrophic blackout sued insurer seeking coverage under all-risk general property damage insurance policy for damages due to food spoilage and loss of business; Appeals Court ruled that term "physical damage" in policy was ambiguous; if insurer had not intended coverage for electrical blackout, insurer should have defined policy exclusion more clearly.
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Electric cooperative sued to enjoin Town from supplying electric power to Town's sports complex; Indiana Court of Appeals ruled in favor of co-op finding complex was located within co-op's service territory and co-op was exclusive supplier of electricity to complex.
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14-year old girl electrocuted when she climbed transmission tower and contacted live transformer; California Court of Appeals ruled in favor of electric company finding: (1) utility did not willfully or maliciously fail to guard or warn of dangerous condition; (2) parents could not establish two of three elements necessary to elevate conduct to level of willful or malicious; and (3) utility's knowledge that injury was probable (rather than possible) was not established.
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Regulations - RUS.
Cynthia M. Currin is an attorney in private practice in Raleigh, NC. She has served as counsel for electric utilities for over 28 years. She is past President of the North Carolina Electric Membership Cooperative Counsel Association. She is a former member of the Board of Governors of the North Carolina Academy of Trial Lawyers ("NCATL"), a member of the NCATL Editorial Board, and past editor of NRECA’s Legal Reporting Service. She is a certified arbitrator and mediator in the state of North Carolina.
We report an "insurance claim" resulting from the four-day blackout that occurred in the northeastern United States and eastern Canada electric "Grid" on August 14, 2003.
Wakefern Corporation sued Liberty Mutual Fire Insurance ("Liberty") for losses sustained at its ShopRite supermarkets due to food spoilage and loss of business. Wakefern had paid a premium of over $5.5 million for insurance coverage. Liberty denied Wakefern's claim, characterizing the food spoilage as "consequential" losses, not "direct" losses. Liberty argued that Wakefern had not shown evidence of "physical damage" to the electric systems as required by the policy terms.
The blackout affected 50 million people. About 265 power plants and 508 generating units were shut down. A Joint Task Force (from U.S. and Canada) determined that the blackout began when three large transmission lines in northern Ohio sagged and came in contact with trees not properly maintained. These Ohio lines disengaged from their interconnection by their protective devices and this current was re-routed to the 345-kilovolt Sammis-Star transmission line-which, in turn, became overloaded and disconnected. This triggered the "uncontrollable 345 kV cascade...The cascade spread rapidly as lines and generating units automatically tripped by protective relay action..."
The Task Force report stated an electrical "cascade is a dynamic phenomenon that cannot be stopped by human intervention once started."
The Superior Court of New Jersey, Appellate Division, ruled: (1) that the electric Grid was "physically damaged"; and (2) if Liberty intended its policy not to provide coverage for an electrical blackout-then Liberty should have defined the exclusion in its policy.
Electric utilities may want to share information on this case with their "key accounts"-to be sure those "key accounts" are knowledgeable about the terms of their insurance coverage regarding electrical blackouts.
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