Coverage disputes as a result of Winter Storm Uri's impact on Texas are likely to be significant, due to the large number of companies affected both within the state and beyond, legal experts say.
Because snow, ice, and freezing also triggered major power outages and rolling power outages in Texas, there are several issues that could complicate the commercial property policyholders' claims process.
The storm, which hit a wide range of states, especially in the southern United States, may be the record holder. first quarter insured property disaster losses for US real estate / non-life insurers, AM Best Co. said in a report from February 19.
Many of the property losses come from water damage caused by frozen and broken pipes, and longer power outages can cause losses for both reinsurance companies and primary insurance companies, said Best in
Property / accident insurance companies can pay an estimated $ 1
The storm will generate huge claims on property and business interruptions, both from companies that are shut down and unable to operate and from the energy sector itself, says Leslie Thorne, partner at Haynes and Boone LLP in Austin.
"Many of these plants could not operate to get energy, electricity in the system because they themselves were frozen," she said. Many of these companies will look at their insurance policies, given that they could not deliver at a critical time, Thorne said.
The incident has the potential to give rise to business disputes that trigger policies beyond commercial property, such as commercial public liability and directors' and liability claims, she said.
Several lawsuits have already been filed against the Austin-based electricity company Electric Reliability Council of Texas, or ERCOT, and the electricity transmission company CenterPoint Energy by family members of those who died and those who suffered property damage during last week's storm.
“These claims will face a lot of headwinds regarding the protection that some of these companies have in the regulatory area. But they will certainly trigger insurance, says Thorne.
Significant disputes will arise due to commercial real estate coverage and losses for companies in Texas that were directly affected by the cold weather, power outages and rolling outages, said Pamela Hans, CEO of Anderson Kill PC's Philadelphia office.
There will also be disputes that arise as a result of contingent business loss losses to companies outside Texas that were dependent on suppliers in the affected area, she said.
"The lion's share of the coverage will be found under the first party's property policy," says Hans.
Policies including public service loss coverage generally identify a specific outage period before coverage is triggered, usually 24 or 48 hours, and the extent of the potential losses depends on how long the power outage lasts, Best said in his report.
Policyholders for commercial real estate should carefully review the terms of their insurance policies and endorsements, Hans said.
“Not all insurances cover loss of service interruption. Many insurance companies do this, but usually through a recommendation that focuses on that loss, so policyholders can not assume one way or another, "said Hans.
With claims of business interruption, there is often" a lot of back and forth and disputes. "Between policyholders and their insurers about what loss can be attributed to what," says Tamara D. Bruno, partner, Pillsbury Winthrop Shaw Pittman LLP, based in Houston.
If a company had physical damage such as frozen pipes or other physical damage it was not necessarily a result of a lack of power, or not just a result of a lack of power, then potential disputes with insurers over causation could arise, she said.
"Would you have had that loss if it was just the ice, or was it ice that worked along with a lack of power, and do you have an exclusion and how do you work through it in the policy language and see if you have coverage or not, says Mrs. Bruno.
Insurers are likely to assert multiple defenses for coverage and claim that different exceptions exclude coverage, Robert Manley and Michael Miguel, principals at McKool Smith in Dallas and Los Angeles, wrote in an email.
"The typical question to be resolved is whether it was primarily a "business interruption", "they wrote.
Insurers traditionally claim that policies are intended to cover the complete cessation of business, not restrictions on business. the operator chose to close the entire facility, "There may be problems if a business decision rather than physical damage caused the cessation of all business," wrote Mr. Manley and Miguel.
Protection and preservation of property costs are often covered by commercial real estate policies, especially if those efforts are linked to a covered cause of loss, Bruno said. operty, sa hon. "We recommend that clients consult forensic auditors early to ensure that these records are stored and managed in a way that allows them to present them to the insurer later," she said. Catalog