The insured suffered damage to computer systems due to an intentional load reduction by a utility. (Photo: Olivier Rateau/stock.adobe.com)
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Editor's Note: This week's question looks for coverage for damage that occurred when an electric utility implemented a load reduction that cut power to the insured premises.
Question: A municipality cut power to the insured's facility due to intentional load reduction. This caused problems with the "motherboard," and the insured also had problems with the soft water system and boilers, along with other minor electrical and computer issues.
The insured has coverage for Utility Service Direct Damage, which does not cover this loss because there was no physical damage to the insured or supplier premises.
My first question is if there could potentially be coverage under Breakdown of Equipment, which includes coverage for an electrical failure such as arcing? However, there is an exclusion listed that may apply: "Defects, erasures, errors, limitations or viruses in computer equipment and programs."
I have fairly limited experience with this coverage part. Any thoughts on the application of this coverage to this situation? I feel that a breakdown was internal to the equipment, which would not address something from outside causes, such as what the insured experienced.
My second question is if this type of loss be better covered under Off-premises Service Interruption coverage if the covered causes of loss included a load reduction, etc.?
Is there a form out there that you are aware of that would provide coverage? It seems like there are areas where rolling blackouts are common, so I wonder how this is addressed coverage-wise in an area where this is a common situation?
— Nebraska Subscriber
Analysis: In today's high-tech world, it is virtually impossible for a business to operate without continual electrical supply, putting enormous loads on municipal power systems. As a result, utilities sometimes resort to planned shutdowns or load reductions in order to relieve stress and prevent long-term power outages. When the demand for electricity exceeds the power supply capability of the utility network, a utility may resort to rolling blackouts to avoid a total blackout of the system.
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