On Sunday February 28th, an exploding manhole rocked Midtown East, NYC, around 7:30 AM. While we'd like to say this is a rare occurrence, that is unfortunately not the case in New York City. According to a special report in 2020 by The City news, between 2009 and 2018 the city logged nearly 4,000 such explosions, with the NY Fire Department responding to more than 45,000 emergency manhole incidents.
For those not familiar with New York manhole explosions, these are primarily a winter event caused when rain or snow melt mixed with corrosive salt seeps underground onto aging, or old and frayed underground wires that have already been subjected to caustic chemicals, gnawing rats, or just simply decay. Because these cables carry as much as 13,000 volts of electricity, they can ignite insulation made from paper, lead, and rubber. The insulation smolders and catches on fire, releasing gases. The pressure from the gas builds up inside the manhole, and the electrical wires arc like a bolt of lightning and ignite the gases, causing a powerful explosion. For more detailed information, see How Stuff Works.
The city of New York has 246,000 manholes and service boxes in its underground system, serviced by Con Edison. Manhole covers typically made of cast iron weigh between 85-300 pounds, so when the flames cause the built-up manhole gas to combust it can send these massive covers skyrocketing anywhere from 1 to 50 feet. Along with that, the concussion from the explosion of gas damaged nearby vehicles and buildings. The greater the combustion, the greater the damage.
Sunday's explosion was responsible for at least three injuries, as well as property damage to vehicles and store fronts. The explosion caused power outages, with firefighters reporting several power outages on 56th Street between 1st and 2nd avenues with rising carbon monoxide levels in various buildings, and some civilians in need of electricity for life-support systems had to be evacuated.
So what does insurance cover? We will explore the Homeowners 3 and Commercial Property ISO forms as related to the possible damage.
Residential and Commercial Property
Residential/Dwelling
Explosion is a covered peril to either the dwelling or personal property in the HO 3 form. Even trees, shrubs, plants or lawns are covered up to 5% of the Coverage A limit, but not more than $500 per tree, shrub or plant. This coverage does not extend to commercial property.
Damage from the manhole cover as a falling object is also covered, but if the property is contained within a building there must first be damage to the building itself by the falling object. For example, the manhole crashes through the roof, and then rain enters the building, damaging personal property.
Smoke damage from the manhole fire is also covered.
Power Failure is covered because the failure of power/utility service took place off the residential property and the failure first resulted from a Peril Insured Against (explosion). Civilians that had to be evacuated for life-support systems or the high carbon monoxide will be covered for additional living expenses. The loss of electricity was a result of the explosion, as was the buildup of carbon monoxide.
For tenants and condominium unit owners, coverage is the same since explosion is a named peril.
Commercial Property
Commercial property coverage is a little more complicated.
Even though explosion from steam vessels is excluded, loss or damage caused by the explosion of gases within the flues or passages through which the gases of combustion pass is covered, along with resulting fire damage. Therefore, the manhole explosion is a covered cause of loss. As such, damage to the store fronts, buildings and business personal property will be covered. If business income coverage is added to the policy, if the stores are closed to damage from the explosion, or if civil authority blocks off the area and customers cannot pass through, then after the first 72 hours the business income and extra expense coverages will kick in.
Smoke damage from the manhole fire is also a covered cause of loss.
Power Failure is only covered under commercial property if it results in a covered cause of loss; thus, if the power failure results in a fire, there will be coverage. However, power failure resulting in higher carbon monoxide levels and a lack of electricity to supply life-support to customers will not be covered. Coverage for power failure can be provided however, if the policyholder has added the Utility Services endorsement specifically to cover power supply property, CP 04 17 Utility Services – Direct Damage. Business income and extra expense coverage will also not apply within the added endorsement CP 15 45 Utility Service – Time Element.
Since falling objects is a covered cause of loss, direct damage from the falling manhole cover will be covered. However, as with homeowners, if the property is contained within a building there must first be damage to the building itself by the falling object. For example, the manhole cover crashes storefront windows, leading to theft of property. Both the window damage and the resulting theft will be covered. Coverage will not apply however if the manhole cover damages personal property in the open, such as an outdoor market stand or advertising sign.
Coverage will apply however to outdoor fences, antennas and satellite dishes, and trees, shrubs or plants that are stock or are part of a vegetated roof, including debris removal expense, if the loss is caused by either fire or lightning, but not from the falling manhole cover. The coverage for this extension is limited to $1,000, but not more than $250 for any one tree, shrub or plant.
Coverage for personal effects and personal property of others in the insured's control will also apply if the loss or damage is from a covered cause of loss, up to $2,500 at each damaged premises, except this coverage will not extend to theft.
Preservation of property coverage will apply if the insured has to remove property to keep it from theft or further damage from a covered cause of loss, such as fire. The property will not be covered however to keep it from further damage due to the loss of electricity unless the Utility Service coverage is added to the policy.
Business income and extra expense coverage will apply after the first 72 hours if the property first sustains damage from a covered cause of loss. Civil authority coverage will also be available if the city or fire department blocks off access to the insured's property, after the first 72 hours.
Personal Vehicles
Coverage for personal vehicles insured under a personal auto policy is straightforward. Under physical damage coverage, Other Than Collision coverage includes explosion among the list of covered perils. An individual's parked vehicle was subjected to damage from an explosion; even if objects fell onto the vehicle, that is not the same as a collision, which is defined as an impact with an object. Whether the vehicle was in motion or parked, and whether the insured had an opportunity to avoid an impact with an object are defining characteristics in determining the difference between collision and other than collision losses.
Commercial Vehicles
Coverage for a business's vehicles will depend of course on the symbol used on the policy for covered auto and whether that vehicle was being used in the insured's business at the time of the damage. The coverage in question for this explosion will be whichever vehicles the insured has purchased comprehensive coverage, but that vehicle must have been used in the insured's business or trade, such as a sales representative vehicle,a delivery vehicle, or transportation service vehicle such as a bus, Uber or Lyft. Comprehensive coverage covers loss or damage from any cause except collision, and the specified causes of loss covers explosion, fire, theft, and vandalism of the covered auto.
Liability
A general liability policy will cover loss or damage an insured is legally obligated to pay for bodily injury, property damage, and personal and advertising injury liability. However, a public utility, such as Con Ed, is different. We looked to NOLO for information on whether you can sue a public utility. A public utility sets out the terms of its customer service contract in a tariff book, which is a rule describing situations in which the public utility can be held legally responsible for a customer's losses in the event of an "interruption in service" or "insufficiency of supply". The tariff books are agreed to by the state's public utility commission. In the tariff book of Con Ed, it is stated that if in any situation the provision of services is interrupted, becomes irregular, or fails "from causes beyond [ConEd's] control or through ordinary negligence of its employees", the company will not be liable. Elsewhere in the tariff book is specific language describing the utility's right to carry out planned service interruptions (i.e. "rolling blackouts") and other restrictive measures to reduce the risk of larger service-related problems. These liability shields of utility services are often rationalized as necessary to keep customers' service rates reasonably low; otherwise if the utility had to pay for losses resulting from often unavoidable problems that can have widespread impact, it would result in a financial burden that would inevitably be passed on to customers.
ConEd does permit customers to file a claim online, and it is noted that there is an option to file a "residential spoilage claim" that might result in reimbursement if "food or medication went bad because of a residential outage".
Includes copyrighted material of Insurance Services Office Inc., with its permission.
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