Our client owns a hotel. The hotel was damaged by fire after a utility pole (owned by the power company) broke in half during a storm and the power lines landed on the insured’s downspout, energizing the downspout and starting the fire. There was substantial fire damage. There was no wind damage to the hotel or any hotel property. The carrier has taken the position that this is a wind loss and is applying a 2% wind deductible. It is our position that this is a fire loss and the standard deductible should apply. The policy is a BP 00 03 and the Wind deductible form is BP 03 12. Please provide your opinion.
Michigan Subscriber
From this description, the original cause of loss to the pole is wind that broke the pole in half. The wind damage is the proximate cause of loss to the pole, which ignited the fire. The BP 03 12 endorsement contains the following provision:
The Windstorm or Hail Deductible, as shown in the Schedule, applies to loss or damage to Covered Property caused directly or indirectly by Windstorm or Hail, regardless of any other cause or event that contributes concurrently or in any sequence to the loss or damage. If loss or damage from a covered weather condition other than Windstorm or Hail occurs, and that loss or damage would not have occurred but for Windstorm or Hail, such loss or damage shall be considered to be caused by Windstorm or Hail and therefore part of a Windstorm or Hail occurrence. ...
Since there is no exception for fire or explosion in this endorsement, and the above provision contains anti-concurrent loss provision, this deductible would apply to Covered Property at the premises identified on the endorsement schedule.
However, a utility pole owned by the power company, and not owned by the insured, would not be covered property at the premises shown in the schedule. As such, since there was no windstorm or hail at the insured's premises to their covered property, then the endorsement would not apply to the insured's covered property. The insured's covered property was directly damaged by fire, not wind, and as such the wind deductible does not apply to this loss. If the utility pole was owned by the insured, our answer would be entirely different as that would make it covered property damaged by wind.