ERCOT's Rolling Blackouts Draw First Lawsuit; AG Vows Probe
The rolling power outages that left millions of Texans out in the cold have produced its first of potentially thousands of civil lawsuits. A new lawsuit filed in Nueces County court claims the Electric Reliability Council of Texas (ERCOT), the company that manages Texas's primary power grid, neglected repeated warnings of vulnerabilities in the state's electrical power infrastructure. The suit also accuses American Electric Power and ERCOT of causing damage to property and business interruptions throughout the wave of freezing temperatures.
According to a quote by the plaintiffs, the blackouts caused widespread property damage, and the companies were responsible due to their gross negligence. The statement continued by alleging the power disruptions made the private property unusable to the owners and the actions were equal to an illegal theft of private property by the state government and private corporations.
Texas Attorney General Ken Paxton announced that their office sent civil investigative demands to the electric utility companies operating in Texas and ERCOT. Texas Attorney General Paxton stated that their office would "get to the bottom of this power failure." The Attorney General's investigation will include power outages, energy pricing, emergency plans, and other recent winter storm issues.
ERCOT Power Outage and Commercial Property Insurance Coverage Claims
Texas sustained a brutal winter storm lasting about ten days. The winter storm in February 2021 brought record-low temperatures, snow, freezing rain, and ice. Tragically, millions of Texans were left without electric service and water for several days. The wintry conditions, along with the rolling power outages, forced tens of thousands of businesses in Texas to shut down during the winter storm. Hundreds of companies also sustained commercial property damage due to water pipes bursting, water damage, and roof collapses. The commercial property insurance claims have already begun to be filed. Some experts believe that the Texas winter storm of 2021 will be the largest single insurance claims event in Texas history by surpassing Hurricane Harvey's $19 billion in insurance claims.
The extensive days of freezing temperatures and ERCOT's decision to initiate rolling power outages created the perfect storm that caused significant financial losses to all kinds of businesses in Texas. Some companies shut down due to the terrible weather conditions, while other businesses were shut down due to no power and Internet. Others closed operations due to flooding or roof damage.
According to the Austin American-Statesman, one energy provider ordered: "all industrial and semiconductor manufacturers to idle or shut down." The news report states that this decision caused Samsung to halt its operations, which cost Samsung millions of dollars in economic losses. Businesses throughout Texas are looking for ways they can recover or minimize their income losses. The first step for many businesses will be to review their commercial property insurance policies. However, business losses may not be covered by their insurance policies, and many policies might not include coverage for "freeze claims."
"Freeze" Claims and Commercial Property Insurance Coverage
Several thousands of businesses in Texas were impacted by the "February 2021 Texas Winter Freeze." A dangerous combination of freezing weather conditions and directed rolling power outages caused commercial properties throughout Texas to be damaged due to roof collapses, power surges, and water pipe bursts that resulted in significant financial losses to many Texas businesses.
Commercial property claims for physical losses or damages caused by bursting water pipes will likely be covered. However, insurance coverage for economic losses caused by power service interruptions will require more detailed analysis, including evaluating all contributing circumstances and relevant policy language. If a business did not endure property damage but was only impacted by an energy service provider's decision to halt electrical service, it is likely commercial property insurance companies will not respond to these claims.
Commercial property policyholders and their attorneys will have to develop aggressive arguments to recover compensation for many types of business losses. Just as in any insurance coverage dispute, the determination of coverage for a freeze claim would be based on a thorough investigation of the facts pertinent to the specific insurance claim along with a thorough analysis of the insurance policy.
The experienced commercial property damage attorneys at Fears Nachawati Law Firm, Parker Waichman LLP and Watts Guerra LLP have successfully represented business clients whose commercial properties were damaged by hurricanes, violent storms, fires, earthquakes, and other business losses. Our national law firms has successfully won bad faith insurance trials concerning complex real estate properties against large insurance companies. Our firms are uniquely prepared to take on the insurance company on your behalf to obtain the insurance proceeds that your business is entitled to receive, and, in some cases, we can fight for punitive damages.
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Did your business sustain commercial property damage due to the rolling power outages in February of 2021? If so, contact us by using our live chat or calling 1-800-800-2828 to receive your free consultation.