This article is a companion piece to this video
In this episode of On Subrogation: Utility Claims, RG subrogation attorney Steve Alsip talks utility claims. What makes subrogating a case involving utilities different from other fields like automotive subrogation? Steve goes into detail about the process, focusing on overhead lines, underground lines and service defects.
Power Companies & Public Safety: Determining Liability in Utility Subrogation
The issues of property damage and personal injury subrogation involving utilities is a much more common sub-field of insurance law than you might think. Our environment is crisscrossed with countless overhead power lines, buried cable lines, underground water/sewer lines, phone poles, and more. This leaves the possibility of tort claims arising from incidents involving utilities ever-present.
Because of the prevalence of utility infrastructure, utility companies are regulated in cooperation with legislation of the state in which they provide service. Utilities that are required to follow certain statutory and regulatory frameworks include:
- Electric
- Cable
- Phone
- Water/sewer
- Gas
Regulating Vital Utility Services to Protect the Public
Because of the unique nature of utility companies, when it comes to approaching a subrogation claim, an attorney is dealing with specialized standards of care, regulatory frameworks that govern the utility, what types of tort issues can be brought against a company, and complex issues of liability. State regulatory agencies that govern utility companies include:
- Public Utilities Commission
- Public Service Commission
- Corporation Commission
- Regulatory Commission
- Federal Energy Regulatory Commission (power)
These state regulatory agencies work with state legislation to protect the public by:
- creating a statutory framework for utility companies, and
- creating compliance rules to keep the public safe and ensure they receive the appropriate level of service.
The Usual Suspect: Property Subrogation for Power Utilities
Because the physical infrastructure of power utilities are pervasive in our surroundings, and because the infrastructure is a giant interdependent network, electricity companies are the most common targets of tort claims for property damage, especially fire subrogation claims. Because power failures and accidents can easily cause huge loss of property and casualty, there’s a lot of potential for legal disputes involving liability in utility subrogation.
Steve cites a case he is currently handling, where strong winds blew a trampoline onto a power line on a neighboring house. This then resulted in a fire that destroyed at least two homes. The initial negligent act is simple to identify: the homeowner that failed to properly tie down their trampoline. But after that, did any utility-related issues contribute to the subsequent fires?
- How are the power lines run?
- Are they too close to homes?
- Are they too flammable?
- Were they improperly maintained/neglected?
Should issues with duty of care on the part of the utility be identified, the subrogating party may be able to pursue the company as an additional liable party in the insurance claim.
Steve breaks how a team investigating a property, fire or personal injury subrogation claim involving utilities should look for potential liability in overhead, underground and poorly-maintained lines:
1. Overhead Power Line Property Subrogation
In subrogation, claims involving overhead lines, poles and transformers are common. Incidents like a car running into a pole and taking it down, or a vehicle that’s too tall catching a line and ripping it off a home. These accidents can result in significant property damage and even fires.
On the other side, you have incidents where poles fall on cars or transformers catch fire and cause house damage. There is a host of havoc overhead lines can cause on the ground that present unique types of liability when considering the process of arguing your subrogation case.
2. Subrogation of Underground Line Disputes
Underground utility lines are often co-located in a single trench, such as phone and cable. 811 is the national Call Before You Dig number. When digging or excavating in areas with utilities, 811 provides survey resources to locate relevant underground lines.
This type of utility subrogation has the potential to be very simple or highly complicated. Did a person/company dig without calling 811 or another appropriate route to locate underground utilities first? There’s your liability for the loss of use and/or property that results from digging into the utility.
But what if the correct measures were taken by the property owner, and the contractor accidentally hit a utility line anyway? Now, a subrogating party can look to the location company and the excavator. For instance:
- Did the survey/location company correctly mark the locations of the utility lines?
- Did the excavator (owner/contractor) act negligently and dig without paying attention to the markings?
If proper measures were not taken by the property owner and/or the companies they hired, they may carry liability for hefty property damage claims, as digging into a line will likely cause problems throughout the network, especially in residential neighborhoods.
3. Product Defects: Subrogating Faulty Power Services
There are also utility subrogation claims resulting from a faulty “product”: a problem with your electricity service. For instance, a power surge to a residence or entire residential area can fry every plugged-in device in every home it affects. Instantly, insurers will have to pay out dozens of large claims that they then need to recoup.
These cases will require experts in order to prove there was a service defect like a surge. This includes an in-depth scene examination and an analysis of how the power is delivered. Is the utility company on the hook for the loss of use and property damage?
A particular culprit of fire claims for power utilities are decaying lines, poles and transformers that have not been properly maintained. As a liability argument, this is referred to as negligent maintenance. The utility company is responsible for maintaining their infrastructure as a matter of public safety and providing compliant services.
However, utility companies are held to different standards of care than, say, a single business owner or a homeowner. A power company is not expected to monitor every piece of equipment in their jurisdiction all the time, because it is agreed upon that it is functionally impossible to do so. However, should someone have reported a smoking transformer that later exploded and caused a fire insurance claim, and the company had failed to act on that previous report, that is a strong claim for liability on the utility company.
If you would like to learn more about the subrogation process and the nuances of insurance law, visit Rathbone Group’s YouTube channel and podcast library for more episodes of On Subrogation. On Subrogation is a free educational resource for subrogation professionals interested in maximizing claims recovery even in complicated cases.Have a suggestion for a topic we have not yet covered? Reach out at [email protected] or [email protected] to see your question discussed in a future episode.