Note how the aforementioned definition is not limited to the variations that would result in failure of equipment, but rather extends to cover variations that cause operation failures. That means it covers situations in which the insured reports that a piece of equipment is “not doing what it's supposed to do” after a surge. In these cases, a surge does not cause a catastrophic failure of the equipment, but it affects the operation of the equipment.

Going back to the cause of electrical surges, it is important to understand that voltage variations can be caused in many ways and take different forms. In general terms, surges are caused either naturally — as in the case of lightning — or artificially, which includes many different events ranging from simple power interruptions to significantly more complex events such as harmonics on the power line. Both sources of surge can cause similar types of damage to equipment, including premature failure of motors, computer and communication equipment lockups, loss of equipment following a thunderstorm, and other symptoms of failure. Still, there are subtle but significant differences between the damages caused by the two types of surge. In most cases, these differences are not clearly apparent and can be missed by an unqualified person or an incomplete investigation.

Magnitude and Duration

The basis for these differences is rather complex and relies on several engineering concepts that go beyond the scope of this article. Nevertheless, it is important to understand the two basic factors that cause much of these differences: magnitude and duration. Magnitude refers to the amount of energy contained in the surge, while duration refers to the amount of time the surge was sustained.

As seen in figure one, a lightning surge has a significantly larger amount of energy (magnitude) compared to any artificially generated surge. Despite the greater amount of energy, lightning lasts for only a very short period of time (duration), at least in comparison to many types of artificially generated surges.

This difference provides us with a tool that can be used to identify the source of the surge. Specifically, differences in magnitude and duration lead to different signs of damage. Damage caused by lightning tends to be catastrophic and localized, while damage caused by artificially generated surges is less severe and more widespread. In other words, the nature and extent of damage sustained by a piece of equipment can indicate the source of a power surge. Typically, when components show signs of prolonged overheating such as melting, discoloration, and widespread smoke contamination, an artificial power surge should be the primary suspect of the equipment failure. On the other hand, if damage is localized and extensive, such as blown components, lightning should be the primary suspect.

Therefore, it is imperative for an insurance adjuster to attempt to define the extent of damage to a piece of equipment. This is not an easy task, given that most insureds and their vendors typically will use generic terms to describe the damage they are viewing. Adjusters probably can recall many situations in which an insured describes how his system “died,” only to discover later that the fan was inoperable or a minor part was defective. A visual inspection can, in most cases, provide significant information about the extent of damage.

In addition to the nature and extent of damage, the type and design of the damaged component can tell a great deal about the source of a power surge if the inspection is performed by a qualified person. In other words, once the exact damaged component or part inside a piece of equipment is identified, one can use the information to identify the source of a surge. This is because lightning surges can be conducted or induced through any part that connects a piece of equipment to the outside world, including communication ports and power supplies, while an artificially generated power surge can only be conducted through the power supply.

For example, if the damage to a piece of equipment consists of a failed modem, network card, television tuner, or non-power-related components, then the damage likely is the result of lightning-related surge that would have been induced on the communication lines. Other forms of power surge could then be eliminated based on that available information and other observations. On the other hand, if the damage is limited to power supplies or other power-related components, then damage could be the result of either lightning or other forms of surge.

The events that preceded the claimed damage to the equipment also provide significant information that can be used to identify the source of a power surge. A lightning-related surge has to accompany a thunderstorm, and lightning would be in the area on the date and time of the loss. On the other hand, an artificially generated power surge typically is caused by an event that could either be inside or outside an insured's premises. Identifying the event that led to the loss is necessary to determine the exact cause and source of the power surge.

Sherlock Holmes Approach

As previously mentioned, field realities are not typically as simple and clear, and quite often an adjuster is faced with challenges that would limit his ability to determine the exact cause of a power surge.

For instance, if the equipment failure is not accompanied with physical damage that can be inspected and analyzed, an investigator may not be able to use the signs of failure to identify the source of a surge. Similarly, any adjuster with even the most modest experience in handling property claims can tell you that the exact date of the loss is not always identifiable. If the date of the loss cannot be identified, then the events that preceded the loss may not always be known. This is further complicated by the fact that many of the events that cause artificially generated surges occur during the summer months when the power grid is heavily loaded, which can cause power failures.

To overcome these and other challenges, an adjuster or his claim investigator should take a broad approach to the investigation. The investigator should attempt to ascertain as many facts as possible before ruling the cause of the loss, including inspection of the damaged equipment as well as research and analysis of the events that preceded and followed the loss.

Additionally, one should not rely on a limited description of damages and events. An insured can describe a power outage causing the damage, when in fact the surge might have occurred minutes before the outage or immediately after the power was restored. Additionally, only professionals involved in the investigation of an insurance claim really care about differentiating between the different sources of a power surge. Therefore, vendors typically tend to blame lightning for many different types of surges.

Mamoon Alyah is a professional engineer and senior director of consulting for LWG Consulting. He can be reached at (847) 275-3724, www.LWGconsulting.com.