NU Online News Service, Dec. 14, 3:48 p.m. EST
With significant growth in the use of wind turbines projected over the next several years, insurers are adding this type of energy business to their portfolios, but many are overlooking subrogation opportunities when claims hit the books, according to a lawyer.
In this week's print edition of National Underwriter, Jason Schulze, a member of the Subrogation and Recovery department at Cozen O'Connor, noted that typical first-party claims involve damage to a "standalone" wind turbine, making it tempting for insurers to dismiss recovery opportunities and attribute a loss to an "act of nature" or an unknown electrical failure.
In the NU article, "Don't Let Wind Turbine Claims Blow Over: How To Assess Recovery," Mr. Schulze, who works in the law firm's Houston office, noted that dedicated energy units are popping up as insurers seek opportunities to diversify their businesses and take advantage of the wind technology industry's projected growth trajectory--expected to occur over the next 20 years.
Wind turbines, on average, contain roughly 8,000 parts. Because of their complexity, it is common to experience first-party property damage claims, he wrote.
From an insurance underwriting standpoint, common types of coverage include:
o Protection for individuals responsible for the design, construction, erection, commissioning and testing of wind turbines.
o Coverage for all risks of loss including destruction or damage to the turbine or property where the turbine is erected.
o Business interruption or loss of revenue coverage, triggered when a wind turbine stops working.
o Coverage for damage to turbines while in transit.
o Potential environmental cleanup costs associated with a wind turbine loss.
The expansion of onshore wind technology is not without some risk for wind energy underwriters, Mr. Schulze noted. "From installation problems to startup delays, there are several potential areas which can ultimately lead to first-party claims," he wrote.
"Simply because a turbine was damaged by lightning does not mean that a viable subrogation opportunity does not exist. Turbines are generally equipped with sophisticated lightning protection systems and the adequacy...of that system must be analyzed--especially considering that third parties are usually responsible for those tasks," Mr. Schulze said, going on to outline key areas ripe for recovery potential.
For information on emerging subrogation and recovery issues, Cozen O'Connor also maintains a blog at http://subrogationandrecoverylawblog.com.
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