Q
Our insured has purchased coverage for off-premises power failure, which includes coverage for losses caused by the partial or complete suspension of the utility services that are indicated on the form. The suspension of service must be caused by direct damage by a covered cause of loss. Loss arising from damage to overhead transmission lines is excluded.
Our area had an ice storm that pulled down many of the overhead transmission lines from the generating station to the city. Even after these were repaired, trees covered with ice fell on overhead power lines. Many of these lines are of the type that runs from the power pole to the business, not from pole to pole. The carrier is denying our claim for coverage because of the exclusion for loss arising from direct damage to overhead transmission lines.
My research determined, however, that utility companies consider transmission lines to be the lines from the point of generation (the power plant) to the substation. Distribution lines, however, are the lines from the substation to the customer. I contend that the downed lines from the power pole to the businesses that I insure are distribution lines, not transmission lines. Therefore, coverage should apply. I spoke with representatives of the utility company, and they said the distinction between transmission and distribution lines is commonly accepted in the industry.
What is your opinion?
Arkansas Subscriber
A
The direct damage off-premises power failure endorsement does exclude losses arising from damage to overhead transmission lines. Transmission lines are not defined on the form. In reviewing various court cases dealing with utility rate-setting, it is clear that the utility industry and the courts recognize a difference between transmission and distribution lines.
But coverage for losses arising from damage to off-premises overhead transmission lines is available by endorsement. This endorsement, CP 04 19 07 88, states that damage arising from a covered cause of loss to overhead power transmission and communication lines is covered. The endorsement defines power transmission lines as “overhead power transmission lines supplying electricity, steam or gas to the described premises” (emphasis added). This definition includes both types of lines that the utility industry differentiates. In addition, we believe that a common understanding of overhead transmission lines would include both transmission and distribution systems. Because of this we believe that the carrier is correct in denying the claim.
This situation points out, however, a problem that occurs too often but could easily be remedied. “Transmission lines “is a defined term on the endorsement that provides coverage, but it is not defined on the form that excludes coverage. It would save many headaches if terms such as this were defined on both types of form.
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