Our insured is covered under the building and personal property coverage form CP 00 10 with the special causes of loss form CP 10 30. There was a cessation of power off-premises that stopped operations, but caused no damage. However, when power was restored, a power surge did damage insured property. The insurer is denying the claim due to the power failure exclusion in the special causes of loss form.

Would this exclusion apply to these facts?

California Subscriber

The usual meaning of the term "failure," as found in a standard dictionary, is "an omission of occurrence or performance." Absent a specific definition of power failure in the policy, it is this definition that must be applied. Therefore, any damage caused by the cessation of power would qualify as damage caused by a power failure; however, damage caused by a surge of power is not an omission of occurrence or performance, and would not fall under the power failure exclusion, properly applied.

However, a Pennsylvania subscriber correctly points out that the adjuster could have relied on the "artificially generated power" exclusion further down in the form. Exclusion 2.a. eliminates coverage for damage caused by or resulting from artificially generated electric current…that disturbs electrical devices, appliances, or wires. However, if loss or damage by fire results, that damage is covered.

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