Canadian Underwriter

Modest insurance impact from blackout expected

August 15, 2003   by Canadian Underwriter

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Impact from the blackout that hit the northeastern U.S. and parts of Ontario from Windsor to Ottawa should not be significant, insurance sources on both sides of the border are reporting.
“It’s very, very difficult to say [what insured losses will be] at this time,” says Mark Yakabuski, vice president of Ontario region for the Insurance Bureau of Canada (IBC). “A lot will depend on how long it [the power outage] lasts.”
That said, he notes that commercial coverage for losses as a result of the power outage is “extremely limited”. Companies would have to have special wording regarding business interruption coverage as a result of power outage, in addition to their standard commercial business interruption cover.
There may be some coverage for spoilage of frozen food specifically, although this may be subject to deductible, and a broker would have to advise on whether such coverage exists.
According to the U.S.-based Insurance Information Institute (III), losses south of the border should be “modest” based on past experience.
The III says while no concrete figure is available for U.S. losses, most commercial policies exclude damage or losses as a result of power outages. Homeowners may have claims for such things as food losses as a result of spoilage, but this would likely be less than the policy deductible.
The III notes that the blackout that hit New York in 1977, lasting two days, caused just US$2 million in insured losses. But about US$28 million in damage was done by resulting “civil disorder”.
“If authorities are right that this blackout will only last a few hours, it will cause lots of inconvenience, but not significant insured losses,” says III vice president P.J. Crowley.
The lights went out in Ontario just after 4:00 pm on Thursday, August 14. As of Friday, many areas had seen powered restored, although at diminished level, and the Independent Electricity Market Operator (IEMO) was calling for rolling blackouts throughout the weekend as officials worked to restore power to all areas. Media are calling the blackout “the worst In North American history”, with some 50 million people affected in Canada and the U.S. As of Friday, no cause has been confirmed yet, with Canadian and U.S. officials each pointing the finger to the other side of the border.
Yakabuski notes that the best practice homeowners and businesses can practice at this point is to limit power usage and water usage so that such services can be fully restored, as quickly as possible to avoid loss, and to unplug any items when power does go off, to avoid a power surge when it is restored.

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