An agent insured a small café located inside a multi-story building in Florida. Following Hurricane Irma, the insured suffered a significant spoilage loss due to a power outage. The reason for the power outage at the time it occurred was that the building owner specifically requested the utility company to cut electrical service due to basement transformers being exposed to possible flooding.

The insured had open perils spoilage coverage but the adjuster cited this exclusion:

“We will not pay for loss or damage caused by or resulting from…The deactivation of electrical power caused by the manipulation of any switch or other device used to control the flow of electrical power or current.”

The claim was submitted to the Big “I” Virtual University’s “Ask an Expert” service and the consensus of the faculty was that the exclusion did not apply to this loss. In particular, the following reasons were cited:

First, a logical interpretation is that the intent of this exclusion is that if the INSURED manipulates a switch to turn off the power, it would trigger the exclusion.

Second, the policy included the following condition:

Control Of Property
Any act or neglect of any person other than you beyond your direction or control will not affect this insurance….

The act of requesting that the power be shut off was made by someone (the landlord) beyond the insured’s direction or control, so the exclusion should not apply.

Third, it’s arguable that, even if the insured called for the power shut off, the policy condition requiring the insured to take action necessary to prevent further damage might apply.

The consensus of the VU faculty was that the loss was not excluded, if only for the “Control Of Property” condition.

Photo by barbourians

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Bill Wilson

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One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information