Insurers try to pass on Texas winter storm damage costs
A deep freeze in February left Texas with billions of dollars in damage from cascading power failures that stranded residents in their dark and flooded homes. And insurance companies are hoping they can pass the bill on — just as they did when wildfires engulfed California.
Two months after the storm crippled large swaths of Texas, insurers are sketching out a legal strategy to pin the costs on utilities and power companies that they say failed to adequately prepare for bitterly cold weather.
The strategy echoes an approach that worked after the devastating California wildfires of 2017 and 2018, when equipment owned by Pacific Gas & Electric sparked blazes that wiped out entire communities.
At stake could be more than $10 billion in insured losses for insurers and their business partners, as well as almost-certain premium increases for property owners if the insurers have to pay for the damage themselves. But the insurers face longer odds in Texas: Decades of deregulation have made the state’s power grid a dizzying web of companies that could make determining fault tricky. Insurers will also have to show that the damage was the result of “gross negligence” — a higher bar than in California.
The insurers say the power companies and utilities failed to prepare for a major winter storm, even though past cold snaps and climate-change data had made the danger clear. In 1989 and 2011, wintry weather caused so much damage that state and federal regulators spent months investigating the causes and issued detailed recommendations for hardening the electrical system against storms.
“They knew in 1989 and even earlier that their systems weren’t winterized, and it doesn’t look like anybody did anything,” said Lawrence Bowman, a lawyer in Dallas who represents insurers in liability disputes. Electric utilities in Texas operate as de facto monopolies and were required to use “reasonable diligence” to ensure a consistent supply of power, he said.
“That’s the essence of the claim, that these participants had market power and failed to exercise it in a way to meet their mandate,” Bowman said.
Kerri Dunn, a spokeswoman for Oncor, the power company with the largest market share in Texas, declined to comment on possible claims by property insurers.
But she said the fault for the cascade of power failures didn’t necessarily belong to utilities.
Oncor and others handle only the transmission and distribution of electricity, relying on other companies to generate power, bill customers and perform other tasks.
CenterPoint, the utility that serves Houston, said that it was committed to working with the government and others on addressing issues related to the storm but that it could not comment on the insurers’ efforts, citing pending litigation.