Insurer faults ERCOT for storm damages
Grid manager may be on its own in multiple lawsuits from last month’s deadly storm
ERCOT’s insurance company is seeking a court ruling excusing it from defending Texas’ electric grid manager from lawsuits or covering damages stemming from the catastrophic power failure in February.
The Cincinnati Insurance Co. on Tuesday sought relief from the U.S. District Court in Austin, arguing it does not have to defend the Electric Reliability Council of Texas because it does not view the power outages as an accident, defined by the insurer as a “fortuitous, unexpected, and unintended event.” As a result, the company said it has no obligation under its insurance policy to cover ERCOT, which faces a flood of lawsuits after the winter storm.
“The allegations in the Underlying Lawsuits allege ERCOT either knew, should have known, expected, and/or intended, that Winter Storm Uri would cause the same power outages which occurred as a result of previous storms in Texas, including storms in 1989 and 2011,” the insurer said in court documents. “The Underlying Lawsuits allege the power outages caused by Winter Storm Uri were a result of the exact same failures including failures of the same generators which failed in the previous winter storms, and therefore, the power outages were foreseeable, expected, and/or intended.”
ERCOT faces a barrage of lawsuits after prolonged blackouts during the winter storm killed nearly 200, left more than 4 million Texans without power and caused billions of dollars of property damage. Without insurance coverage, ERCOT is exposed to millions of dollars in settlements or damages to victims and their families.
ERCOT did not respond to a request for comment Thursday.
ERCOT’s insurance policy with Cincinnati Insurance, effective until June 2022, states that the insurer “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies. We will have the right and duty to defend the insured against any ‘suit’ seeking those damages.”
The policy, however, says Cincinnati Insurance has no duty to
defend ERCOT in cases in which the insurance policy does not apply, and retains the discretion to investigate any “occurance” and settle any claim or lawsuit that results from it. The insurer defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”
Lawsuits filed against ERCOT by family members of those who died during the blackouts allege ERCOT failed to adequately prepare the grid against freezing temperature and knew of the threats that ice and extreme cold would pose to the grid. Several lawsuits allege ERCOT’s conduct was “intentional and knowing.”
Cincinnati Insurance’s filing comes less than a month after the Texas Supreme Court declined to decide whether ERCOT is a governmental agency with sovereign immunity protecting it from lawsuits. ERCOT, a private, nonprofit corporation overseen by the Texas Legislature and the Public Utility Commission, is the only grid manager in the country that has such protection.
The state’s highest court ruled 5-4 in March that it won’t decide a closely watched case between Dallas electricity generator Panda Power and ERCOT, which raised questions about ERCOT’s sovereign immunity from lawsuits. The majority ruled that the Texas Constitution prohibits the court from deciding the case after the trial court issued a final judgement dismissing the case, making the case before the Supreme Court moot.
The Supreme Court could still decide on ERCOT’s immunity as appeals from the Panda Power case come up through the legal system.
Rulings in the Panda Power and the Cincinnati Insurance cases will have widespread implications for ERCOT, which faces mounting lawsuits, including over the deaths of an 11year-old boy and a 95-yearold man, both found dead in their freezing Houstonarea homes.
Some 4.5 million Texans — including 1.4 million CenterPoint customers in the Houston area — were without reliable power for days during the power failure last month. The rolling blackouts caused billions of dollars of property damage as water systems failed, food spoiled and water pipes froze and burst.
Nearly 200 deaths statewide, including at least 90 deaths in the Houston area, have been linked to the blackouts, according to a Chronicle analysis of reports from medical examiners, justices of the peace and the Department of State Health Services. Deaths were caused by prolonged exposure to freezing temperatures, loss of essential medical devices and carbon monoxide poisoning as people sought warmth by running vehicles, portable generators and barbecue grills indoors.