By R. Bruce Wright, CPCU

Voltage claims, also referred to as fluctuation claims, appliance claims, or electrical damage claims, are perhaps the most common type of claims utilities experience. They are frequent, and although often modest in cost, they can take up a great amount of time and effort to handle.

Debates with consumers can consume large amounts of time and energy, and go round and round in the pursuit of the answer to the question of fault. As a result, many utilities in our program ask about how to handle these situation when their annual consultation visit takes place.

I believe that despite the variety of such losses, on the whole these claims fall into one of three primary categories. Sorting them into these categories may help guide one to the best or most appropriate response. Let’s look at the three groups or types of claims.

Group 1 is made up of those losses that are in fact the fault of the utility. Examples include events such as line workers making an error while working on the lines, installing the wrong voltage transformer, not making a solid connection, or even responding to an outage or “blink” report and failing to find the actual problem until it recurs (perhaps multiple times) in the future. In this type of situation, when the problem is the result of a utility error, or where its representatives did something wrong, our advice is to quickly report the event in order to get the claims department working on it as soon as possible. It is to your advantage to quickly establish the facts and the amount of the loss, and then proceed to get it settled as promptly as possible to prevent any escalation of costs or emotions.

Group 2 claims are at the other extreme where losses are simply not the fault of the utility. For example, someone reports that during a lightning storm their home was struck leaving various damaged appliances, etc. The immediate response should be that the utility is not the cause of the lightning, there is no way for a utility to prevent lightning, and the consumer should contact their own insurer for any available coverage. Then the utility should advise its own insurer’s claims department of the event so they can set up a “record only” file and be prepared to back up the denial if the consumer tries to pursue it further.

So, that takes care of the ones clearly owed, Group 1, and the ones clearly not owed, Group 2. That only leaves Group 3, the other cases where liability is unclear. Or as I often put it, “Them’s we owe, them’s we don’t, and the other 90%!” These are the black, the white, and the shades of gray.

In my experience, management attitudes on how to respond to voltage claims in debatable liability situations vary widely from company to company. Some leaders want to take a tough line and deny all but the most blatant losses, while others want to placate consumers if possible. After reviewing thousands of claims for voltage damage, I find that in many, even most, cases, each side (company/consumer) has good points on their side in “gray area” claims. It seems that I can often defend either position, in favor of either payment or denial.

Here’s an example of what I mean. One common type of report might say that a consumer called to report that while watching TV there was a “pop” and the TV sizzled and turned off, all the lights blinked off, and then very quickly everything came back on except the TV, which now won’t work at all. When it was called in, the utility sent a service person out, who looked at the lines around the home, and found what he called a “loose neutral” due to a connector that was no longer tight to the line. It had worked perfectly for 5 years until now, when it failed for no apparent reason. The member thinks he deserves a new TV.

Let’s look at this first through the consumer’s eyes. That person did nothing wrong. While watching TV, the consumer saw the power supply go off, come back on, and in the process the TV was damaged. The repair person said it was a failed connector on the utility line, a line the utility controls, maintains, and exclusively works on. In fact, if anyone else tried to inspect or maintain it, a utility would respond very vigorously to demand that this stop. So, from the consumer’s point of view, this dangerous stuff, electricity, that comes into the home via wires owned and exclusively maintained and controlled by the utility, has zapped the TV because of a failure of the utility to provide proper installation or maintenance. The electricity that the utility sells, that it delivers over its equipment, apparently fried the TV. Why wouldn’t it owe for a new one? (As a side note, as everyone should be aware, even if a claim is owed, it is not paid on a “new for old” basis; a used item is subject to depreciation. A tube-type TV is worth virtually nothing today, to cite one obvious example.) Pay the poor consumer.

From the utility’s side, things may look a bit different. In order to see this clearly, we need to understand the basics of liability law. In order to owe a claim it is required that one have liability under common law, liability that arises from negligence. Negligence is the failure to meet a duty owed when that failure directly causes actual harm to another. In this case there is surely a duty to maintain the power delivery system that is used to deliver the power to the consumer. But is that an absolute duty? Well, not normally. It is usually limited to the level of care that an equally knowledgeable person would use to protect the integrity of the power system, and since the expected lifetime of a connector that is properly installed is measured in decades, not years, it is not likely to be deemed “reasonable” to have inspected or replaced it after just 5 years.

So, absent some other error, it seems most likely that the event we have described would be judged to be an unforeseen event that could not be reasonably anticipated. And, the cost of prevention (such as by changing out all connectors every 5 years) would be so great as to make electricity unaffordable for most consumers and would cause an uprising if it were to be tried. Accordingly, the TV replacement is not the utility’s problem, it is the consumer’s. Let the consumer call their home-owners insurance company, who will no doubt explain why they don’t cover these claims either in most cases.

Which of these arguments is the most persuasive? How will a jury rule? Your guess is as good as mine. That leads me to believe that in the case of a debatable loss like this one, both the hard core denial and the appeasement approach are wrong, or at least not very effective in the long run. One leads to bitter feelings, the other encourages future claims and high costs. Voltage claims of this type can go back and forth with a member-consumer in a debate that goes on and on, with multiple calls and contacts until patience is worn to a frazzle on both sides. Heated words, rude threats, and even lawyer’s letters can be exchanged, but no resolution is agreed to. There has to be a better way.

So, how can we most effectively deal with these events, especially when these claims are fairly frequent and at times lead to lengthy contentious arguments with consumers who simply won’t accept no for an answer, while management won’t give in? I believe an alternative approach, the compromise, seems more sensible. As an adjuster (Many years ago!) I found that a settlement where both the consumer and the utility were less than happy was likely to be the fairest to all. Set the value of the loss, after depreciation, and then decide on a ratio of responsibility. Or take a shortcut and say that paying half the value of the loss is about right. If both sides are grumpy about it, it is probably fair!

Summary

In any such case, make sure everyone at your utility who speaks to consumers in these situations understands that they need to be cautious of what they say. Don’t immediately accept responsibility if there is any question about the cause. Promise to investigate and have the claims department contact the consumer. Don’t lead them to think they will get paid automatically. “We will submit this to the insurance company” is better than “Our insurance company will take care of this.” Then, follow through and investigate. If you find that your utility has erred, it is always good policy to admit the error and support the effort to fairly settle the claim as quickly as possible. Tell the adjuster what happened, why you concluded it was your fault, and support the settlement process. The sooner it closes, the sooner the consumer will simmer down, and the fewer the phone calls your management will be subjected to! If it is clearly a weather event with no intervening errors on your side, then tell the adjuster that you don’t want it paid, what you found was the cause, and prepare management to resist political pressure that may come. If you cave in, you can be sure more claims will follow. And in most cases, the “gray” ones, set the adjuster, the consumer, and management on the path toward a reasonable compromise.