As witnessed in the recent BP Oil Spill tragedy in the Gulf of Mexico, explosions are sudden, unexpected, and can happen almost instantaneously, oftentimes without warning. Due to the unpredictable nature of the ensuing loss, damages and recovery efforts will most certainly take a very long time, possibly years. Detailed investigations will need to be conducted to protect and substantiate the property insurance claim. Determinations of how to apply coverage will need to be assessed. The scope of repair or replacement will undoubtedly be a challenging task if qualified professionals are not involved at the onset. However, the above referenced explosion is not just limited to oil producing facilities located in the middle of the ocean. Explosions frequently destroy manufacturing facilities, distribution centers, warehouses, and commercial properties. Recently, an explosion located in Georgia decimated a family home in an upscale neighborhood leaving millions of dollars of damages in its wake.
Tutwiler and Associates was retained to assist an insured who had an elevator explode in a luxury four-story townhouse. The main hydraulic line that runs the elevator car broke on an upper floor causing hydraulic fluid to shoot out under pressure into the interior wall spaces and permanently installed fixtures. The result was that the drywall ceiling and floor coverings and a very expensive wardrobe of high-end designer clothes were covered in oily hydraulic fluid.
Following inspection of the damages by the insurance company’s representative, the insurance carrier's denial letter stated: "We have completed our investigation of the above claim and find that the damage reported is excluded from coverage. You reported the elevator LEAKED fluid causing damage to the walls and ceiling of the condominium and to your contents. As the damage was not caused by a covered peril, we are unable to provide coverage for your claim."
The carrier then goes on to list 17 named perils which includes "EXPLOSION." In reply to the denial letter, the following question was posed: "after careful review of your denial letter, there needs to be additional clarification on the explosion peril."
The carrier's reply stated: “…the PLRB indicates that the definition of explosion encompasses criteria relating to:
- A sudden release of expanding pressure;
- Noise, although not necessarily loud;
- A bursting forth of material, whether gaseous, liquid, or solid;
- Evidence of the scattering of debris to locations further than would have resulted from gravity alone.
In the elevator claim, Tutwiler was able to show that is exactly what happened. As a result the carrier extended coverage under the "EXPLOSION" peril and the matter was resolved to everyone's satisfaction or at least to the policyholder’s complete satisfaction.
In the above example, the peril of explosion was one of the named perils of the policy applicable to that specific loss.