131 Insurers Sue ERCOT Over Winter Storm Uri

Winter Storm Uri hit Texas in February 2021. Now, insurance is feeling the strain.
By: | April 8, 2022

Winter Storm Uri rolled into Texas like nothing the state had ever seen before.

Unprepared for such a freeze, the power grid shutdown. Millions were plagued in darkness. Heat was a luxury. Water pipes burst. Homes and businesses flooded.

Insurance companies faced claim after claim after claim.

The February 2021 storm quickly showed flaws in the power grid, and its operator, Electric Reliability Council of Texas or ERCOT, is now feeling the strain as more than 130 insurers in the state are filing suit against the company.

The suit alleges gross negligence, that ERCOT and 37 additional power generating entities “failed to plan and prepare for the winter storm event, and the energy failure caused significant property damage to the policyholders of plaintiffs.”

The Texas Department of Insurance reported that of the 500,196 insurance claims that stemmed from the event, more than 85% came from residential property owners and homeowners. The remainder of the claims came from commercial properties.

Estimates of insured losses reached as high as $10.3 billion as of July 2021, according to the Texas Department of Insurance. The suit further calls into play ERCOT’s alleged failure to heed the Federal Energy Regulatory Commission’s warning that the power grid needed to fully winterize its equipment long before Uri rolled in.

The insurance companies are demanding a jury trial and have asked the court to consider subrogation, which would allow the insurers to recoup costs, even their customers’ deductibles.

Rich Johnson, a spokesperson from the Insurance Council of Texas, noted “it took months for insurers to evaluate each claim, and so far, around 90% of the claims [have] been closed — 53% were closed with a payment to the policyholder, and 37% were closed without a payment to the policyholder,” one Texas news outlet reported.

ERCOT has not made a public statement yet.

It has, however, stated that in addition to the lawsuit filed from the insurers, “there are dozens of personal injury lawsuits against ERCOT that are part of the Multi-District Litigation (MDL) process in Houston.”

Scorecard: Litigation is set to begin in March 2022.

Takeaway: Who’s responsible when a natural disaster rolls in? Not only is Texas seeing such a lawsuit, but states like California and Nevada are also seeing litigation from insurance companies due to wildfire devastation. The debate of culpability will be one to watch as climate change continues to compound these events. &

Autumn Demberger is a freelance writer and can be reached at [email protected].

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