Electrical Arc Damage Caused by Rogue Squirrel Excluded from Insurance Policy, Says Court
On a brisk November afternoon, a little gray squirrel scampered onto the equipment of an electrical substation owned by the City of West Liberty, Iowa.
The squirrel “found itself in a rather shocking situation when it came into contact simultaneously with a cable clamp … and the grounded steel frame which supported the cable.”
It was not a happy ending.
The electrical arc caused by this squirrel lasted 30 to 45 seconds, causing more than $200,000 worth of damage to the City’s facility. The City sought coverage through its property insurer Employers Mutual Casualty Company (EMC), but the claim was denied due to an electrical currents exclusion.
The City filed suit seeking coverage under the policy. EMC filed for summary judgment, and the district court decided in favor of EMC, stating that the “squirrel’s presence was merely a legal cause of the chain of events that ensued afterwards. [It] did not cause any damage.”
Rather, the electrical arc caused the damage, which the policy does not cover.
The case reached the Iowa Supreme Court, where the event and the policy wording came into play.
The policy stated that it “cover[s] direct physical loss to covered property at a ‘covered location’ caused by a covered peril.” As for electrical currents, it did “not pay for loss caused by arcing or by electrical currents other than lightning.”
The City argued EMC had to pay for the damage, because it wasn’t just an electrical arc that caused the damage — the squirrel acted as the catalyst. EMC countered that only “one peril — electrical arcing — caused damage. The only peril at issue — electrical arcing — is subject to a coverage exclusion.”
In the end, the court wasn’t moved in the City’s favor.
“Electrical arcing is always going to have some cause,” said one justice of the Iowa high court. “Policy language excluding an event would be meaningless if an insured could avoid the exclusion simply by pointing out that the event itself had a cause.”
Scoreboard: The City of West Liberty, Iowa will not receive coverage for damage caused by an electrical arc due to policy exclusions.
Takeaway: It’s best to review many possible scenarios of loss when crafting policy language so that insurer and insured both know what’s covered under unforeseen circumstances.