From traditional power plants to renewable energy sources, the power and energy sector plays a crucial role in our daily lives. So when disasters strike or equipment fails, the resulting insurance claims can be complex and challenging to navigate.
Understanding the unique aspects of power and energy claims is essential for effectively managing and resolving these cases. In this blog, we’ll explore the various types of power and energy claims, the common causes of failures and disasters, and best practices for investigating and adjusting them.
Power plant claims
Coal, natural gas and nuclear facilities form the backbone of our energy infrastructure. Power plants generate electricity by converting fuel into heat, producing steam that drives turbines connected to generators. While these facilities are designed to operate safely and reliably, they’re still vulnerable to fires, explosions and mechanical malfunctions caused by electrical faults, material failures, gas leaks, boiler tube leaks and more.
Real-world example of power plant failure
A sudden boiler tube failure at a coal-fired power plant caused a steam leak that severely damaged nearby equipment. A Sedgwick loss adjuster and an EFI Global forensic engineer worked together to determine that the failure was due to long-term corrosion and erosion in the boiler tube. This finding confirmed that the power plant had not adequately monitored and maintained the equipment.
Best practices for investigating and adjusting power plant claims
To effectively handle power plant claims, adjusters should prioritize:
- Visiting the scene of the incident to assess the damage firsthand and gather physical evidence.
- Engaging with technical experts early in the investigation to help determine the cause of failure.
- Gathering maintenance records, inspection reports and operating logs to help establish the condition of the equipment before the incident.
- Interviewing plant operators, maintenance staff and management to gain insights into the events leading up to the incident.
- Consulting with industry specialists to help interpret technical data and guide repair or replacement options.
Oil and gas claims
The oil and gas industry is responsible for extracting, processing and distributing fossil fuels. Common causes of loss in this area include equipment failure, human error, natural disasters and intentional acts like sabotage or terrorism.
Given the scale and complexity of the oil and gas industry’s operations, navigating offshore and onshore incidents can be challenging. For example, offshore incidents like oil rig explosions or pipeline leaks often occur in remote locations, require specialized cleanup and involve complex maritime laws and regulations. Onshore incidents, like well blowouts or refinery fires, can impact large areas and require coordination with government agencies and local communities.
In both cases, stringent environmental regulations significantly impact the claims process. Adjusters must be well-versed in relevant environmental laws and regulations to ensure compliance and minimize the insured’s liability.
Best practices for investigating and adjusting oil and gas claims
When faced with oil or gas claims, adjusters can strengthen their response by:
- Assembling a multidisciplinary team of specialists in fields like petroleum engineering, environmental science and maritime law.
- Ensuring that on-site investigations are conducted with the utmost attention to safety protocols.
- Collaborating with government agencies like the Coast Guard or Environmental Protection Agency to ensure compliance with relevant regulations and coordinate response efforts.
- Preserving all relevant evidence like physical samples, photographs and witness statements to support the claims process.
- Maintaining open lines of communication with the insured, brokers and other stakeholders to provide regular investigation updates and address questions.
Renewable energy claims
As the world transitions toward a more sustainable future, wind, solar, hydroelectric, geothermal, biofuel and hydrogen power are all emerging as viable alternatives to traditional fossil fuels. However, these technologies come with their own set of risks and claim scenarios.
Wind, solar and hydroelectric systems are prone to mechanical and electrical issues like electrical faults, generator breakdowns and gearbox malfunctions, which can lead to fires, equipment damage and flooding. Other emerging renewable technologies like geothermal, biofuel and hydrogen power are susceptible to high-impact equipment failures, including blowouts, storage tank ruptures and pipeline leaks that can cause fires, explosions and environmental damage.
Real-world example of renewable energy failure
A wind farm operator reported that multiple turbine blades had suddenly failed. An adjuster and EFI Global forensic engineer traced the root cause of failure back to a manufacturing defect in the blade that caused premature cracking and deterioration. The investigation findings prompted a broader evaluation of other turbines on the wind farm for the same defect and resulted in the manufacturer replacing all the blades, even after the warranty had lapsed.
Best practices for investigating and adjusting renewable energy claims
While renewable energy technologies vary in design and complexity, adjusters can ensure they effectively manage claims by:
- Engaging the right specialists to accurately determine the cause and extent of damage.
- Considering how environmental factors could have contributed to the failure or disaster.
- Evaluating the impact of failure or disaster on the surrounding environment.
- Reviewing installation and maintenance records to gain insight into the cause of failure.
- Coordinating with relevant government agencies, local communities and environmental groups throughout the claims process.
Navigating the changing energy landscape
Handling power and energy claims isn’t a one-size-fits-all endeavor. Each claim is unique, requiring different expertise depending on the nature of the incident, technology involved and location of the loss. As the energy landscape grows more complex, adjusters must stay informed and engage the right resources to keep pace with evolving technologies, infrastructure and regulatory requirements.
Learn more – Explore how EFI Global’s forensic engineering, fire origin-and-cause and environmental consulting services can help your business recover after an energy failure or disaster.