Lloyd’s Sees No Major Insurance Claims From Power Crisis

January 22, 2001

Julian James, Head of Lloyd’s worldwide markets, said that while he saw no “major insurance claims” arising from California’s current power crisis, he anticipated a rise in claims against directors and officers, and under business interruption clauses in many policies.

“The suit issued by San Francisco against 13 power producers is likely to be the tip of a litigation iceberg if this situation continues,” said James; “that could well lead to insurers facing claims under Directors & Officers cover, as management find themselves personally liable.”

James didn’t expect that the power outage would trigger widespread “business interruption” clauses in many policies, but did say that the activities of the high tech companies in Silicon Valley might be a special case. “Their sensitivity to power fluctuations could create claims under ‘work in process’ clauses where delicate processes are affected by changes in power.”

James added that, while such policies were available through Lloyd’s and other insurers, “the market today is small, and we doubt that this incident will have an impact.”

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