Who is responsible–and what should you do–when a repair crew from your local power utility negligently causes a power surge and all of your appliances–everything that has wires and plugs into the wall–is fried?
That was the question from 82 year old Thelma who resides in a small California desert community that is serviced by a small electricity utility. Her email began, “Where we live there isn’t a lot of excitement, but several of us who live in a small cul-de-sac were treated to a show that, at first, reminded me of the hysterically funny Jackass series of movies.”
Anyone who likes those insane films is A-OK in my book.
Thelma was in her front yard watching a crew replace a power pole and related equipment when, “Suddenly, their rig jerked forward and the supervisor began screaming, ‘You idiot! Stop! Stop!’ but the driver kept on slowly moving and then, there was this huge, bright flash. At that same time I heard the strangest sounds come from inside my house, and when I came back in, there was a burnt smell in the air.”
All of her appliances, television, clock-radios–everything electrical was nuked, even though, “I had surge protectors throughout the house.”
“We’ll Take Care of You”
Within an hour a representative of the power company was at her door, promising to take care of the damage. He gave her a complaint form to fill out, which she did that very day, sent it in, and then, if you know the saying, “I’m from the government and am here to help you,” that’s where she found herself.
“They were very prompt in getting back to me, saying that everything destroyed would be paid for, but at ACV, and that means Actual Cash Value–depreciated in other words! But everything destroyed was many years old, which means that I would get virtually nothing! So, then I contacted my homeowners insurance company and was informed by my agent that I would be fully compensated at replacement cost value but that my rates would be doubled, so not to use the insurance! I’ve been insured with them for over 20 years, never had a claim and it would seem so unfair to use the insurance and then get penalized!
“And then I found you articles and called you. What should I do?”
Liability of the Utility for Negligence - ACV
In most states, when negligence of the utility’s employees causes damage, compensation is required. For example, Southern California Edison's claims policy (summarized) states: “Generally, we are responsible for losses that occur due to our negligence and not causes beyond our control.”
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Across the country, most utilities have similar language and address how a claim will be evaluated with language similar to that of SCE, and there is nothing wrong with this:
“If Edison accepts responsibility for damage to a customer's personal property, it will compensate the customer for the least cost of the following: repair, fair market value or replacement. For items that are not new and cannot be repaired, fair market value is determined by the estimated value the item would have just prior to the damage occurring.”
ACV - Actual Cash Value - can mean virtually nothing with a house filled with old but perfectly good, functioning appliances, which is Thelma’s situation. But fortunately she has homeowners insurance with Replacement Cost Coverage, and this means that, practically speaking, she has no real choice but to have her own insurance handle the claim, less her $1,000 deductible.
Her insurance company will turn around and seek reimbursement from the electric utility, including recovery of her deductible.
Wrongly Advised by Her Insurance Agent to Not File a Claim
So, why would her agent discourage her from using her homeowners insurance knowing that she only gets Social Security and does not have the money to replace all those things that were destroyed? I asked him that, well, didn’t really ask him that, instead, putting it this way and trying not yell:
“You want this 82 year old woman to just take what the utility offers her, right? You are trying to scare her with a claim that her rates will double! That is nonsense and you know it! The bottom line is that you don’t want a claim made because you think it will look bad for you with the carrier! That’s it, isn’t it?
“You are going to help her with that claim, and you are going to stop scaring her about her rates doubling next year just because of something that was not her fault. Are we clear?”
With a trembling voice, he replied, “Yes, yes, Mr. Beaver. I’ll fix it. Don’t worry.”
Worry is my middle name.