Over 100 insurance companies are suing the Electric Reliability Council of Texas and 37 power generating entities. The companies allege that the defendants’ negligent actions led to billions of dollars in property damage and hundreds of deaths.
However, multiple legal issues could make it difficult for the plaintiffs to collect.
Basis of the lawsuit
The lawsuit references a report by the Federal Energy Regulatory Commission that alleges that power generators ignored warnings to winterize equipment. The insurers believe this negligent behavior caused significant property damage and injuries in the state. Insurers seek to recover a portion of the $10.3 billion in damages paid to policyholders because of damage caused by the power outages. Additionally, if the suit is successful, some policyholders could receive reimbursement for deductibles and other uncompensated losses.
Legal issues
ERCOT asserts that because it functions as an arm of state government that it has sovereign immunity and can not be liable for damages. Additionally, ERCOT does not have money to pay settlements. Texas residents would likely pay for any judgments against ERCOT in the form of higher utility rates. The plaintiffs will have to wait for the courts to decide the issue of sovereign immunity before they can move on to proving that ERCOT is liable for damages.
The massive failure of the Texas power grid is a complex case involving billions of dollars in property damage and personal injury cases. Texas residents may be footing the bill whichever way the courts decide. If the insurance companies are unable to recover, then insurance rates are likely to increase. If ERCOT must pay damages, then utility prices will probably go up.
