Wind Turbines Slow Down Hurricane Winds
Off the New York coastline would be a perfect place for an array of wind turbines, according to a Stanford professor. It would not only offer clean energy to the Big Apple but it would protect it the next time a Superstorm Sandy comes calling.
“If you have a large enough array of wind turbines, you can prevent the wind speeds [of a hurricane] from ever getting up to the destructive wind speeds,” said Mark Jacobson, a professor of civil and environmental engineering at Stanford University.
Computer models demonstrated that offshore wind turbines reduce peak wind speeds in hurricanes by up to 92 mph and decrease storm surge by up to 79 percent, said Jacobson, who worked on the study with University of Delaware researchers Cristina Archer and Willett Kempton.
“The additional benefits are there is zero cost unlike seawalls, which would cost about $30 billion,” he said, noting that the wind turbines “generate electricity so they pay for themselves.”
The researchers studied three hurricanes, Sandy and Isaac, which struck New York and New Orleans, respectively, in 2012; and Katrina, which slammed into New Orleans in 2005. Generally, 70 percent of damage is caused by storm surge, with wind causing the remaining 30 percent, he said.
That’s why onshore wind farms would not be as effective, he said. While they would reduce the wind speed, they wouldn’t impact storm surge.
In 2013, one of the “most inactive” Atlantic hurricane seasons on record, insured losses totaled $920 million, according to Guy Carpenter, which relied on information from the Mexican Association of Insurance Institutions. The most noteworthy events were Hurricane Ingrid in the Atlantic and Tropical Storm Manuel in the Pacific, which displaced thousands as they caused excessive rainfall, flooding and mudslides.
According to the Insurance Information Institute, Katrina was the costliest hurricane in insurance history, at $48.7 billion, followed by Andrew in 1992 at $25.6 billion and Sandy at $18.8 billion. Economic losses, of course, were much higher.
Wind turbines, which can withstand speeds of up to 112 mph, dissipate the hurricane winds from the outside-in, according to Jacobson’s study. First, they slow down the outer rotation winds, which feeds back to decrease wave height. That reduces the movement of air toward the center of the hurricane, and increases the central pressure, which in turn slows the winds of the entire hurricane and dissipates it faster.
The benefit would occur whether the turbines were immediately upstream of a city, or along an expanse of coastline. It could take anywhere from tens of thousands to hundreds of thousands of wind turbines off the coast to offer sufficient hurricane protection.
At present, there are no wind farms off the U.S. coastline, although 18 have been proposed for off the East Coast. Proposals have also been made for off the West Coast and the Great Lakes. There are 25 operational wind farms off the coast of Europe.
“Overall,” Jacobson and his colleagues concluded in the study, “we find here that large arrays of electricity-generating offshore wind turbines may diminish hurricane risk cost-effectively while reducing air pollution and global warming, and providing local or regionally sourced energy supply.”
Legal Spotlight: March 2014
Insurer Need Not Pay Settlement
An Indiana appeals court ruled that ACE American Insurance Inc. was not required to contribute $3 million to the settlement of an emissions lawsuit filed against Pernod Ricard USA, d/b/a Seagram Lawrenceburg Distillery.
However, the court left open whether ACE acted in bad faith in the case.
Pernod, which operated a distillery in Lawrenceburg, Ind., from January 2002 until June 2007, was sued by a neighbor, William Klepper, in a class-action lawsuit that claimed mold from the distillation process damaged nearby properties.
Pernod was insured under a commercial general liability policy by XL Insurance America from Jan. 1, 2001-2003, and by ACE from Jan. 1, 2003-2004. The ACE policy included a provision that “legally obligated” ACE to pay damages for bodily injury or property damage, as defined in the policy. It also included a “voluntary payment provision” that stated the insured should not “voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.”
ACE agreed to contribute 49 percent of the defense costs to Pernod “under a full reservation of rights,” according to the ruling. XL paid the remainder, and in total, ACE contributed $167,965 to the costs of legal defense.
During settlement discussions, XL and Pernod asked ACE to contribute $1 million toward an agreement, but ACE set its contribution at no more than $250,000. Nonetheless, in April 2009, a settlement agreement was reached, without ACE’s involvement, that required Pernod to pay $1.2 million, XL to pay $1 million and ACE to pay $3 million.
A special master determined that ACE had honored its obligations, and that Pernod had breached its contract by entering an agreement without ACE’s consent.
A trial court agreed, but declined to enter a final judgment on all of the issues. An appeals court also agreed that ACE was not required to contribute to the settlement. However, it ruled that a final judgment on claims that ACE acted in bad faith “would be premature” at this time,” and that such a determination could be based on civil law liability, in addition to the insurance contract.
Scorecard: ACE did not have to contribute $3 million to settle allegations against a distiller accused of damaging nearby property due to mold from ethanol emissions.
Takeaway: The court expanded the ability of insureds to pursue bad-faith claims handling against carriers, by not restricting such claims to breach of the insurance contract.
Insurer Must Defend Church in Trademark Case
A church schism in South Carolina has led to a trademark infringement lawsuit filed by a breakaway diocese against the Episcopal Church in the United States — and has ensnarled an insurer that issued a commercial liability policy.
The Episcopal Church in South Carolina (TEC-SC), which broke away from the national church (TEC) in 2012 over issues including authorization of same-sex marriage, and gay bishops, filed suit to seek court authorization of its use of intellectual property, such as trade names and services.
TEC-SC then filed suit in the U.S. District Court for the District of South Carolina against Church Insurance Co. of Vermont and the Church Insurance Co., seeking indemnification and defense under its CL policy, and alleging breach of contract and bad faith.
On Jan. 6, the court dismissed Church Insurance Co. from the case, ruling there was no evidence it had issued a policy to TEC-SC.
The court also ruled the Church Insurance Co. of Vermont had a duty to indemnify and defend TEC-SC because the IP property claims created an advertising injury and potential damages, as defined in the policy.
It rejected an argument that the insurer breached its contract, but ruled there was insufficient evidence that the insurer acted in bad faith.
Scorecard: The insurance policy provides a coverage limit of $1 million for defense, and payment of claims for trademark infringement.
Takeaway: The potential awarding of attorneys’ fees are sufficient to trigger coverage for potential damages.
Oil Terminal Wins Flood Deductible Argument
A Supreme Court of New York judge agreed with Castle Oil Corp., that the company’s insurer had miscalculated the amount of a deductible following nearly $2.3 million in damages caused by Superstorm Sandy.
Castle Oil, which owns and operates a fuel oil terminal in the Bronx, had a commercial property policy with ACE American Insurance Co. in 2012.
The policy contained a $2.5 million sublimit for “flood including storm surge located in special flood hazard areas,” as defined by FEMA. The policy endorsement provided that the deductible applicable to flood loss in such areas was equal to 2 percent of the total insurable values at risk per location, subject to a minimum of $250,000.
At issue in the lawsuit filed was the phrase “insurable values at risk.”
The insurer contended that the deductible should be based on the total insurable value of the property, which was $124.7 million. That would result in a deductible of nearly $2.5 million, which is above the oil terminal’s damage amount, according to the opinion. Castle argued successfully that the 2 percent deductible applied to the $2.5 million insurable values “at risk” of flood damage — resulting in a deductible of $250,000. If that was not the case, the court ruled, the flood insurance coverage would be “illusory.”
During the litigation, ACE noted that policyholders might be able to submit a claim for more than the coverage limit and have the deductible subtracted from that amount, said Finley Harckham, an attorney and partner at Anderson Kill, who represented Castle Oil. Thus, policyholders could end up recovering the full limit of coverage without it being reduced by a deductible.
Scorecard: ACE was required to pay $2 million in damages to Castle Oil minus the deductible.
Takeaway: The value of a property for premium purposes does not necessarily equate to the value of the property’s insurable risk.
Insurer Avoids Data Breach Costs
The Connecticut Appellate Court ruled that “mere negotiations” did not fit the definition of “a suit” in a CGL policy that required an insurer to defend the insureds. The case involved the 2007 loss of computer tapes containing personal information of about 500,000 past and present IBM employees. The tapes were lost in transit.
Recall Total Information Management, which had a records storage agreement with IBM, had subcontracted with Executive Logistics to transport the data. Executive Logistics had a $2 million commercial general liability policy and a $5 million umbrella liability policy, both naming Recall as an additional insured.
Federal Insurance Co. denied coverage, and the court ruled it did not have to reimburse Recall for the $6.2 million it paid to IBM for the costs of notifying affected employees and offering credit monitoring. The insurer also said there was no “personal injury” coverage, as the policy required “publication” of the data to a third party. IBM’s lost data was never used.
Scorecard: Federal Insurance Co. did not have to pay $6.2 million following a data loss.
Takeaway: The court left open the possibility that costs to make injured parties whole by offering credit monitoring, etc., could be covered, if there is “publication” of the data to a third party.