How to Sow the Wind but Avoid a Whirlwind Of Liability Claims
Wind power is considered a safe and clean alternative source of energy. But it is a deceptively complex technology that can lead to a large number of loss scenarios for liability insurers.
If you think about the insurance needed for wind energy systems (WES), property is probably the first cover that springs to mind. But WES projects need liability insurance protection, whether they are onshore or, as is increasingly the case, offshore.
Third-party liability loss potential is harder to estimate than first-party losses: a lot depends on the location of the risk and the vulnerability of third parties to falling masts or broken rotors, for example. With offshore WES, the third party might be a ship that collides with a mast whose warning lights malfunctioned.
A liability policy can also cover the various professional parties and contractors involved in constructing the WES, including architects and engineers as well as the component makers. There’s also the question of costly downtime, when installations require repair or maintenance.
This area of liability exposure is challenging for insurers to manage because there can be multiple claims made by the parties involved against one another. Although such issues can be mitigated by liability limitation clauses, or contractual “hold harmless agreements.”
WES liability insurers also need to make sure that there is a clear line between the scope of the liability covers and other lines of insurance business included in the WES project.
These are all key issues that need to be analyzed by insurers writing liability cover for WES - if they are to get close to estimating the potential severity and frequency of third-party losses.