Insurance Claims ‘Explode’ in the Wake of Columbia Gas Incident in Massachusetts

Insurance Claims ‘Explode’ in the Wake of Columbia Gas Incident in Massachusetts

By: Michele N. Detherage

On September 13, 2018, a series of natural gas explosions surged across Massachusetts’ Merrimack Valley. Blame for the blasts was quickly attributed to Columbia Gas of Massachusetts, a local utility company and subsidiary of NiSource Inc.1 The explosions and related fires appear to have been caused by overpressurized gas lines and resulted in a myriad of casualties. More than 80 homes were damaged or destroyed, 1,829 families or more were placed in alternative housing, at least 21 people were injured, and one young man was killed.2 As expected, a series of personal injury lawsuits have been filed – but how do home and business owners go about recovering for their property losses?

  • Dwelling and Structures: Coverage for damage to a residence and additional structures such as a detached garage or shed.
  • Personal Property: Coverage for damage to the contents of a home such as appliances, furniture, electronics and other personal items used, owned or worn by its occupants.
  • Additional Living Expenses: Coverage for the costs of temporary housing, meals and boarding of pets, as well as other additional living expenses which may arise from being evacuated from one’s home.

Like owners, renters often have insurance policies which cover costs related to the loss of personal property and additional living expenses. While the coverage under such policies can be fairly expansive, homeowners and renters alike should be mindful that insurance policies often explicitly limit or exclude coverage for certain categories of personal items which one might expect to find on a residential premises, such as precious coins, jewelry, and automobiles. If coverage for such items is intended by a homeowner or renter’s policy, the insuring language is often located in one of the additional endorsements.

Businesses typically maintain policies with coverage for both property and liability risks. Some of these policies will include business interruption (aka business income) insurance. Such coverage applies to losses suffered while repairs or replacements necessitated by fortuitous events (e.g. gas explosions) take place, including lost revenue, lease payments and employee wages – subject to retention and valuation terms. Business interruption provisions may also provide coverage for the extra expense of operating out of a temporary location. If, however, coverage for business interruption is not specifically provided in an insurance policy pertaining to business property, owners will not be afforded such coverage.3

In addition to the claims filed by home and business owners, NiSource has begun to file insurance claims of its own. NiSource reportedly expects its insurers to cover some of the costs associated with the September blasts.4 The company is supposedly insured for up to $800 million in liability insurance.5 While NiSource may expect its insurers to cover much of its exposure related to the third-party claims arising out of the incident, it is likely that any applicable policies would not provide reimbursement for fines and penalties.6 Costs related to punitive damages are often excluded from liability policies. It has been estimated that Columbia could face anywhere from $50 million to $100 million in penalties and fines for violations of government safety regulations. 7

Insurance claims are inevitable in the wake of a catastrophic event such as the one that took place on September 13, 2018. Luckily, victims are often not without options due to a wide range of insurance policies which are likely triggered by the loss. As time unfolds, it will be interesting to observe the various intricacies in managing this large volume of claims which often involve numerous insurance policies with varied coverage.

1 Valencia, Milton J. “Lawrence disaster estimated at $800 million and counting.” The Boston Globe, Nov. 1, 2018.
2 Glaun, Dan. “Columbia Gas has paid out $19.8 million for Lawrence area gas explosion claims, with most still unfulfilled.”, Oct. 19, 2018.
3 See e.g. Witcher Constr. Co. v. Saint Paul Fire and Marine Ins. Co., 550 N.W.2d 1, 3-5 (Minn. App. 1996), rev. denied (Minn. Aug. 20, 1996)(where policy described property as the insured subject matter and did not reference indemnification for business interruption losses, coverage properly denied).
4 Matthews, Zoe. “Columbia Gas parent won’t rule out rate hike.” The Eagle Tribune, Feb. 26, 2019.
5 Id.
6 Valencia, Milton J. “Lawrence disaster estimated at $800 million and counting.” The Boston Globe, Nov. 1, 2018.
7 Id.

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