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Power plant wins appeal in insurance coverage dispute

Power plant wins appeal in insurance coverage dispute

A New York appeals court has affirmed a lower court ruling in favor of a Canadian energy company against insurers in a $58 million dispute over business interruption and property coverage involving a power plant unit that was out of commission for eight months.

On Sept. 16, 2008, TransCanada Energy USA, a unit of Calgary, Canada-based TransCanada Corp., shut down a unit in its New York Ravenswood electric generating plant because of excessive vibrations, according to Tuesday’s ruling from the New York Supreme Court Appellate Division’s 1st Department in New York in National Union Fire Insurance Co. et al. v. TransCanada Energy USA Inc. and TC Ravenswood Services Corp.

Four days later, a crack in the generator’s rotor was discovered and the unit was out of service until May 18, 2009, according to the ruling.

TransCanada had first-party property and combined business interruption coverage from insurers including National Union Fire, a unit of American International Group Inc., covering the period Aug. 26, 2008 to June 1, 2009. Although still listed in the ruling, AIG has settled the litigation for an undisclosed amount and is no longer a party in the case.

Other insurers included Ace INA Holdings Inc., now a unit of Warren, New Jersey-based Chubb Ltd., and Arch Insurance Co., a unit of Hamilton, Bermuda-based Arch Capital Group Ltd.

TransCanada and the insurers each filed suit in the case. In March 2016, the New Yolk Supreme Court ruled in favor of TransCanada in the case. The Supreme Court’s appellate division affirmed the ruling on appeal in Tuesday’s decision.

The crack had started to form before the policy’s inception period, said the latest ruling. But, it added, “Since there is no provision in the policy that excludes physical loss or damage originating prior to the commencement of the policy period, the policy covers the loss,” said the court, which also affirmed the lower court’s ruling on the issue of business interruption losses.


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