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OPERATIVE DATE FOR POLICY COVERAGE WAS THE DATE THE POWER GENERATING TURBINE WAS TAKEN OUT OF SERVICE, EVEN THOUGH THE DAMAGE WHICH ULTIMATELY LED TO THE SHUT DOWN HAPPENED BEFORE THE POLICY PERIOD (FIRST DEPT).

The First Department determined the loss of a power-generating turbine was covered by the insurance policy even though the damage preceded the policy period. The turbine was taken out of service when a crack triggered a shut-down. Even though the crack occurred prior to the shut-down and lengthened over time, the operative date was when the turbine was taken out of service:

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[The power company] makes a claim under the subject insurance policy for coverage of losses that resulted when a power-generating turbine (Unit 30) … was taken out of operation on September 12, 2008 (during the policy period), due to excessive vibrations. The vibrations were found to have been caused by a nine-inch crack in Unit 30’s rotor. Unit 30 functioned according to an alarm and trip system, with protocols established when the policy was underwritten. According to these protocols, Unit 30 was functioning properly until September 12, 2008, notwithstanding that the crack had begun to form before the inception of the policy period; moreover, it is undisputed that the crack had continued to lengthen during the policy period. Therefore, the loss occurred on September 12, 2008 – the discrete event of physical loss or damage triggering the time element coverage – when the unit was taken out of operation due to the excessive vibrations, and [the power company’s] property sustained a physical loss or damage during the policy period. 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 … . National Union Fire Ins. Co. of Pittsburgh, Pa. v TransCanada Energy USA, Inc., 2017 NY Slip Op 06513, 1st Dept 9-19-17

INSURANCE LAW (OPERATIVE DATE FOR POLICY COVERAGE WAS THE DATE THE POWER GENERATING TURBINE WAS TAKEN OUT OF SERVICE, EVEN THOUGH THE DAMAGE WHICH ULTIMATELY LED TO THE SHUT DOWN HAPPENED BEFORE THE POLICY PERIOD (FIRST DEPT))

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