AAIS Renewable Energy Generating Equipment Coverage

AAIS RENEWABLE ENERGY GENERATING EQUIPMENT COVERAGE FORM ANALYSIS

(February 2024)

 

Introduction

Eligibility

Policy Construction

IM 8065–Schedule of Coverages–Renewable Energy Generating Equipment

IM 8060–Renewable Energy Generating Equipment Coverage Analysis

   Agreement

   Property Covered

   Property Not Covered

   Optional Coverages

   Coverage Extensions

   Supplemental Coverages

   Perils Covered

   Perils Excluded

   What Must Be Done in Case of Loss

   Valuation

   How Much We Pay

   Loss Payment

   Other Conditions

   Definitions

Endorsements and Schedules

Underwriting Considerations

INTRODUCTION

The American Association of Insurance Services (AAIS) Renewable Energy Generating Equipment Coverage Form covers renewable energy generating equipment such as wind turbines and solar panels. It is designed to cover equipment that is part of or connected to buildings or building complexes to which it supplies power. Such equipment may be part of the building's sustainable or "green" design. Excess capacity that such equipment generates may be sold to electric utilities. This coverage form is not intended to cover wind farms or large array solar panel farms.

In addition to physical damage coverage for the generating equipment, the basic coverage form includes built-in optional coverages for loss of energy generation income if the named insured sells excess power to a utility and costs to buy replacement electricity.

AAIS has developed one Renewable Energy Generating Equipment Coverage Form. It has its own corresponding schedule of coverages. This analysis examines this coverage form.

ELIGIBILITY

Any individual or commercial operation that owns and/or operates renewable energy generating equipment such as wind turbines and solar panels to supply its energy needs. Wind farms or large array solar panel farms specifically designed to provide energy to others, such as utilities, are not eligible.

POLICY CONSTRUCTION

AAIS Renewable Energy Generating Equipment Coverage requires at least these four forms:

Related Article: CL 0100–AAIS Commercial Lines Common Policy Conditions

IM 8065–SCHEDULE OF COVERAGES–RENEWABLE ENERGY GENERATING EQUIPMENT (01 12 change)

This Schedule of Coverages is used with IM 8060–Renewable Energy Generating Equipment Coverage. IM 8065 contains the following information:

Policy Number (01 12 addition)

The 01 12 edition added a space to enter the policy number.

Covered Property

This section has spaces to list and describe the location, the covered equipment at that location, and the limit.
IM 8070–Additional Renewable Energy Generating Equipment Schedule is used to schedule additional locations and equipment.

Catastrophe Limit

This limit is entered in the space provided. It is the most paid in a single occurrence at all locations and for all equipment.

Optional Coverages

There are two optional coverages. A box must be checked to select coverage, and a limit entered in the space provided. The two optional coverages are:

Coverage Extensions

The limits on the Schedule of Coverages for the following coverages apply to all covered locations:

The limit is $15,000 unless a different limit is entered.

Supplemental Coverages

Each of these coverages provides additional limits of coverage or additional coverage. Required entries vary by type of coverage.

The limit is $15,000 unless a different limit is entered.

The limit is $10,000 unless a different limit is entered.

Valuation

There are two valuation options. A box must be checked to select the one desired. The two options are:

Deductible

The deductible that applies is entered in the space provided.

Waiting Period

A waiting period must be checked if Optional Coverage–Energy Generating Income is selected. The two options are:

The number of days must be entered in the space provided.

Coinsurance

One of the following coinsurance options must be selected:

Additional Information

This section of the schedule of coverages lists endorsements and forms included when the policy is issued.

IM 8060–RENEWABLE ENERGY GENERATING EQUIPMENT COVERAGE ANALYSIS

This analysis is of the 07 11 edition.

Introduction

The terms "you" and "your" are the party(ies) identified on the declarations as the insured. "We", "us," and "our" is the insurance company that provides coverage. These are the only two definitions in this introduction. However, there are many other defined terms used in this coverage form. The other terms can be found in the Definitions Section at the end of the coverage form. It is very important to review these definitions because of how they can broaden or restrict coverage.

Agreement

The insurance company agrees to provide the coverage described in the coverage form and in the schedule of coverages. The named insured agrees to pay the premium. This entire agreement is subject to all the coverage form's terms, conditions, endorsements, and definitions.

Property Covered

Coverage applies to the renewable energy generating equipment described below, subject to any exclusions or limitations that apply.

1. Coverage

Direct physical loss or damage by a covered peril to the named insured's renewable energy generating equipment is covered, as is any similar property of others in the named insured's care, custody, or control.

 

Example: Magnificent Magnetic Metalworks consumes a great deal of power in its sophisticated metal fabricating processes. Mike, the sole proprietor, decides to invest some of his profits into his one wind turbine as a hedge against future rate increases, to reduce his electric bill, and to possibly generate excess energy to sell back to the utility during his periodic slack periods. Mike is correct on all counts and sees his profits increase even after allowing for the cost to purchase and install the wind turbine.

2. Coverage Limitations

The only property covered is renewable energy generating equipment listed and described on the schedule of coverages. The listed property is covered only if it is within 1,000 feet of, attached to, or mounted on a location listed and described on the schedule of coverages.

Property Not Covered

Six specific types of property are excluded:

1. Aircraft or Watercraft

Aircraft and watercraft are not covered. Unmanned Aerial Vehicles (AUV or drone) are aircraft and, therefore, not covered.

2. Buildings and Land

All buildings and land are not covered, even the buildings and land where the covered property is located.

3. Contraband

Property that is illegal to possess is not covered. Property that is legal to possess but being used as part of an illegal trade or being transported illegally is also not covered.

Example: Jeremy was upset with the price of solar panels in the United States, so he arranged to have some shipped to him from China. A loss occurred, but the claims adjustor denied payment on the basis that the panels were contraband when he realized that these particular panels were not allowed to be used in the United States.

4. Stock for Sale

Any stock of merchandise the named insured has available for sale is not covered when the selling of these items are part of the named insured’s business.

Example: Jeremy really likes solar energy. After the problems with the Chinese solar panels, he found an excellent and legal manufacturer and decided to start selling the panels to his friends and neighbors. The panels he uses on his property to generate energy are covered property, but the panels he holds as stock to sell to friends and neighbors are not.

5. Vehicles

Self-propelled vehicles designed to be used on highways are not covered even if they are not licensed for such use.

Note: This property is more correctly insured under commercial automobile coverage forms.

Related Article: CA 00 01–Business Auto Coverage Form Analysis

6. Waterborne Property

This property is not covered, and there are no exceptions

Note: This exposure is unlikely to happen often or at all. In the unlikely event that an item of renewable energy generating equipment is on a barge or ferry, coverage on it should be arranged through the barge or ferry operator.

Optional Coverages

Two optional coverages are available. Coverage applies only if selected on the schedule of coverages.

1. Energy Generating Income

This coverage is appropriate for named insureds who generate income by regularly supplying their surplus power to a public utility.

If renewable energy generating equipment sustains direct physical loss or damage due to a covered peril, the loss of income because surplus energy from that equipment is not available to be sold is covered. The interrupted equipment must be at a location listed on the schedule of coverages.

The named insured must document the amount of energy generated and sold to the public utility because this documentation is used to determine the amount of the loss. If the named insured has a contractual obligation to supply power, this coverage does not pay the cost for the named insured to purchase power from others to meet such obligations.

Expenses the named insured must incur during the interruption period to move, repair, or replace the damaged part(s) of the renewable energy generating equipment at a faster pace is also covered. Payment of these expenses is limited to the amount by which they reduced the amount of loss or damage that would have been paid without the expenses being incurred.

When the interruption of power is increased because laws, ordinances, or decrees that do any of the following are being enforced, this coverage continues during that extended time:

·         Regulates the construction, use, or repair of covered renewable energy generating equipment

·         Requires that any part of the equipment be demolished, even that which was undamaged by the covered peril

However, this applies only if the law, ordinances, or decrees were in force at the time of loss. This does not apply if the law, ordinance, or decree regulates or requires any action related to the effects of pollutants.

Loss of any surplus power income due to a reduction in or loss of efficiency or performance because of equipment’s age or because the solar panels are delaminating is not covered.

Note: Delamination is the act of splitting or separating a laminate into layers. A laminate is composed of layers bonded together.

The most paid for all aspects of this optional coverage is the limit on the schedule of coverages.

Example: Jeremy was delighted that he generated enough energy to run his operations. He was thrilled to discover that he had a surplus to sell to his local utility company. Over the prior 12 months, he earned an average of $1,500 per month. A wildfire damaged 50% of his panels, and he could not produce surplus power for four months. This $6,000 loss is covered. When he began to reinstall the panels, he was notified of a grandfathered ordinance. Complying with the ordinance results in a one-month delay, and the insurance company pays him an additional $1,500.

2. Electricity Replacement

This coverage pays the named insured's costs to purchase replacement electricity from a public utility when its renewable energy generating equipment sustains loss or damage by a covered peril.

b. Coverage applies only if the named insured's renewable energy generating equipment would have produced electricity if there was no direct physical loss or damage to it.

c. Coverage applies only until the renewable energy generating equipment is repaired or replaced and operates according to its manufacturer's specifications. However, coverage does not extend past the policy’s expiration date.

Note: It is very unusual for extra expense type coverage to end with the policy expiration date. Most continue until other policy conditions, such as the limits, are used up.

d. The most paid for this optional coverage is the limit on the schedule of coverages.

Example: The loss of his solar panels also results in Jeremy having to purchase power from the utility company. Jeremy’s utility cost is $3,000 per month, and Jeremy expects to receive the same five-month revenue under Energy Generating Income. Unfortunately, there is no ordinance coverage, which reduces his loss to four months of revenue, and his policy expires after he receives only two months of revenue. Jeremy receives only $6,000 and must pay the remaining $9,000 loss himself.

Coverage Extensions

Provisions That Apply To Coverage Extensions

There is one coverage extension. The limit is either the limit on the schedule of coverages or the default limit included in the coverage form. These limits are part of the applicable limit for covered property and not in addition to it unless otherwise indicated. These limits are not added to or combined with limits for any other coverage extension or supplemental coverage and are not subject to any coinsurance provisions that apply elsewhere in the coverage form.

Debris Removal

When a covered peril damages or destroys covered property, the cost to remove any created debris is covered under this extension. Debris removal does not include any costs for removing, restoring, or replacing polluted land or water or extracting pollutants.

There are two parts of the Limit section. The first is restricting any debris removal payment to no more than 25% of the amount paid for the actual direct physical loss or damage. The second part is that when the debris removal and the physical damage loss are added together, no more than the limit of insurance is paid.

An additional $5,000 (or a higher amount entered on the schedule of coverages) is available if the debris removal expense is more than 25% of the loss amount or if the combined cost of loss and debris removal is more than the limit of insurance for the covered property.

Debris removal expenses must be reported to the insurance company within 180 days of the date of loss for this extension to apply.

Supplemental Coverages

Provisions That Apply To Supplemental Coverages

There are two supplemental coverages. Each has its own default limit that can be increased by entering a higher limit on the schedule of coverages. Limits for any supplemental coverage are separate from the applicable limit for covered property, not part of it.

The limit available for coverage described under a supplemental coverage is the only limit available for it. It is not the total of the limit for a supplemental coverage and the limit for covered property. The limits are not added to or combined with limits for any other supplemental coverage or coverage extension. They are also not subject to coinsurance provisions that apply elsewhere in the coverage form.

1. Newly Acquired Equipment

When the named insured acquires new generating equipment during the policy term, coverage is automatically provided for that location for a maximum of 60 days. The limit is $15,000 per occurrence to allow the named insured time to report it to the insurance company. Coverage ceases when the property is reported, when the policy expires or after 60 days, whichever occurs first. This is not free coverage since additional premium for the equipment must be paid starting from the acquisition date. The $15,000 limit can be increased.

2. Pollutant Cleanup and Removal

The named insured's expenses to extract pollutants from land or water are covered if a covered peril that occurred during the policy period in any way caused their release or discharge. However, there are significant restrictions.

The expenses must be reported to the insurance company within 180 days of the date of loss.

Testing for, evaluating, observing, or recording pollutants costs are excluded except for those required as part of a covered pollutant extraction process.

A 12-month policy period aggregate limit of $25,000 applies. This limit can be increased.

Perils Covered

Coverage applies to risks of direct physical loss or damage unless the loss is limited or caused by an excluded peril.

Perils Excluded

1. Primary Exclusions

The first group of exclusions is essentially absolute. Subject to specific exceptions, loss or damage by each is totally excluded, regardless of any other cause or event that contributes to a loss, either concurrently or in any other sequence. The insurance company does not pay for any direct or indirect loss or damage caused by or results from any of these events.

Related Article: Concurrent Causation and Anti-Concurrent Causation Clauses–A Discussion

a. Civil Authority

There is no coverage for a loss that results from an order any civil or government authority issues. These orders may include seizure, confiscation, destruction, or quarantine of property, but this exclusion is not limited to only these. The only exception is when the loss or damage is caused by a civil authority destroying property to control a fire. This exception applies only if the fire is the result of a covered peril.

b. Earth Movement

Earth movement is not covered except for the following three exceptions:

c. Flood

The insurance company does not pay for loss or damage caused by flood. It also does not pay when waterborne material carried or moved by flood causes loss or damage. Damage by mudslide or mudflow is also excluded. This exclusion applies regardless of whether or not wind was involved in any of the above.

There is one exception. Loss or damage by fire, explosion, or sprinkler leakage that results from flood is covered.

d. Nuclear Hazard

The insurance company does not cover loss or damage caused by or resulting from any nuclear reaction, radiation, or contamination. This is absolute and applies whether or not the nuclear incident was controlled, and by whatever means caused. Any loss the nuclear hazard causes is not treated as a loss that fire, explosion, or smoke causes. The only exception is when a fire results from the nuclear fire. Direct loss or damage from that fire is covered, but the damage from the nuclear hazard remains excluded.

 e. Ordinance or Law

There is no coverage for any loss or increased construction costs because of enforcing any government regulation that controls the use, construction, or repair of any property. The requirement to demolish that property and to remove its debris is also not covered. Any enforcement that occurs, even if the property has not been damaged and increased costs incurred as a result of complying with the regulation, is not covered. This includes any construction, demolition, or debris removal activities.

Note: Limited income-related coverage is available under Optional Coverages 1. Energy Generating Income.

f. Sewer, Septic Tank, Sump, or Drain Backup and Water below the Surface

Coverage does not apply to loss or damage that any of the following causes:

There is one exception. If fire, explosion or sprinkler leakage results from any of the above, the loss or damage from the fire, explosion or sprinkler leakage is covered but not the other damage.

g. War and Military Action

The insurance company does not pay for loss or damage caused by any act of war. Undeclared and civil war or warlike action by a military force are all considered war. All actions taken to hinder or defend against an actual or expected attack by any government or sovereign authority that uses military personnel or other agents are also considered war and excluded. In addition, acts of insurrection, rebellion, revolution, or unlawful seizure of power and any action any government authority takes to prevent or defend against any such acts are excluded. If any action within the terms of this exclusion involves nuclear reaction, radiation, or contamination, this exclusion applies in place of the nuclear hazard exclusion.

Note: This means that the exception for resulting fire under the nuclear hazard is not covered when it results from war.

2. Secondary Exclusions

The second group of exclusions applies to loss or damage caused by or resulting from any of the following loss events. Some of these exclusions have exceptions, conditions, or limitations that should be noted and reviewed carefully. The insurance company does not pay for any loss or damage caused by or that results from any of these events.

a. Animals

There is no coverage for any loss or damage caused by or the result of an animal. The term animal includes rodents, vermin, and insects, but the term is not limited to only these. However, if any such excluded loss or damage results in a specified peril occurring, coverage applies to the loss or damage that specified peril causes.

Example: A curious squirrel got into some renewable energy equipment and started chewing on the wiring. He ate through the insulation and started a fire. The chewed through wiring is not covered, but the damage caused by the fire would be.

b. Contamination or Deterioration

Loss or damage that is caused by contamination or deterioration is excluded. This applies to corrosion, decay, fungus, mildew, mold, rot, and rust. It also applies to any quality, fault, or weakness in covered property that causes it to damage or destroy itself. However, this exclusion is not limited to only these described causes.

c. Criminal, Fraudulent, Dishonest, or Illegal Acts

Coverage does not apply to loss caused by, or that results from criminal, fraudulent, dishonest, or illegal acts that any of the following commit alone or in collusion with another:

Coverage applies if employees destroy property. It does not apply if employees steal.

d. Defects, Errors, and Omissions 

There is no coverage for loss or damage caused by any negligent or non-negligent act, omission, error, or defect. This applies only if they are related to specifications, designs, construction, workmanship, materials, installation, repair, or maintenance. There is an exception. If such excluded defect, error, or omission results in a specified peril occurring, coverage applies to the loss or damage for that specified peril causes.

e. Electrical Currents

Loss or damage caused by electrical arcing or currents is excluded unless caused by lightning. However, if the excluded arcing or currents result in a specified peril occurring, the loss or damage for that specified peril is covered.

f. Error or Omission during Processing

Coverage does not apply to loss or damage to property caused by omissions or errors that occur while covered property is being worked on or processed. Such omissions or errors can occur during repair or maintenance, but this exclusion is not limited to only those operations. However, if any such error or omission results in a specified peril occurring, coverage applies to the loss or damage for that specified peril causes.

g. Loss of Use and Consequential Loss

There is no coverage for loss caused by or that results from delay, loss of use, loss of market or any kind of consequential damage or loss.

h. Mechanical Breakdown

Loss or damage caused by or that results from mechanical breakdown or moving parts of machinery bursting or rupturing because of centrifugal force is excluded. However, if any of these results in a specified peril occurring, coverage applies to the loss or damage caused by that specified peril.

i. Missing Property

The unexplained or mysterious disappearance of covered property is excluded when there is no physical evidence to suggest what happened to it, and the only proof that a loss occurred is based on an audit or physical inventory. The one exception is that this does not apply to covered property in the custody of carriers for hire.

j. Pollutants

There is no coverage for loss caused by or resulting from any release, discharge, seepage, migration, dispersal, or escape of pollutants. There are three exceptions:

k. Steam Boiler Explosion

Loss or damage caused by an explosion of steam boilers, pipes, turbines, or engines is excluded. There are two exceptions. If such an explosion results in a fire or combustion explosion, there is coverage but only the loss or damage the fire or combustion explosion causes. Any damage caused by the explosion of gas or fuel in a firebox, flue, or combustion chamber is also covered.

l. Temperature/Humidity

Loss or damage to covered property caused by dryness, dampness, humidity, changes in, or extremes of temperature is excluded. If any of these results in a specified peril occurring, the loss or damage it causes is covered.

m. Voluntary Parting

When property or title is voluntarily surrendered to others, there is no coverage for any loss or damage to that surrendered property. This applies even if the reason for the surrender was due to a fraudulent scheme, trick, or false pretense.

n. Wear And Tear

Loss or damage caused by wear, tear, marring, or scratching is excluded.

3. Exclusions Applying only to Optional Coverages 1. Energy Generating Income Coverage

This group of exclusions applies only to Optional Coverages 1. Energy Generating Income Coverage and then only if the coverage is selected.

The follow added expenses or items that add additional time to the period of interruption are not covered.

a. Additional Time

The interruption period is not increased because of any of the following, even if it increases the time needed to repair or replace any part of renewable energy generating equipment.

b. Consequential Loss

Any loss that is a result of direct loss.

c. Customs Regulations

Customs regulations and/or restrictions on imports or exports.

d. Interruption of Utility Service

The incoming electricity which the renewable energy generating equipment needs to proceed with or resume operation is interrupted.

e. Lack of Funds

The funds needed to proceed are not available.

f. Leases, Licenses, Contracts, or Orders

This refers to cancellation, suspension, or lapse of any of these. The exception is if a covered interruption loss caused the cancellation, suspension, or lapse, it is covered.

g. Property Not Covered

Any loss or damage to property that this coverage form does not insure.

h. Strikes and Other Interference

Strikers or other persons interfering with covered property being repaired or replaced or operations resuming.

i. Unnecessary Expenses

Expenses that are unnecessary for covered renewable energy generating equipment to operate or that are more than the amount of loss they reduce.

What Must Be Done In Case Of Loss

1. Notice

The named insured must promptly notify the insurance company or its agent of a loss. The notice must include a description of the property lost or damaged. If a criminal act caused the loss, the appropriate law enforcement agency must also be notified. The insurance company has the right to require that any notice to it be in writing.

2. You Must Protect Property

During and after a loss, the named insured must take all reasonable steps to protect covered property from further loss. The insurance company pays reasonable costs the named insured incurs, but to do so, the named insured must maintain accurate records to substantiate the costs. Paying these costs is not in addition to the policy limits. There is no coverage for any repairs or emergency measures performed on property not already damaged by a covered peril.

Note: It is important to realize that any such costs incurred will reduce the amount available to pay the actual loss.

3. Proof of Loss

The named insured must complete and return the insurance company's prescribed proof of loss forms within 60 days after the company requests it. The information provided must include the time, place, and circumstances involved with the loss and information on any other insurance coverage that may apply. It must also include the named insured’s interest and the interest of others concerning the property involved, including lienholders, loss payees, and mortgagees. Any changes in title to the property during the policy period must be disclosed, in addition to providing any other reasonable information the company may require to adjust and settle the loss.

4. Examination

Examination under oath may be required in matters that relate to the loss. The insurance company may request these examinations more than once, but such requests must be reasonable. If multiple persons are examined, the company has the right to examine each individual separately.

5. Records

The named insured must produce any records related to the loss. The insurance company must be allowed to make copies and take extracts of them as often as it reasonably requests. Records include tax returns and bank microfilms of all related cancelled checks, but records are not limited to just these.

6. Damaged Property

Damaged and undamaged property must be made available for the insurance company's inspection as often as reasonably necessary. It must also be allowed to take samples of the property to the extent necessary to adjust and settle the loss.

7. Volunteer Payments

The named insured has the right to make payments, assume obligations, pay or offer rewards, or incur other expenses. However, unless the insurance company's has given written approval for such actions, the named insured cannot expect any reimbursement. The only exception is that the insurance company will pay for the costs incurred to protect property as item 2. above describes.

8. Abandonment

The insurance company decides when and if it will take ownership of the named insured’s property. The named insured is, therefore, not permitted to abandon damaged property to the insurance company until the insurance company agrees in writing to accept it.

9. Cooperation

The named insured must cooperate with the insurance company. Any actions required of the named insured within this policy must be performed.

10. Energy Generating Income

Note: The following items are rather far-reaching conditions but apply only when the Energy Generating Income coverage is selected. The final items are related to negotiations to facilitate the actual direct damage loss and determine the loss amount. Would the named insured want this coverage if it realizes it is sacrificing its negotiating power in return for selecting it?

These conditions apply to only Optional Coverages 1. Energy Generating Income Coverage (if provided).

The named insured is required to move at a reasonable rate in restoring or rebuilding damaged equipment. It is required to all that is reasonable to minimize a covered loss and act with due diligence and dispatch.

The named insured is not given the option of taking time off following a loss. If it intends to start or continue generating energy, it must commence or resume doing so as soon as possible.

The named insured is expected to assist the insurance company by minimizing interference with equipment being repaired or replaced so that the interruption is as short as possible. The insurance company must be permitted to access the covered property, so it can negotiate with other parties involved in repairs or replacement. Manufacturers, suppliers, contractors, subcontractors, and similar or related parties may be contacted by the insurance company to do any of the following:

Valuation

A valuation must be selected on the schedule of coverages based on item 1. or item 2., as follows:

1. Functional Replacement Cost

The value of covered lost or damaged property is based on the cost to replace it with functionally equivalent property. This valuation applies only if the property is actually replaced. If it is not replaced, its value is based on its actual cash value on the date of loss, including a deduction for depreciation.

Note: This could be an excellent valuation for this fast-moving technology. The value of equipment deteriorates rapidly because of the fast pace of technological advances, which is lowering prices. The named insured may choose to insure based on what equipment would be purchased to replace the current equipment instead of valuing it based on its replacement cost.

2. Replacement Cost

The value of covered lost or damaged property is based on the cost to replace it without a deduction for depreciation. It is limited to the cost to repair it with similar property, on the same site, and for the same purpose, but not for more than the named insured spends to repair or replace it.

This valuation does not apply until the named insured actually repairs or replaces the damaged or destroyed property. A claim can be made for actual cash value before the property is repaired or replaced. A claim for replacement cost valuation can be made later if the named insured informs the insurance company of its intent to do so within 180 days after the date of loss.

Replacement cost does not apply to items 3., 4., and 5. below.

3. Pair or Set

The value of a loss that involves damage to or loss of one part of a pair or set is based on a reasonable proportion of the value of the entire pair or set. However, the loss of one part of a pair or set is not considered a total loss.

Note: This recognizes that the value of the whole is greater than the value of individual parts but that the remaining parts still have value as separates.

4. Loss to Parts

The value of a lost or damaged part of property that consists of several parts is the cost to repair or replace only the lost or damaged part.

5. Determining an Income Coverage Loss

These conditions apply to only Optional Coverages 1. Energy Generating Income Coverage. The insurance company considers the following three factors when it attempts to determine an Energy Generating Income Coverage loss:

How Much We Pay

1. Insurable Interest

The insurance company does not pay more than the named insured's insurable interest in the covered property at the time of loss.

2. Deductible

The insurance company pays only the amount of loss that exceeds the deductible amount on the schedule of coverages.

3. Loss Settlement Terms

Subject to other items in this section, the insurance company pays the least of the following:

4. Catastrophe Limit

The most the insurance company pays in a single occurrence is the Catastrophe Limit on the schedule of coverages. This is regardless of the number of items of renewable energy generating equipment, locations, or combination of these, or coverages under Optional Coverages, Coverage Extensions, or Supplemental Coverages.

5. Coinsurance

a. When coinsurance applies to a coverage provided, the insurance company pays only part of the loss if the limit is less than the percentage of the value of the covered property on the schedule of coverages.

b. The following are the three steps to determine the amount of loss to be paid:

Step 1. Multiply the percentage on the schedule of coverages by the covered property’s value at the time of loss.

Step 2. Divide the covered property’s limit by the result determined in Step 1.

Note: There is no coinsurance penalty if the result is 1.00 or higher.

Step 3. There is a coinsurance penalty when Step 2. is less than 1.00. Subtract the deductible from the amount of loss and then multiply the total amount of loss by the percentage determined in Step 2.

The insurance company does not pay more than the amount determined in Step 3. or the limit, whichever is less. It does not pay any remaining part of the loss.

c. If there is more than one limit on the schedule of coverages, this procedure applies separately to each limit.

d. If there is only one limit on the schedule of coverages, this procedure applies to the total of all covered property insured under that limit.

e. This coinsurance provision does not apply unless a coinsurance percentage is entered on the schedule of coverages.

6. Insurance under More Than One Coverage

Two or more coverages in the coverage form may apply to the same loss. In that case, the insurance company does not pay more than the value of the actual claim, loss, or damage sustained.

7. Insurance under More Than One Policy

a. Proportional Share

The named insured may have other coverage subject to the same terms as this coverage form. In that case, this coverage form pays only its share of the covered loss. That share is the proportion that its limit of insurance bears to the limits of insurance of all insurance that covers on the same basis.

b. Excess Amount

There may be other coverage available to pay for the loss other than as described in 7. a. above. In that case, this coverage form pays on an excess basis. It pays only the amount of covered loss that exceeds the amount due from the other coverage, whether collectible or not. Any payment is subject to the limit of insurance that applies.

8. Waiting Period

When a selection is made for Optional Coverages 1. Energy Generating Income Coverage, a waiting period must be entered on the schedule of coverages. This waiting period is similar to a deductible because the insurance company does not pay for loss of energy generating income until after the number of days in the waiting period has passed.

Loss Payment

1. Loss Payment Options

a. Our Options

The insurance company has the following four loss payment options if a covered loss occurs.

b. Notice of Our Intent to Rebuild, Repair, or Replace

The insurance company must notify the named insured of its intent to rebuild, repair, or replace within 30 days after receiving a properly completed proof of loss.

2. Your Losses

a. Adjustment and Payment of Loss

The insurance company adjusts all losses with and pays the named insured unless another loss payee named in the policy is involved.

b. Conditions for Payment of Loss

The insurance company pays a covered loss within 30 days after it receives a properly prepared proof of loss and the amount of loss is established. The amount of loss is determined by either a written agreement between the company and the named insured or after an appraisal award is filed with the company.

3. Property of Others

a. Adjustment and Payment of Loss to Property of Others

The insurance company has the option to adjust and pay losses that involve property of others either to the named insured acting on the property owner’s behalf or to the property owner.

b. We Do Not Have to Pay You if We Pay the Owner

The insurance company is not obligated to pay the named insured when it pays the property owner. In addition, if the property owner sues the named insured, the company has the option to defend the named insured in that suit.

Other Conditions

1. Appraisal

The insurance company and the insured may not always agree on the value of a covered claim. This condition provides one method to resolve disputed claims.

Either party can request an appraisal to determine the value of a disputed claim. Once requested, the parties have 20 days to obtain their own independent and competent appraisers and give their appraiser's name to the other party. The two appraisers then have 15 days to select a competent impartial umpire. If they cannot agree on an umpire within that time period, either can request that a judge in the court of record in the state where the property is located appoint one.

The appraisers then determine the claim’s value. They submit any differences to the umpire. Once any two of the three parties agree, the amount of loss is set.

Each party pays its own appraiser. Both parties share the umpire’s cost and other expenses equally.

2. Benefit to Others

The insurance provided does not directly or indirectly benefit any party with custody of the named insured's property.

3. Conformity with Statute

Any condition in this coverage form that conflicts with any applicable law is amended to conform to that law.

4. Estates

Note: This condition applies only if the named insured is an individual.

a. Your Death

If the named insured dies, the person who has custody of the named insured's property is an insured until a qualified legal representative is appointed. The named insured’s legal representative becomes an insured once he or she is appointed. Both are insureds, but only with respect to the property this coverage form insures.

b. Policy Period is not Extended

This coverage does not extend past the policy’s expiration date.

5. Misrepresentation, Concealment, or Fraud

This coverage is void if any insured at any time willfully concealed or misrepresented a material fact related to the insurance provided, the property covered, or its interest in the property. It is also void if fraud or false swearing by any insured took place concerning the insurance provided or the property covered.

Note: The named insured must deal with the insurance company honestly. Its rights of recovery may be voided if it intentionally misrepresents or conceals a material fact or information. This means the insurance is treated as simply having never existed versus denying a particular claim.

6. Policy Period

Only covered losses that occur during the policy period are paid.

7. Recoveries

Paying the loss does not end the obligations of the named insured and the insurance company toward one another. Additional provisions apply if the insurance company pays a loss and the lost or damaged property is subsequently recovered, or the parties responsible for the loss pay for it.

Either party that recovers property or payment must inform the other. Recovery expenses that either party incurred are reimbursed first. If the named insured keeps the recovered property, it must refund the amount of the claim the insurance company paid unless the company agrees to a different amount. If the claim paid is less than the agreed loss due to applying a deductible or another limitation, any recovery is prorated between the named insured and the insurance company based on the company's respective interest in the loss.

8. Restoration of Limits

Payment of a claim does not reduce the limit available for future claims.

9. Subrogation

The insurance company acquires the named insured's rights of recovery from third parties after it pays a loss. The named insured must help the insurance company secure those rights. The company is not obligated to pay a loss if the named insured hinders or impairs the company's rights of subrogation. However, the named insured can agree in writing to waive recovery rights from others before a loss occurs.

10. Suit against Us

The insurance company cannot be sued by anyone for any coverage until all the terms of the coverage form are met. Suits must be brought within two years after the named insured first knew about a loss. If a state law invalidates this condition, any suit brought must comply with the provisions of that law and begin within the shortest period of time allowed by law.

11. Territorial Limits

Covered property must be located in the United States, its territories and possessions, Canada, or Puerto Rico for coverage to apply.

Definitions

Defined terms are used throughout the coverage form. It is important to review the definitions because coverage can be restricted and expanded within the definition. Twelve terms are defined:

1. Earth movement

Earthquake is earth movement, as is any landslide or mine subsidence. A volcanic eruption, explosion, or effusion is also earth movement. The earth shifting, rising, eroding, expanding, freezing, or thawing is earth movement, as is any mishandled soil compacting. Any movement of water that causes foundation, building, or structures to crack, settle, or shift is also considered earth movement.

Mine subsidence is earth movement regardless of whether the mine is a natural mine or a man-made one.

The only exception to this definition is that sinkhole collapse is not considered earth movement.

2. Flood

A general but temporary condition where normally dry land becomes at least partially inundated. The cause of the inundation may be due to an overflow of inland or tidal waters, waves, tidal waves, or tsunamis. It may also be due to spray from these that may be wind-driven or not.

Surface water runoff or unusually rapid accumulation is also flood, regardless of the source of the water.

Mudslide or mudflow is considered flood only when the cause is either surface water runoff or unusually rapid accumulation or waves or because water exceeds the cyclical levels that would be expected.

3. Interruption

Any break or stoppage in the operation of renewable energy generating equipment that a covered peril causes. The term includes both generating and transmitting energy.

4. Interruption period

a. The period of time following a covered loss when renewable energy generating equipment operations are interrupted. The covered loss must be due to direct physical loss or damage by a covered peril to such equipment. The interruption period is not limited by the policy’s expiration date.

b. This is not the increased time the named insured needs to comply with enforcing any law, ordinance, or decree that regulates the use or repair of any property, but only if it involves in any way responses to or assessing pollutants.

5. Limit

The amount of coverage that applies to the insured property.

6. Pollutant

This is a broad and expansive term. It is solids, liquids, thermal or radioactive contaminants, and irritants. It includes, but is not limited to, acids, alkalis, chemicals, fumes, smoke, soot, vapor, and waste. Waste includes materials intended for recycling, reclamation, and reconditioning, as well as for disposal. Visible and invisible electrical or magnetic emissions and sound emissions are also considered pollutants.

7. Renewable energy generating equipment

Any electrical generating equipment that uses wind, solar, or other renewable resources as its energy source.

8. Schedule of coverages

Any page labeled as such that contains coverage information. Declaration and supplemental declarations are included.

9. Sinkhole collapse

The earth’s surface suddenly settling or collapsing into an underground opening created by water acting on limestone or some other rock formation. The value of the collapsing land or the cost of filling the sinkhole is not included in this definition.

10. Specified perils

The named perils of aircraft, civil commotion, explosion, falling objects, fire, hail, fire extinguishing equipment leakage, lightning, riot, sinkhole collapse, smoke, sonic boom, vandalism, vehicles, volcanic action, water damage, the weight of sleet, snow or ice and windstorm. Two terms need further explanation.

Falling objects do not include loss to personal property stored in the open. Damage to the interior of buildings or personal property stored in buildings damaged by a falling object is not included unless that falling object first breaches the building's exterior.

The cracking or breaking of part of a system or appliance that holds water or steam that causes the sudden or accidental discharge or leakage of the water or steam is water damage.

11. Terms

All policy provisions, limitations, exclusions, conditions, and definitions that apply to this coverage.

12. Volcanic action

An airborne volcanic blast or shock waves, ash, dust, and particulate matter. The cost to remove that ash, dust, and particulate matter is paid only if the covered property sustained direct damage from it. Lava flow is also considered volcanic action.

 ENDORSEMENTS AND SCHEDULES

AAIS has developed the following endorsements and schedules for use with the Renewable Energy Generating Equipment Coverage Form.

IM 8070–Additional Renewable Energy Generating Equipment Schedule

This schedule is used to list and describe additional locations and the covered equipment at those locations. It is used when the space on IM 8065–Schedule of Coverages–Renewable Energy Generating Equipment is insufficient.

IM 8071–Equipment Breakdown Schedule

This schedule is used with IM 8072–Equipment Breakdown Coverage to select coverages and to list the limits, deductibles, waiting periods, and any additional information that applies.

IM 8072–Equipment Breakdown Coverage

This endorsement adds equipment breakdown coverage. It provides property damage coverage for covered equipment caused by a mechanical breakdown accident. It can also provide Energy Generating Income and Electricity Replacement. Coverages are selected, and other information entered on the IM 8071–Equipment Breakdown Schedule.

IM 8073–Ordinance or Law Coverage

This endorsement provides supplemental ordinance or law coverage. This covers the increased cost to repair, reconstruct, or rebuild damaged and undamaged portions of renewable energy generating equipment due to the enforcement of ordinances, laws, or decrees.

UNDERWRITING CONSIDERATIONS

Each risk should be evaluated separately, paying attention to the degree of hazard that applies to its situation. Some of the factors that determine the degree of hazard include where it is located, the type of equipment, type of construction, size, condition, maintenance, damageability, and susceptibility to fire, wind, and other unique perils that may affect it.

Underwriting also includes evaluating these physical factors and the extent of care provided to maintain and protect the equipment at the locations involved. Because the property is at fixed locations, it is subject to fixed location causes of loss. The main underwriting considerations are evaluating the locations where the equipment is situated, and the protective measures implemented to reduce or eliminate loss. This includes reviewing contracts between the named insured and others with an insurable interest in the equipment, such as landlords, customers, and leasing companies.

The named insured itself should be evaluated from the standpoint of inspections, maintenance, and repair of covered property and its financial means to do so. It should have written maintenance records and a formal safety and inspection program in place. Previous losses should be reviewed to determine if any remedial action was taken afterward to prevent it from recurring.

Adequate financial strength for enterprises in this class of business is essential. Regular preventive and other maintenance on equipment is needed. Lack of sufficient financial resources could mean deferred maintenance that leads to a catastrophic collapse or electrical failure of state-of-the-art equipment.

The following is a long list of both usual and unusual and serious exposures associated with wind turbines and solar panels: