Utilities Contractors Can’t Find Wildfire Coverage

May 28, 2021

Utilities contractors working in wildfire-prone areas across U.S. states are finding it difficult to obtain liability coverage, according to an article in Business Insurance. Contractors performing vegetation management or transmission and distribution line work have seen increased insurance rates or a lack of available coverage, forcing some of them to decline work, brokers say.

According to the article, some of the largest insurers that used to be silent or more flexible in their coverage now have mandates to exclude wildfires. For example, some insurers are not quoting without a full wildfire exclusion, regardless of the state. Other insurers that are willing to provide coverage want to first see strong risk management protocols in place. 

“What are your vegetation management protocols? What is the protocol if it is a high wind day with dry air temperatures? What kind of protocols do you put in place in order to ensure the likelihood that a fire won’t be created by the work that you’re doing?” said Danette Beck, Valhalla, New York-based national construction practice leader at USI Insurance Services LLC.

Contractors also need to review their contracts with utilities and make sure the cost of that insurance is going to be included as part of their bid for the work, she said.

According to the article, California has historically seen the largest share of wildfire losses, but large severity wildfire events are spreading across the country. There are fears that wildfire losses will eventually occur across Midwestern and Southern states including Texas and Florida, and even in Eastern states.

In 2020, five wildfires in Western states accounted for damages of over $1 billion. Future litigation is also a concern, as the potential exists for contractors that perform utility work to be pulled into lawsuits.