ERCOT is having a very bad two weeks in court. And things just got worse for power providers in Texas, too.
Nine London-based insurance companies joined a massive lawsuit this week brought by scores of the world’s largest and most influential property insurance companies seeking to force the Electric Reliability Council of Texas and three dozen Texas electric providers to reimburse them for billions of dollars in damages related to Winter Storm Uri in February 2021.
Lawyers for insurance underwriters at Lloyd’s of London, Atrium, Brit Global, Canopius and W.R. Berkley filed a complaint Thursday in Travis County District Court seeking to add their names to lawsuits claiming that ERCOT and the energy companies were grossly negligent for failing to “winterize” the Texas power grid before record-low temperatures and ice storms struck the state for four days starting Feb. 15 of last year.
The nine insurance carriers join lawsuits filed Dec. 28 by Liberty Mutual, Farmers, State Farm, Travelers and more than 70 other insurance carriers claiming that ERCOT and power giants Luminant, NRG Energy, Calpine and 30 other electric providers ignored multiple warnings to protect the state’s electric supply.
Their combined failure led to extensive power outages that killed at least 240 people and did billions in property damage to the insurance companies’ clients, the lawsuits allege.
“ERCOT’s behavior was egregious, unreasonable, and in no way guided by good utility practice,” according to a 62-page complaint filed by Brown Fox partner Jordan Campbell on behalf of the United Kingdom insurers. “ERCOT’s loss of system reliability, and the resulting damages to plaintiffs, were avoidable and would have been prevented had ERCOT acted reasonably or employed good utility practice.”
“ERCOT knew or should have known of the unreasonably dangerous condition created by the lack of preparedness and readiness to confront the winter storm,” the lawsuit alleges.
The original lawsuits, filed between Christmas and New Year’s Day, received little news media attention. The plaintiffs in those cases are represented by Munck Wilson, Cozen O’Connor and Kane Russell Coleman Logan.
ERCOT, which is represented by Winstead, has asked the Travis County District Court to transfer the litigation to a series of pending lawsuits before the Austin Court of Appeals, which is being asked if the Texas Public Utilities Commission or the Texas district courts have proper jurisdiction over these disputes.
In the complaint, Campbell argues that the power companies had “a duty to adequately winterize” their facilities to “supply steady, continuous, and adequate, electricity to the ERCOT power grid.”
“Defendants’ acts and/or omissions rose to the level of gross negligence,” the insurance companies claim. “Defendants were aware of the risk of harm to plaintiffs’ insureds yet exhibited conscious indifference to the rights of plaintiffs’ insureds, which proximately caused the damages complained of herein.”
Last week the Dallas Court of Appeals ruled that ERCOT, a nonprofit entity created by the PUC, does not have sovereign immunity and can be held liable for its actions. In addition, a federal bankruptcy judge in Houston overseeing the Brazos Electric Power Cooperative’s Chapter 11 case convinced ERCOT to enter into mediation with Brazos over a $1.9 billion power bill from Winter Storm Uri.
Meanwhile, lawyers representing hundreds of individual victims in wrongful- death, personal injury and property damage lawsuits are pushing those cases against ERCOT and dozens of energy companies toward trial.
The Texas Lawbook has made multiple efforts to obtain comments from ERCOT, the power companies and their lawyers.
ERCOT and the power companies “unwillingness to accept or adopt any minimum weatherization standards runs contrary to the common law of Texas,” the insurance companies’ lawsuit contends. “The Supreme Court of Texas has long held that, separate from any contractual obligations, a common law remedy exists for the tortious failure of an electric company to supply electricity.”
The lawsuit argues that ERCOT and the power generators “failed to properly prepare for a widely predicted, forewarned, and entirely foreseeable event” that the companies claim caused “water infiltration and subsequent property damage.”
ERCOT, along with the power-generating companies, should have increased electric-production capacity in Texas leading to the February 2021 storm, but “consciously chose not to do so,” the complaint states.
The result, according to the lawsuit, was extended power outages for homes, offices, retail stores and manufacturing facilities.
“The frozen water caused the pipes to break and when the pipes thawed, leaks from the damaged pipe systems caused significant water damage,” the complaint states.
The lawsuit argues that the “malfeasance and nonfeasance of the defendants cannot be apportioned with reasonable certainty” because the Texas power grid is interconnected and indivisible. Electric supply shortages in one part of Texas cause “rolling blackouts throughout all other parts of the system.”