Truth is in the Details ™

The Case of the Hydrophobic Hydro Plant

Synopsis:
A complex loss where good business decisions greatly complicated determination of insurance coverage for property damage as well as business interruption cost.

Background:
The generator floor in a hydroelectric generating facility flooded and one generator went underwater while generating at 4,160 volts. A twin of the wet generator had broken its shaft prior to the flood and was out of the facility at the time. The owner decided to make significant engineering changes to the design of the generators while they both were out of service and to have the changes incorporated prior to reinstalling them. The design changes resulted in a significant extension of the time the flooded generator was out of service.

Assignment:
TI was requested to determine the costs associated with repair of damage due to the flooding incident, and to separate repair costs from the costs of re-engineering and upgrading the generator sets. TI was also requested to determine the date on which repair of flood-related damage could have been completed and to then calculate the lost revenue incurred by the owner only during the time necessary to repair the flood damage.

TI worked closely with the generator repair contractors and carefully separated damage caused by the flood from the costs associated with redesign and improvement. TI then obtained historical flow records for the involved river from the USGS. Based on historical river flow data and the insured’s production data, TI correlated river flow volume with electrical production and then calculated lost power production during the period of downtime. Thus, in the end, the insurer paid only for actual loss related repair and only for revenue associated with power that could have been produced by the involved generator during the time necessary to repair flood-related damage.

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