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   Utility Damage Loss Of Use
P:  6/8/2007 8:21:39 AM
Utility Damage Claims Specialist

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Total Posts: 10
Last Post: 6/26/2007
Member Since: 6/1/2007

A large national telecommunications company has a business practice of always assessing a loss of use charge on its invoices it sends out to contractors for damaged telephone and fiber optic cables.  The loss of use charge is based on what it would cost the company to rent a competitor's facilities to restore service to its customers while its own facilities are being repaired by splicing technicians.  The interesting thing is I have never known this company to actually rent a competitor's cable while its own cable is being repaired but the charge is always assessed anyway.  The formula used to compute loss of use is $1.42 x the number of customers out of service.  This utility explains that they are charging for loss of use because they have been denied the right to use their facilities for the time that repairs are being made.
 
Loss of use on utility damage claims is fairly new (less than 10 years old), and there has been a patchwork quilt of litigation across the country with some jurisdictions allowing the charge and some disallowing it.  Opinions from those courts that deny loss of use reason that it is a windfall for the utility and since the utility was not precluded from obtaining income from its customers during this time since no refunds were given, then the utility has not incurred a loss.
 
I am wondering how other adjusters handle loss of use since the utility, in this situation, did not lose profit as it did not have to give refunds to customers and did not incur any costs that it would not have incurred but for the accident? 
 
 

Revisions : 0   |    Posted:  6/8/2007 8:21:39 AM   |   IP:  Recorded    |    Report this post


 There are 7 replies to this message.  There are 7 replies on this page.

P: 6/8/2007 2:07:50 PM
sspalto

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Total Posts: 178
Last Post: 6/10/2007
Member Since: 1/1/2007

I'm surprised to hear that some courts have denied loss of use in this factual situation.

One of the most generally agreed principles among adjusters who know their stuff legally speaking is that loss of use is an entitlement to the claimant based on the rental value of the item. There is no requirement (as some inexperienced adjusters think) that there be an actual out of pocket loss.

Of course this comes up mostly in auto cases. The utility situation may raise other issues--such as how was the magic 1.42 factor arrived at and why is it so universal. Is it a true rental value?

Revisions : 0   |    Posted:  6/8/2007 2:07:50 PM    |    IP:  Recorded    |    Report this post
P: 6/11/2007 1:16:08 PM
Utility Damage Claims Specialist

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Total Posts: 10
Last Post: 6/26/2007
Member Since: 6/1/2007

Thanks Sspalto for your post. 
 
The interesting thing about these, at least for fiber optic cables, is that the utility has a ring system so they have a redundant feed so the customers don't experience an interruption in service.  This is known as the "spare boat doctrine" from maritime law and is often cited by those courts that deny loss of use.
 
In the case law I've researched a fiber optic repair is realitively inexpensive and is typically in the $20,000 - $25,000 range.  The utility then adds maybe $600,000 - $800,000 for loss of use which is 37+ times the cost of the actual repair.  This is what I meant by "windfall" for the utility when they have no out of pocket costs other than the actual repair and no loss of income.
 
The magic $1.42 factor for copper conductors is, in the words of the utility, "a market value for our facilities based on the tariff rates for like kind of service".
 
 
 
 

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P: 6/18/2007 11:08:04 AM
jhetfield99

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Hi, I check these boards every once in a while and your topic caught my eye since I also highly disagree with paying loss of use to utilities.  As you've alluded to, most all of these networks have built-in redundancies that are necessary for their business and really have lost nothing during a cable or fiber cut.  In other words, they are simply charging you for potential loss of profit.  As for the $1.42 per line, that is simply a calculation for a low rate for "minimum service" that could potentially been used by the cable it it had been in use or rented.  As for the amount they are charging, they are simply charging what they think they can get away with without causing too much commotion.  I once had a bill from Embarq that charged $1,833 per fiber pair!!  When you see that as shock factor, all of a sudden, $1.42 per pair doesn't sound as bad. 
 
The old argument of comparing phone line rental to car rental should not be a simple fix to make you pay their loss of profit bill.  I believe they need to provide case law from that state showing paid loss of use
 
As you can see, I have had some experience with this and found a vendor that is very good at getting the Telecoms to drop their loss of use as well as lower their construction, admin costs. (most of what I typed above is a regurgitation of what I have learned from them).  They handle a variety of utility, bridge, and spill claims.  Here is their website if you're interested: www.elitesvcs.com.  Obviously their service isn't free ( I believe they earn a % of the savings they get the claimant to agree to),  but they are very good at what they do from my experience.  I believe I worked with Mr. Carnes there.  Hope some of this helps.  Good luck.

Revisions : 0   |    Posted:  6/18/2007 11:08:04 AM    |    IP:  Recorded    |    Report this post
P: 6/19/2007 8:55:09 AM
Utility Damage Claims Specialist

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Total Posts: 10
Last Post: 6/26/2007
Member Since: 6/1/2007

Excellent post jhetfield!  I too specialize in these and have adjusted over 12,000 utility damage claims and have never paid loss of use to a utility.  I primarily adjust claims in Missouri and Kansas and we have no case law supporting loss of use.

It always amazed me when I was claims manager for an electric utility and would send out an invoice for $10,000 in damages and I would receive a check from the construction company's insurance company for $10,000 without questioning the invoice.  I always had some room for negotiating a 10% - 15% reduction but most adjusters have no experience with utility damages and don't know how to scrutinize the invoice or research the event.  Very often the utility will take a business decision to do repairs a certain way that simply isn't reasonable or customary and the result is a drastically increased repair invoice for the tortfeasor.  Here is a very common example - a car runs off the road in a rural area late on a Friday night and breaks a utility pole in half.  The electric utility takes the decision to dispatch a repair crew at 1:00 a.m. on a Saturday morning to replace the pole.  If the span isn't too long (the distance between poles) the utility usually has the option to float the conductors (disconnect the wires from the damaged pole and allow them to be supported by the next two poles).  So, the utility can either dispatch a crew to replace the pole on an overtime rate in the middle of the night, or they can float the conductors until Monday morning then dispatch a repair crew to effect repairs on a regular time labor rate.  When I was an adjuster for Progressive I had this very situation happen and successfully reduced a $3,100 damage claim to $1,800.
 
Anytime you need assistance with one of these feel free to e-mail me at dpack@capitalelectric.com
   

Revisions : 0   |    Posted:  6/19/2007 8:55:09 AM    |    IP:  Recorded    |    Report this post
P: 6/26/2007 1:10:49 PM
Utility Damage Claims Specialist

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Last Post: 6/26/2007
Member Since: 6/1/2007

An insurance company I consult for just sent me a new damage claim for this same telecommunications company.  The invoice is for over $10,000 and the loss of use component is $2,100.  The interesting thing about this one is that only the jackets of the two telephone cables were affected and none of the conductors inside were damaged meaning that no customers sustained a loss of service, yet the company is attempting to claim they sustained a loss of use.  When I have negotiated a settlement I'll make another post giving the settlement amount to demonstrate to the forum the amount of "fluff" that is built into these claims.    

Revisions : 0   |    Posted:  6/26/2007 1:10:49 PM    |    IP:  Recorded    |    Report this post
P: 6/26/2007 3:54:28 PM
TRon

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Last Post: 7/6/2012
Member Since: 9/30/2006

Look forward to your further posts, this is interesting.

I Post Large, it is easy on old eyes!!

Revisions : 0   |    Posted:  6/26/2007 3:54:28 PM    |    IP:  Recorded    |    Report this post
P: 12/2/2011 10:15:26 PM
Sr.Utility Claims Adj.

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Last Post: 12/2/2011
Member Since: 12/2/2011

 

This topic i deal with daily.  My thought is this if you take a child in a store that sells crystal vases.  

 

The child knocks a vase worth 50K off the shelf and breaks it >>>>

 

1. Should the owner write it off as the cost of doing business he should expect things like this to happen when open to the public?

 

2. or charge the person for what a broken vase is worth after its destroyed?  I think not

 

Well I think she owes full price for the broken vase, she’s in control of the child (backhoe) not the owner and her child’s behavior (negligent behavior) caused the damage and sorry to say she can’t make a deal for $20.00 for  a broke vase after the damage when prior the vase has a cash value of 50K.

 

 

So when I hear the fiber didn’t put no one out of service so why the loss of use..

 

 When a cable goes down the repair team has to stop the productive job that makes the utility companies money to deal with damage that 99.9% of the time could have been avoided why they shouldn’t pay for loss of use of the cable. 

 

Florida case law was set because no one understood it and it needs to be heard again with people who understand it more. 

 

Just because the phone company takes extra measures by being able to jump someone over to another line to avoid complete outage is why people think it’s not a loss and they install those extra fibers for future customer and growth, not damagers.

 

What if someone called to rent the whole fiber ... then can it be charged? 

 

 Well then we have to disclose who it was and then we are block by the privacy act and why would anyone want to say who there customers are so someone can sell the information to competitors...

 

 OOO and from experience,

 

 How many times have you had your cable or someone you know had the internet, cell phone, electric, water, gas, phone, ect...  go down and you get tired of it call the utility company to complain and to make you happy they just give you a credit on your account..

 

Well the customer service dept. has no clue what’s going on and probably don’t keep track of it..

 

So that means if it is damage think of all the searching and time spent and labor hours charged to a claim that would be trying to figure it out...

 

Now I know when they figure the cost it seems high,   it’s based on what they would of made on that cable for the time it was down had it been available//  

 

 

Now you say but they didn’t rent the service out.. well would you tell a new client who wants to rent the cable .. well right now my line has been damaged so after its fixed we will get your service going…who wants to RENT A CABLE THAT’S BEEN DAMAGED……

 

 So when you see a fiber repair for 5k and loose of use 700k I think the 700k is a bigger loss shoot just for the inconvenience they should get be able to collect it that’s a lose is a huge deal ...

 

But the utilities do understand that and will work with people but saying  course not you fin… just because they have to work all hours day or night rain, sleet, or shine.. 20 below zero or 120* … Whatever t takes to keep my internet going…..they should get Loss Of Use (sell) for the vase(broken cable down…..     hope this better helps to understand why they charge this and why it its owed!! 

 

Sr.Utility Claims Adj.

Revisions : 0   |    Posted:  12/2/2011 10:15:26 PM    |    IP:  Recorded    |    Report this post

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