Insurers Sue ERCOT to Recoup Costs From $10 Billion Winter Storm

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Nearly a year after Texas' electric grid didn't hold up to a record-setting winter storm, insurance providers are suing ERCOT to recoup the $10 billion in damages they’re expected to pay out.

More than 130 insurance companies are named in the suit, saying it was ERCOT’s negligence, along with its suppliers, that led to last February’s power failure.

The complaint, filed in a Travis County court, says in part:

"Although ERCOT and the PGCs could have been prepared to meet the peak levels
of demand experienced during Winter Storm Uri, ERCOT and the PGCs failed to adequately prepare for the 2020/2021 winter season, and in fact, planned to fail."

To date, there have been more than 500,000 claims across the state.

Public adjuster TJ Ware said while it wasn't Texas’s costliest catastrophe, it was unprecedented in many ways.

"The scale of the loss here was huge. It was massive. That would be the situation for the insurance companies to take the massive legal action they've taken,” said Ware.

It's a process called subrogation, and it’s standard practice in the insurance industry to recoup costs.

Recently, it helped insurers get back $11 billion in the wake of California's Camp Fire.

If a settlement is reached in this case, the Insurance Council of Texas, which isn’t part of the lawsuit, said it could put money back into the pockets of North Texas homeowners.

"If they paid a deductible to repair, replace or fix anything, any damage done to their house, they may get that. Depending on the settlement, they may get a portion of that or all of that deductible back. So, this is a positive for insurance customers and the citizens of Texas,” said Communications Director Rich Johnson.

ERCOT said it won’t comment on pending litigation.

Last week, it announced its generators were ready for winter weather after completing on-site winterization inspections now that the state requires facilities to prepare.

Depending on what happens in court, insurance professionals said there could be more changes to come.

"We'll see. Sometimes these massive events cause changes statutorily, legally, and in the way that insurance companies deal with their customers and how they write their policies,” said Ware.

About 90% of those 500,000 claims filed have been closed.

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