Condo Media - June 2017 - 18

Asked & Answered

Insuring Solar Panels

Where Panels are Located Can Make a Difference

Q
A

18

CONDOMEDIA

Our board is considering installing solar panels in
our community and we're wondering: Will the association's master policy cover the cost of repairing
or replacing them if they are damaged or destroyed,
or will we have to obtain a separate policy to provide
that coverage?

Don't you hate it when we begin an answer to a question
with "that depends?" Unfortunately, that's the unavoidable response to almost any question dealing with insurance. In this case, Gregory Pierce, LIA, CPA, vice president and director of business development at NorthStar
Insurance Services, Inc., says the answer depends, in part,
on where your panels are installed.
If they are on roofs, the most common arrangement, the
property damage coverage for "buildings" would probably
cover the panels. The standard policy language defines
buildings to include: "fixtures, including outdoor fixtures
and signs," "permanently installed machinery and equipment," and "personal property owned by you that is used
to maintain or service the building or structure or its location." Absent language excluding them, Pierce says panels
on your roof would seem to fit within that definition.
If the panels aren't attached to the building, master
policy coverage is less clear. Pierce cautions, "There is a
difference between covered and technically covered." He
sees enough room for interpretation-and disputed coverage-in the policy language to suggest you should probably
obtain what is known as an "Inland Marine" policy, providing separate coverage specifically for building equipment.
Whether the panels are installed on the roof or planted
in a field, you should check with your insurance agent or
your underwriter to verify the coverage. You want your
insurer to be aware that you have the panels, so they
won't be surprised if you file a claim related to them.
Verifying coverage for the panels is only one concern.
You also want to be sure the policy limit reflects the cost
of repairing or replacing them. If your master policy
limit is set at $10 million and the panels you add cost
$500,000, Pierce suggests, you will want to increase your
coverage limit to $10.5 million.
Insuring the panels may or may not increase your premium, Pierce says, depending (there's that word again)

on how your underwriter feels about covering solar
panels. Some companies may not increase your premium
at all, Pierce notes, while others may increase it a lot,
and some may refuse to insure the panels at all. If your
insurer says no, (or if you don't like the cost,) you can
obtain the separate "Marine Inland" policy described
earlier to provide the protection you need.
Either your master policy or that Marine Inland
policy would insure your panels for damage resulting
from storms, fires, water leaks, or other specifically
covered events; but neither would provide coverage
for mechanical failures unrelated to those events. An
electrical surge that severely damages the panels or fries
them completely, for example, would not be covered. To
get that protection, which Pierce says you should have,
you will need an "equipment breakdown" policy, which
would cover specified "accidents," including: "artificially
generated electrical current, including electrical arcing,
that damages electrical devices, appliances or wires."
Pierce has one additional entry on the list of issues
your board should consider, and it applies to the installation of your panels: Make sure you employ appropriate
"risk transfer strategies," by which he means, "include all
the protections you can get" in your contract with the installation company. At a minimum, he says, you will want
to require the company to provide proof of adequate
insurance, indemnify the association from claims resulting from damage for which the contractor is responsible.
You also want to make sure there is nothing in the
contract that would prevent the association's insurance
company from suing the contractor to recover the cost of
a covered claim resulting from something the contractor
did, failed to do, or failed to do properly.
Condo Media - June 2017

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