Beyond the Outages: Regaining Your Business Footing--Recovering Your Losses

Beyond the Outages: Regaining Your Business Footing--Recovering Your Losses

The energy crisis has complicated the efforts of many California businesses to continue to operate, let alone maintain profitability. Statewide, electrical outages and escalating gas and electricity prices have cost businesses millions of dollars a day, and added uncertainty to business operations, the workforce and the economy.

There are some specific considerations business executives should understand involving insurance, energy contracts, special exemptions and environmental issues, that are important to obtaining relief and recovery. Knowledge in these areas is equally important for taking preventive measures, to minimize the financial impact of future occurrences similar to those experienced in the past few months

Insurance Recovery. California businesses that have suffered property damage or possible liability because of power outages may have viable claims for the recovery of certain costs and damages under their insurance policies. This could be a huge benefit to businesses that have had production spoiled, computer data lost, facilities damaged or, in some cases, revenues cut due to power interruptions. Insurance also may provide a source of recovery for companies facing certain types of power interruption-related liability. Two keys to insurance claims: policy wording is critical and often must be carefully analyzed in light of relevant legal standards to take full advantage of the coverage provided, and time is of the essence as notice to insurers of possible claims must be provided promptly.

Relief From Damaging Energy Contracts and Costs. Companies may want to terminate or modify their existing contracts with California utilities or other gas and electricity providers. Companies may want to change their utility agreements, obtain alternate suppliers, institute hedging strategies or pursue other opportunities. In addition, some companies may need to commence negotiations or litigation to recover losses, damages or to remedy a contract breach. What the current crisis demonstrates is that most California companies also need to immediately reassess their energy buying strategies and contracts in order to prevent this harm from continuing.

Blackout Exemptions. Companies have obtained exemptions from blackouts in the current crisis. If power interruptions at your company could threaten public health or safety, or endanger an essential service, there are ways for you to seek a regulatory exemption from utility blackout orders.

Environmental Services: Many environmental issues are arising for businesses confronting regulatory changes, seeking emissions credits or looking for exemptions to deal with the energy crisis. For example, most companies relying on portable generators are unaware of the permitting requirements, emissions limitations, fuel storage requirements and siting limitations that may apply. Similarly, high costs, penalties and other potential liabilities can be avoided if businesses are aware of the regulations and possible exemptions that apply.

Labor and Employment Issues. Power outages leave employers facing a broad range of workforce questions. Companies may have altered work schedules, shifting to non-peak energy hours, for example, to avoid production disruptions from outages. Companies will want to ensure they are in compliance with laws and agreements.

McKenna & Cuneo is already assisting many companies with their energy-related consequences of this crisis. Attorneys listed below are available to discuss your needs.

Insurance Issues: Richard Opper (619) 595-5439

Matthew Schlesinger (202) 496-7651

Joseph Butler (213) 688-6129

Energy/Contracting Issues:

Michael Kavanaugh (213) 688-6233

Carol Smoots (202) 496-7196

Stephen Gardner (202) 496-7661

Blackout Exemptions:

Greg Evans (213) 688-6240

Carol Smoots (202) 496-7196

Labor & Employment Issues:

Anna Masters (213) 688-6215

Stephanie McNutt (213) 688-6181

Dan Johnson (202) 496-7786

Environmental Issues:

Charles Pomeroy (213) 688-6256

Stan Landfair (415) 267-4170

Richard Opper (619) 595-5439

For more information, please contact: