Is Brown Out Damage to Entertainment Unit and Airconditioner Covered? – Claims Magazine

ISSUE

The insured has an extensive entertainment system, including a television, radio, compact disc player, tape player, computer, and nintendo. All of these items were damaged by a brown out which lasted for several days. The brown out also damaged an air conditioner motor/compressor. The insured filed a claim under his HO 00 03 04 91. Is there coverage for the loss to these items?

ANALYSIS

The peril relevant to analysis of this claim is as follows:

COVERAGE C – PERSONAL PROPERTY

. . . .

15.Sudden and accidental damage from artificially generated electrical current.

This peril does not include loss to a tube, transistor or similar electronic component.

Was there "sudden and accidental damage" in spite of the fact that the brown out occurred over a period of several days? Where a power disturbance commences suddenly and accidentally but the effects persist over a period of time, the resultant damage should be considered "sudden and accidental." In Vanguard Ins. Co. v. Connett, 270 F.2d 868 (10th Cir. Kan. 1959), the federal appeals court had to determine whether sudden and accidental damage had occurred where the insured's furnace controls short-circuited during his two-week absence from the dwelling, and the malfunction allowed the house to overheat. This caused extensive structural damage to the house and the furnishings therein. The court found this damage to be "sudden and accidental injury . . . resulting from electrical currents artificially generated" even though the heat damage occurred over a period of days.

Does the exclusion for loss to "tubes, transistors, or similar electronic components" preclude coverage for any of the devices damaged?

The exclusion does not apply to the airconditioner motor/compressor. Motors and compressors are electrical devices, rather than electronic components.

Electrical devices should be distinguished from electronic components. The best working definition of "electronic components" would be all devices or parts used in forming an electronic circuit. An electronic circuit controls the electrons present in electrical energy to convey information or perform a task other than one requiring the mere power of electrical current. An airconditioner motor/compressor merely uses the power or energy of electricity to perform work. It is thus not an electronic device.

It may also be helpful to categorize items by the type of store at which they are purchased and the trade which services them. Large electric motors are an item distributed by electrical supply houses.

They would not be sold by electronics stores or distributors, whereas resistors; capacitors; inductors; integrated circuits; tubes; transistors; diodes; rectifiers; relays; certain types of transformers; circuit boards; internal wiring; rosin-core solder; special connectors, plugs, jacks, and wiring; and other devices used in electronic circuits would be.

The home entertainment devices are electronic; thus, the exclusion specifically applies to any discrete tubes or transistors. However, modern entertainment devices do not use many discrete tubes and transistors, but rather, they use large scale integrated circuitry. Does integrated circuitry constitute a "similar electronic component" within the exclusion from this peril?

In 1952, when the broad form was developed, the peril was introduced as follows:

U. Sudden and accidental injury to electrical appliances, devices and fixtures, if covered under the building items(s), including wiring, caused by electrical currents artificially generated.

By 1955 the coverage was extended to include non-building items, with the exception of television picture tubes. With only picture tubes excepted, the industry encountered a lot of radio tube losses which were being paid only because it was difficult to tell whether the tube burned out from old age or from a surge of current. The peril was then reworded to exclude loss to tubes, transistors, and similar electronic components.

To determine the approximate scope of this exclusion as respects radio and television, PLRB collaborated with an electrical engineer. All parts of a radio or television set were classified in one of three categories:

A. Covered Category – Cabinet, jacks, switches, wiring, fuses

B. Covered Category – Coils, transformers, condensers (capacitators), resistors

C. Excluded Category – Tubes, transistors, "and similar electronic components," i.e., tubes, transistors, diodes, rectifiers Our understanding is that these categories were developed on the basis of the function of the items. Diodes and rectifiers are excluded along with transistors and tubes because they perform a similar function in the radio or television set.

This analysis was helpful based on the vacuum tube technology of the 1950s and early 1960s. Then the transistor made the vacuum tube obsolete for most applications.

Enter then, the integrated circuit, a small "chip" with dimensions measured in millimeters. A tiny chip incorporates the equivalent of thousands of transistors, resistors, capacitors, wires, etc. This chip performs functions similar to those performed by discrete tubes, transistors, diodes, and rectifiers and also performs functions similar to those performed by transformers, condensers, resistors, and wires. There is no way to separate the various components of the chip. Thus, for purposes of an exclusion, which must be interpreted narrowly, we do not believe that a microchip is an electronic component "similar" to a discrete tube or transistor.

As is the case with tubes and transistors, it is difficult to determine whether an integrated circuit has been damaged by electrical current or has failed for other reasons. Further, it is difficult to find a technician capable of repairing this equipment, and thus many losses are unnecessarily classified as total. In light of these difficulties, we suggested to ISO that they consider revising the forms so as to exclude losses to all electronic components, or, so as to cover these losses, but only as specially limited or as endorsed for an increased premium.