The Department of Energy recently earmarked more than $117 million in funding under the American Reinvestment and Recovery Act of 2009 to increase the development and use of solar technologies in the United States. As with any developing technology, the evolution of solar power brings with it many unknowns for the manufacturers, operators and end users of solar products. Not surprisingly, the growing use of solar power has resulted in a variety of legal disputes and insurance claims.
Challenges For Manufacturers, Operators and End Users
States began passing legislation aimed at promoting solar energy in the 1970’s and 1980’s. See, e.g. Illinois Comprehensive Solar Energy Act, 30 Ill. Comp. Stat. 725/1 (1977) (promoting solar energy systems as effective and feasible alternative renewable energy sources); California Solar Shade Control Act, Cal. Pub. Res. Code § 25980 – 25986 (1978) (seeking to balance benefits of planting trees against benefits of promoting solar power); Ariz. Rev. Stat. § 33 – 439 (1980) (forbidding contractual prohibitions on installation of solar devices).
Over the years, the development and use of solar technologies has presented a number of different challenges for manufacturers, operators, and end users of solar products.
- Manufacturers may be concerned about damage to equipment or loss of equipment during transit.
- Operators may be worried about delays in start-ups, or business interruption.
- Manufacturers and operators both may have to guard against machinery breakdowns, overheating or fire damage.
- Residential end users may be more concerned about weather damage from hail or high winds, or about the possibility that area vegetation, or even an addition on their neighbor’s home could block the sun from reaching their solar panels.
- Residential and commercial end users both may also question what happens if the technology does not provide the energy performance or cost savings that was promised.
As discussed below, a variety of lawsuits relating to solar energy products have made their way through the courts. These suits have included allegations of nuisance, misrepresentation, property damage, faulty work and breach of contract, as well as requests for injunctive relief. Some of these suits have also involved insurance coverage questions. The discussion here is not intended to be exhaustive, and does not address coverage under policies that may have been written specifically to insure solar risks. However, it is intended to briefly highlight certain coverage issues that may arise with respect to solar energy technology.
Nuisance and Injunctive Relief
One of the earliest lawsuits involving solar energy arose out of a dispute between two homeowners in Wisconsin in 1982. In Prah v. Maretti, 321 N.W.2d 182 (Wis. 1982), a homeowner sought injunctive relief on the basis that a new home construction would prevent sunlight from reaching his solar panels. The court found that unreasonable obstruction of access to sunlight could constitute a private nuisance, and that therefore, the homeowner had stated a claim upon which relief could be granted. O’Neill v. Brown, 609 N.E.2d 835 (Ill. App. Ct. 1993), involved a similar dispute in which one homeowner sought to enjoin another homeowner from building an addition that would affect the performance of the first homeowner’s solar panels. However, unlike the Prah court, the O’Neill court denied the request for an injunction. The O’Neill court explained that “where a structure serves a useful and beneficial purpose, it does not give rise to a cause of action [for nuisance] . . . even though it causes injury to another by cutting off the light and air. . .” 609 N.E.2d at 839 (citation omitted).
Insurance coverage for nuisance claims frequently turns on whether the definition of “personal injury” in the policy includes wrongful entry or invasion of the right of private occupancy. See, e.g., Gen. Accident Ins. Co. v. W. Am. Ins. Co., 42 Cal. App. 4th 95, 103-04 (1996) (including trespass and nuisance as examples of torts encompassed by policy definition of “personal injury”). Thus, coverage may be available for some nuisance claims depending on the policy language at issue.
Claims for purely injunctive relief on the other hand, are less likely to be covered by insurance. See, e.g., 116 Commonwealth Condo. Trust v. Aetna Cas. & Sur. Co., 742 N.E.2d 76, 79 (Mass. 2001) (“the trust could not reasonably expect that the policy would cover an action for injunctive relief that did not seek money damages”); Jones v. Farm Bureau Mut. Ins. Co., 431 N.W.2d 242 (Mich. Ct. App. 1988) (“damages” does not encompass strictly injunctive relief). But see AIU Ins. Co. v. Superior Court, 799 P.2d 1253 (Cal. 1990) (CGL policies which provided coverage for all sums that insured became legally obligated to pay as “damages” or “ultimate net loss” because of property damage, covered costs of reimbursing government agencies and complying with injunctions ordering cleanup under Comprehensive Environmental Response Compensation and Liability Act and similar statutes).
Suits alleging that a solar product manufacturer misrepresented the extent to which its product would provide a cost savings, or misrepresented how it would perform are not uncommon. For example, in FTC v. Solar Michigan, Inc., No. 86-cv-40368, 1988 U.S. Dist. LEXIS 16797 (E.D. Mich. Sept. 27, 1988), the court found that a solar energy heating systems manufacturer who had promised savings of 20 – 60%, had misrepresented the potential for savings where it had no evidence to support its claims.
Coverage for claims arising out of alleged misrepresentations can depend on whether the alleged misrepresentations meet the policy definitions of bodily injury, property damage or personal injury. See, e.g., Frohberg v. Merrimack Mut. Fire Ins. Co., 612 N.E.2d 273 (Mass. App. Ct. 1993) (misrepresentation claims are not property damage); LaFrance v. Travelers Ins. Co., 594 N.E.2d 550, 551 (Mass. App. Ct. 1992) (coverage under “personal injury” definition is limited to torts enumerated in that definition, such as false arrest, detention, imprisonment, or malicious prosecution).
A significant number of suits have also been brought alleging property damage to the solar products themselves. These have included suits against insurers. Coverage for such claims may depend in large part on the policy’s definition of “property damage.” Many policies define property damage in pertinent part as “physical damage to or destruction of tangible property” and, therefore, require actual damage or destruction to property for coverage to be available. However, some policies also provide coverage for “loss of use” of tangible property that has not been physically damaged or destroyed.
In University Mechanical Contractors of Arizona, Inc. v. Puritan Insurance Co., 723 P.2d 648 (Ariz. 1986), a contractor purchased piping and o-ring couplings from a solar heating and cooling system supplier. After the piping was installed, leaks developed due to problems with the pipes and o-rings. The supplier’s insurance policy defined “property damage” as injury or destruction to property, or loss of use. The Supreme Court of Arizona held that because installation of the faulty o-rings had resulted in loss of use, and the policy covered loss of use, coverage was available.
In National Technical Systems, Inc. v. Hartford Fire Insurance Co., No. B151340, 2003 Cal. App. Unpub. LEXIS 7134 (Cal. Ct. App. July 24, 2003), the policyholder’s customer alleged that its solar panels had been damaged during testing conducted by the policyholder. The boiler and machinery policy at issue defined “accident” as a “sudden and accidental breakdown of [covered equipment] . . . which manifests itself at the time of its occurrence by physical damage that necessitates repair or replacement of the covered equipment.” Id. at *27. Finding no evidence of a breakdown of equipment, or physical damage to the solar panels that manifested at the time of the testing as required under the policy, the California Court of Appeals affirmed summary judgment for the insurer, finding no coverage.
Disputes have also arisen over allegedly faulty installation of solar products. Coverage for claims involving allegedly faulty work may turn on whether the policy contains a “your work” or “your product” exclusion, as well as on whether the facts as alleged implicate those exclusions. This was the result reached in Coppola v. Unigard Security Insurance Co., 662 N.Y.S. 2d 858 (N.Y. App. Div. 1997). In that case, a homeowner sued the policyholder installer alleging faulty installation of a solar greenhouse. The policy contained “your work” and “your product” exclusions. The Appellate Division affirmed the lower court’s denial of the insurer’s motion for summary judgment, finding questions of fact existed as to the applicability of the exclusions.
Breach of Restrictive Covenant
Additionally, a number of suits have been brought against homeowner’s associations, where the associations had sought to enforce restrictive covenants that would have had the practical effect of preventing the installation of solar panels. In Garden Lakes Community Ass’n v. Madigan, 62 P.3d 983 (Ariz. Ct. App. 2003), the homeowner installed a solar device without obtaining prior approval from the homeowner’s association. In siding with the homeowner, the court found that a restrictive covenant that barred alterations to property without homeowner association approval violated an Arizona statute forbidding contractual prohibitions on installation of solar power devices. The court reached a contrary result in Taylor v. Ridge at the Bluff’s Homeowner’s Ass’n, 579 So. 2d 895 (Fla. Dist. Ct. App. 1991) and held that a Florida statute barring governing bodies from prohibiting installation of energy devices based on renewable resources, including solar energy, did not apply to homeowner’s associations.
Claims arising out of the breach of a restrictive covenant may be covered under some specialty policies that are specifically developed for such risks. For example, some insurers offer restrictive covenant indemnity insurance which is intended to cover legal expenses incurred in any action or proceeding relating to the enforcement or breach of a restrictive covenant. Such policies can also provide indemnification against loss arising out of the cost of demolition and/or restoration of buildings, or for the decrease in the market value of the property if the covenant is enforced.
As the development and use of solar power grows, future lawsuits against solar technology manufacturers and operators and homeowner disputes are possible. If such suits mature into insurance claims or coverage disputes, insurers will likely face traditional coverage questions such as whether the allegations fall within the policy’s terms and conditions, or if coverage is barred by an exclusion.