What does the recent significant growth in the solar energy sector mean for construction-defect claims? A panel of experts aimed to answer that question during a 2024 CLM Construction Conference session, titled, “Solar Panel Claims are Heating Up.”
The session speakers included Richard Somes, attorney, Tyson & Mendes LLP; Chris Lambert, casualty claims manager, Engle Martin; Victoria Godwin-Reese, attorney, Chartwell Law Offices; Donna Friis, construction practice leader, Envista Forensics; and Holly Rose, senior claim manager, Nationwide Insurance Company. According to Godwin-Reese, “Utility-scale solar [accounts] for 53% of all new electric capacity added to the grid in 2023.” However, she continued, “Obviously, with rapid growth and use of this newer technology, we are going to start to see new and different claims coming up. …As solar panels heat up in popularity, so do the claims.”
Friis discussed two different types of solar panels. “The first one is what we traditionally think of as a solar panel where it takes the energy from the sun and converts it to electricity,” she explained. The other type uses “heat transfer to preheat water,” which can be used to heat pools and preheat water for water heaters.
Insurance Coverages
According to Lambert, “Policies do matter. Each carrier is different; each policy is different, but typically, we do see that solar panels are covered as long as they are permanently mounted, fixed to the roof, and then become part of the roof itself. So, think about the normal perils you would have: Wind comes to mind, hail comes to mind, lightning, vandalism, tree limbs that might fall on it…fire, things like that.”
Lambert added, “If you’re the owner of the property, the solar panels are yours and you have insurable interest there. However, there are a lot of situations where you’re leasing solar panels. So, in that case, the solar company provider and the power provider that’s providing those panels is going to have insurable interest as well.”
Godwin-Reese pointed out that a vast majority lease solar panels compared to owning them, explaining, “Does someone really want to buy technology that may be outdated in the next five years, six years? That’s why leasing is more popular.”
Solar Insurance Claims
The top five states for solar panel homeowners insurance claims in 2021 were California, Texas, Arizona, Florida, and Colorado, according to the speakers. “The average claim for damage to solar equipment during 2021 was for about $3,700; that was after deductible,” said Godwin-Reese. “And roughly two-thirds of them were actual claims resulting from hail and fire.”
California leads the way in claim value, explained Somes, with “a whopping $8,000 per claim…after deductible. …A way to prevent these claims is to enforce code compliance [and] mitigation of damages, essentially.”
Rose noted that homeowners should make sure their insurers are notified when they add solar panels so the carriers know about it, and Somes agreed with that point, stating, “You definitely don’t want that surprise…so, you want to reach out and let them know ahead of time that you’ve got this new system, and then also they may require some additional imbursements.”
Some solar panel-related risks include:
Moisture Intrusion
“Obviously, in coastal areas, we would like to use…more corrosion-resistant fasteners,” explained Friis. “Most of us think of stainless steel or galvanized nails to make that happen.”
Fire
“You have to think about where the battery…and charging station are located,” noted Somes. For instance, keeping the battery in the garage could cause it to overheat. Furthermore, “Firefighters have issues putting out fires in general because of solar panels—just getting onto the roof. Roofs sometimes collapse because the panels are on top of older homes that are not structurally sound.
Some provisions to take when it comes to preparing for fires, Somes continued, include shutting off the electrical connections when there is a fire; structural, electrical, and fire code compliance in relation to system design; ensuring a system is retrofitted to existing construction and design; and system inspection testing.
Environmental Factors
Lambert noted that there are environmental factors to consider in the manufacturing and disposal of solar panel systems. He also said it is important to know what solar panels are made out of. “Approximately 95% of what they’re made of is silicone, which is a very prominent material found everywhere. But that other 5% is a lot of metals: aluminum, copper, silver…even arsenic is involved in the manufacturing process.”
Lambert continued, “Also, the manufacturing process itself can release greenhouse gases into the atmosphere: nitrous oxide, POCs, things of that nature.”
According to Lambert, “Ultimately, when it’s time for that solar system to be replaced once it’s reached the end of its useful lifespan, it has to be done so in a manner that is proper, that is not going to contaminate the environment as well. It needs to be properly recycled or disposed of [and] if it’s not properly disposed of, you run the risk of contaminating the ground or ground water with some of those materials….” He added most insurance policies have strong pollution exclusions in them. “So, you can run the risk of no coverage in those situations.”