Powering up

Wholesaler Nielson, Hurtado is a one-stop shop for power distribution risks

By Elisabeth Boone, CPCU

Flip a switch and your lights come on, your TV screen leaps to life, and your microwave starts to reheat your Szechuan leftovers.

For most Americans, electricity is an unseen yet vital force that we take completely for granted until an ice storm leaves us shivering in the dark or an August heat wave shuts down the local power grid. The people who design, build, maintain, and repair power generating facilities, however, take nothing for granted as they work to keep electricity flowing to our homes, stores, offices, schools, hospitals, and factories.

And if you think generating and distributing electricity is challenging, consider the complexity of arranging insurance coverage for the myriad of exposures faced by these facilities.

Bringing both industry experience and underwriting expertise to the table is Nielson, Hurtado & Associates, Inc. (NHA), a finite wholesale insurance brokerage based in Sandy, Utah, that specializes in placing insurance for power distribution facilities throughout the United States.

Jess Hurtado, cofounder and managing director, has almost 30 years of insurance experience that includes broking, underwriting, alternative risk, claims analysis, risk management, and program management. He began his career in 1978 with Stevenson, Collinsworth & Nielson, an independent agency based in Miami, and subsequently held positions with Bayley, Martin & Fay and Rollins Burdick Hunter, major brokerages that ultimately became part of Aon. Since 1996, Hurtado has worked exclusively in the insurance marketplace for power distribution facilities, focusing on arranging coverage for rural electric cooperatives. In 2005 he left Aon to form NHA.

“What is now NHA’s electric utility program,” Hurtado says, “is over 30 years old and has been operating continuously through a variety of company names. We are proud to be part of this ongoing tradition.

“Since the formation of NHA, we have expanded our business to include not only electric utility cooperatives but also municipal power distribution facilities, public utility districts, generation facilities, and cogeneration facilities,” Hurtado explains. “We have grown from what was essentially a one-carrier market to a wholesale operation with multiple markets within each segment of the insurance marketplace.”

One-stop shop

NHA’s mission, Hurtado says, is “to provide one-stop shopping for brokers and their clients; to coordinate, through our market knowledge and relationships, the most comprehensive coverage and competitive pricing available. We currently place business for more than 50 sub-brokers on a national basis,” he adds, “and our broker count is increasing weekly.”

The NHA staff brings focus and commitment to meeting the insurance needs of electric utility risks. Each staff member was involved with the electric utility program prior to the formation of NHA. Serving as administrative manager is Tonya Hill, who has worked on the electric utility program since 1999. She works closely with the firm’s brokers on all aspects of account placement and management. Will Potter has been part of the utility team since 2002 and is NHA’s key account manager, working with brokers and underwriters in the analysis, underwriting, and placement of accounts.

Hurtado’s son, Jared, has been working with the utility program for four years. He has been serving as an assistant account executive and is preparing to move into a more active marketing and production role. Arianne Ingersoll is the newest member of the NHA team and is responsible for sub-broker licensing and building productive broker relationships.

As noted earlier, NHA arranges coverage for a variety of power facilities, each of which presents its own set of exposures. “Generation facilities can be large or small,” Hurtado says. “They generate power from coal, natural gas, or other fuels; and that is what puts power into the grid. They sell their power to distribution facilities, which generally have multiple contracts to sell power to the end user, which is an individual or business.

“Cogeneration,” Hurtado continues, “is the simultaneous production of electricity and heat using a single fuel such as natural gas, although a variety of fuels can be used. The heat produced from the electricity generating process (for example, from the exhaust systems of a gas turbine) is captured and used to produce high- and low-level steam. The steam can be used as a heat source for both industrial and domestic purposes and can be used in steam turbines to generate additional electricity. Cogeneration technology provides greater conversion efficiencies than traditional generation methods as it harnesses heat that would otherwise be wasted,” Hurtado explains.

“We generally inspect a generation or cogeneration facility before we offer a quote because we want to make sure that it’s operating according to the standards established for that particular piece of equipment,” he says.

Generation and cogeneration facilities have a public liability exposure, Hurtado says, “but it’s not as great as that for a distribution facility, because it’s a step removed from the general public.”

Power distribution facilities include electric cooperatives, municipal facilities, and public utility districts. “The distributor is an intermediary between the generation or cogeneration facility and the end users, who are residential, commercial, or industrial consumers,” Hurtado says. “While there are a variety of incidents that can cause a loss in the utility industry, our primary concern is contact cases, when an individual comes in contact with a live power line.”

Electrocutions happen for a number of reasons, Hurtado notes, and these run the gamut from bad judgment to bad luck. Electrocution,” he explains, “not only can cause death but also can result in severe burns, loss of limbs, or quadriplegia. If a person touches a power line when he is grounded, the electricity enters the body and leaves with such tremendous force that there is little chance of a complete recovery.”

Urbanization factor

The incidence of electrocutions has increased, Hurtado observes, “because of what I like to call the urbanization of rural America.

“Over the last 40 years, we have witnessed many people moving into rural areas for a variety of reasons. Because of the advent of air conditioning,” he adds, “many rural areas of the South have become major metropolises. Forty years ago, Orlando was just a small town in central Florida—but look at it now.

“Atlanta and Tampa are more examples of how air conditioning has been a factor in making these warm temperate and subtropical areas much more attractive as permanent places to live, raise families, and retire,” Hurtado continues. “This migration has transformed many areas that not too long ago were considered rural into large cities and towns. Larger populations not only put more stress on power distribution facilities; they also bring more people into contact with power lines.

“Windstorms are caused by a variety of atmospheric conditions and can easily bring down or cause power lines to sag,” he explains. “For some reason, some people don’t seem to realize the danger involved in touching or attempting to move a downed or sagging power line. The fact that a line is down or sagging doesn’t mean it no longer has power running through it,” Hurtado observes. “The best course is always to assume that the line is live and let the professionals from the power company make an assessment and take the appropriate actions. Over the years we have experienced a variety of electrocution claims. It’s likely that most could have been avoided by the exercise of appropriate caution and respect for the power source at hand.”

In addition to claims from the general public, Hurtado says, “we have experienced a variety of claims brought by general contractors or subcontractors who were injured while working near power lines. Again, using appropriate equipment that is non-power conductive, maintaining an adequate distance from live lines, working closely with the power company to make sure lines are discharged before work on them takes place, and a healthy respect for the danger at hand are keys to preventing a tragic injury,” Hurtado declares.

Loss control is key

Given the extreme severity of the electrocution exposure, loss control and risk management play a vital role in managing the risks for power generation and distribution facilities.

“Our aim is to implement efficient and effective loss control,” Hurtado says. “We work closely with each of our insureds to evaluate its strengths and weaknesses in order to develop a risk management/loss control program that will minimize the potential for loss. We want to do everything we can, as correctly as we can, knowing that randomness is one of the most difficult elements of underwriting and actuarial analysis.”

NHA has an exclusive agreement with Synebar Solutions, Inc., for loss control and risk management services. “We provide an annual on-site personal loss control and risk management evaluation to each of our insured facilities,” Hurtado says. “We then carefully review each evaluation, make recommendations to the insured, and provide specialized training to the facility where the need exists.

“In addition to individual facility training,” Hurtado adds, “we also work with state associations to provide risk management and loss control training to their members on a group basis.”

Working with markets

The highly specialized nature of its business demands that NHA build strong relationships with carriers that can meet each insured’s needs.

NHA offers full primary and excess property coverage; general liability limits of $1 million with a $6 million aggregate; primary automobile limits of $1 million, and the ability to provide umbrella limits in excess of $35 million.

“In addition, we provide specialty coverages that are unique to power distribution risks, along with enhanced coverages that have been negotiated exclusively for NHA and the broker’s clients,” Hurtado notes. Among these coverages are fire suppression, failure to supply power when loss results from accidental damage, pesticide or herbicide application, rental reimbursement, livestock damage, and employees as named insureds.

“We began operations with one primary market for each coverage segment we offer,” he says. “In some cases we now have a variety of markets for each segment, and depending on the specific needs of the broker and the client, we can provide the most comprehensive and competitive markets available. We believe this gives us a significant advantage and places NHA at the forefront of the wholesale broker utility marketplace.”

Another factor in NHA’s solid carrier partnerships is longevity. “Generally speaking, the life span of a program with any given market is less than five years,” Hurtado observes. “NHA continues to work with Travelers, a relationship that goes back to 1994. Other markets with which NHA has developed long-term relationships are AIG, Starr Tech, CNA, and Hartford Surety.

“The key to our long-term success is using a balanced, three-pronged approach to the business,” Hurtado declares. “Accurate, realistic, dedicated underwriting; knowledgeable claim adjusters; and specialty loss control and risk management are the backbone of our success. Each NHA underwriter has been interviewed, selected, and trained in the unique aspects of the power distribution business.”

Like many other industries, especially those that are strongly driven by advances in technology, the power generation and distribution industry is undergoing transformative changes.

Hurtado describes his firm’s commitment to identifying and dealing with emerging exposures in the industry it serves. “We take humble pride in our facility, and we work to serve the needs of each broker who depends on NHA to provide the best risk management and insurance solutions to meet its clients’ expectations in an ever-changing world.” *

For more information:
Nielson, Hurtado & Associates, Inc.
Web site: www.nhapower.com