Claims For Damages Allegedly Resulting From Utility Service

A recent Illinois Appellate Court decision has addressed claims for civil damages alleged to result from electric utility service outages. The Village of Deerfield v. Commonwealth Edison Company, No. 2-08-0917 (Ill. App. 2d Dist. December 15, 2009).
This decision should be of interest to both investor-owned and municipal-owned water and wastewater utilities.

The Village's complaint, in separate counts, alleged that outages in electric service resulted from breaches of duties under the utility's franchise agreement with the Village and under the state Public Utilities Act. The complaint sought recovery of civil damages for damages allegedly suffered by residents during outages, such as spoiled food, purchase of generators and sump pumps, temporary housing, and extra policing.

The Appellate Court first resolved a jurisdictional issue. The utility is regulated by the Illinois Commerce Commission, which has exclusive jurisdiction over allegations of excessive rates or unjust rate discrimination. THe Court concluded that the circuit court has jurisdiction over the claims at issue because they allege deficient performance, not excessive or discriminatory rates. It said that the question of jurisdiction turns on the nature of the relief sought--in this case, claims for ordinary civil damages.

However, the Court held that the doctrine of primary jurisdiction should apply. This doctrine is applicable when a regulatory administrative agency has expertise to resolve certain issues or when there is a need for uniform administrative standards. Noting that both reasons applied here, the Court said that the circuit court should defer to the Illinois Commerce Commission to consider issues related to quality of service, given the technical nature of the data involved. Under primary jurisdiction, the court proceeding is stayed pending the Commission's action.

The Appellate Court then addressed the question whether the damages sought are recoverable under the Moorman doctrine. In Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69, 91 (1982), the Illinois Supreme Court held a "plaintiff cannot recover for solely economic loss under the tort theories of strict liability, negligence and innocent misrepresentation." Thus, this doctrine bars " ' damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits-without any claim of personal injury or damage to property.' " 91 Ill.2d at 82.

In the Deerfield case, the Appellate Court held that the Moorman economic loss rule barred the claims for the costs of temporary housing and purchase of back-up generators and battery-operated sump pumps because they were purely economic losses. However, the Court stated that the rule did not bar claims for lost perishable inventory due to outages or the costs of clean-up and mold remediation due to flooded basements, as actual physical damage to property was alleged.

Damage claims against regulated water and wastewater utilities, related to service issues, likely would be treated in a manner similar to the Deerfield decision: application of the primary jurisdiction and Moorman doctrines. Unregulated municipal utilities would face service issues damage claims fully in the circuit court, which can become a complex evidentiary matter for any trial judge or jury. Presumably, the Moorman doctrine still would apply to these utilities.