USING EXCULPATORY PROVISIONS TO LIMIT UTILITY LIABILITY

In a recent opinion, the Illinois Supreme Court held that claims for damages allegedly arising from utility service outages are barred by liability limitations for service interruptions contained in a regulated utility's tariff. (Sheffler v. Commonwealth Edison Company, Docket No. 110166, June 12, 2011).

The Court stated that a tariff, once duly filed with the utility regulatory agency (in this case, the Illinois Commerce Commission), binds the utility and its customers and governs their relationship. Once the tariff is approved, the Court said, it is a law and has the force of a statute.

The Court explained that a utility's ability to provide service at reasonable rates depends, in part, on having rules that limit liability.

The Court cited its prior decision in Illinois Bell Switching Station, 161 Ill. 2d 233, where it held that a tariff exculpatory clause barred recovery of consequential damages due to service interruptions.

In both the Edison and Bell cases, the exculpatory tariff limited liability to recovery of the proportionate charge for service for the period of interruption.

In the Edison case, the Court said, plaintiffs' claims of negligence were based upon equipment malfunctions due to weather, and the tariff specifically exempted such claims from liability. The Court also noted that even if a negligence claim was not barred by a tariff, jurisdiction of the claim would be with the regulatory commission, not with the courts.

Regulated water and wastewater utilities should consider including in their tariffs appropriate exculpatory provisions applicable to claims relating to service. Except for a few states, municipal owned water and wastewater utilities generally are not subject to regulatory agency jurisdiction and do not have tariffs. However, they do have, or should have, service rules contained in ordinances which become incorporated as part of customer contracts. Accordingly, municipal owned utilities should consider including appropriate liability limitation provisions in their service rules for the same reasons that regulated utilities have such tariffs.