A major hotel incurred a business interruption loss when electric power service was necessarily suspended for 12 hours while repairs were made to a switchboard, extensively damaged by electric arcing. Denial of liability by the insurer precipitated a lawsuit.

The trial court determined that the insurer did not have a coverage obligation. It found that electric arcing, the proximate cause of damage, was a specifically excluded cause of loss. The insured appealed.

The insurance policy contained a "Causes of Loss-Special Form," which, in pertinent part, provided that:

"We will not pay for loss or damage caused by or resulting from any of the following: ....Artificially generated electric current, including electric arcing, that disturbs electrical devices, appliances or wires.... But if loss or damage by fire results, we will pay for that resulting loss or damage."

The insured claimed coverage under the exception to the exclusion for electric arcing. It argued that fire in the form of combustion with a glow was produced by the electric arcing on the switchboard. It presented testimony that "fire" was defined in the insurance industry as combustion with a flame or glow.

The trial court had not been persuaded by the argument and applied the "common sense" definition of fire requiring flame. The appeal court noted the fire department report that smoke was present but fire had not occurred. The court said that treatment of arcing as fire would render the exclusion useless.

The court concluded that electric arcing was the proximate cause of damage and was an excluded event. The judgment of the trial court was affirmed in favor of the insurance company and against the insured.

(QUADRANGLE DEVELOPMENT CORP., Appellant v. HARTFORD INS.CO., Appellee. US Court of Appeals for the District of Columbia. No. 93-CV-747. August 18, 1994. CCH 1994 Fire and Casualty Cases, Paragraph 4940.)