Short Circuit: Subrogation Challenges in North Carolina Utility Outage Claims

July 16, 2026

When the power goes out and a policyholder’s property is damaged, insurers want to know whether the utility can be held responsible. Under North Carolina law, the answer is often “it depends on the fine print.”

Utilities Write Their Own Rules — And We Have to Live with Them

Every electric utility in North Carolina files its rates, terms, and conditions with the North Carolina Utilities Commission (NCUC) for approval. Once approved, the filing is not just a price list — it is treated as a package deal. Courts have held that any liability-limiting language buried in that filing is just as much a part of the “rate” as the price itself. This includes a cap on damages or even language excusing the utility from responsibility for outages.

The practical effect: once the NCUC approves a utility’s filing, a court generally will not let a customer argue in a later lawsuit that the liability cap is unfair or invalid. This idea has a name: the “Filed-Rate Doctrine.” The plain-English version is simpler:  if it is in an approved tariff, you cannot attack it in court even if the terms seem unreasonable.

For insurers evaluating a subrogation claim, this means the tariff — not the accident report — should be the first document you pull. If the customer’s relationship with the utility runs through a filed rate, the cap in that filing controls. One uncommon exception: if the agreement is a private contract unrelated to the utility’s basic public service – not the standard tariff – ordinary contract rules apply instead, and the cap gets less protection.

If the Tariff Doesn’t Bar the Claim, Ordinary Negligence Rules Apply

Assuming the claim survives the tariff issue, North Carolina uses the same negligence standard for utilities as for anyone else: Would a reasonably careful person or company have acted the same way? Courts refer to utilities owing the “highest degree of care” because electricity is dangerous. But that heightened standard shows up almost entirely in cases where someone was electrocuted, not in cases about the power simply going out.

Property Damage Can Be Recovered — Lost Profits Usually Can’t

The distinction between property damage and lost profits matters more than any other in an outage case. If the outage physically damages something (spoiled inventory in a walk-in cooler, fried equipment, or a fire), North Carolina law allows that kind of claim to proceed as an ordinary negligence case. But if a business simply lost money because it had to close for a day with no physical damage, courts consider this a “purely economic loss.” North Carolina law generally allows negligence claims in those circumstances. Those economic losses must be pursued as a contract claim instead. This leads right back to the tariff and its liability cap.

A Storm Doesn’t Automatically Let the Utility Off the Hook

Utilities often blame outages on storms (an “Act of God”), but that defense is narrower than it seems. Under North Carolina law, a storm only excuses the utility if the storm was the only cause of the damage. If the utility’s own carelessness, like deferred maintenance, a known bad line, or ignoring a complaint, combines with the storm to cause the loss, the storm defense does not apply. Courts have also held that a storm which repeats now and then, even irregularly, may not even count as the kind of “unforeseeable” event the defense requires.

Bottom Line

Do not write off a utility outage claim just because the customer had standard utility service or a storm was involved. The insurer’s priority is to pull the tariff to see what limits apply, then focus on provable physical damage rather than lost income. Lastly, dig into whether the utility’s own maintenance played a role alongside the weather.

For any further questions, please contact Kurt Widenhouse.