I first read this article late at night on my IPAD. Even at that late hour my mind immediately went to the enormity of this loss; the question of coverage and, most baffling, the dilemma in trying to assess a valuation of a loss of this type.
The Boston Globe first reported this loss in an article June 11, 2012 and the incident was reported to have happened in late May. The article reported: “A freezer malfunctioned at a Harvard-affiliated hospital that oversees the world’s largest collection of autistic brain samples, damaging a third of the scientifically precious specimens and casting doubt on whether they can be used in research. The Harvard Brain Tissue Resource Center is the largest and oldest federally funded “brain bank’’ in the United States. It provides thousands of postmorte
m brain tissue samples annually to researchers across the nation. The freezer failed sometime late last month at the center, which is housed at McLean Hospital in the Boston suburb of Belmont. The frozen tissue samples are normally maintained at about minus 80 degrees Celsius, but the temperature had reached about 7 degrees — the temperature of a common refrigerator — when the failure was discovered. The hospital launched an investigation to determine why the freezer malfunctioned and why two alarm systems failed to go off as the temperature rose.” http://articles.boston.com/2012-06-11/news/32177667_1_study-autism-autism-research-brain-bank
Now to the question as to whether this loss is covered by insurance. There still is not clarity as to how this loss occurred so we will consider various scenarios. The first possibility is that there was a “malfunction” of the refrigeration unit. This type of loss could be covered under an Equipment Breakdown Policy which would cover the repair of the refrigeration unit that was damaged assuming it fell within the definition of “accident” and the refrigerator was “covered property”. The big question, of course, is the damage to the contents in the refrigerator that being the brains being used for research. The EB policy does pay for resultant damage to the property from the accident. The big question mark is how to put a value on the “spoiled” brains AND the business income resulting from the loss of the brains in the research process. From what I have read up to this point, this loss does not appear to have been a breakdown but rather a loss of temperature which was temporary. If there was no breakdown then the Equipment Breakdown Policy would not respond.
We would now have to look at the Commercial Property Form under a Spoilage Endorsement such as the ISO Spoilage Coverage form CP 04 40. The endorsement is very broad based and has two insuring agreements: Breakdown or Contamination and Power Outage. The first covered Cause of Loss requires a “Breakdown” which does not appear to have happened in this situation. The Contamination is “by the refrigerant” also did not happen in this case. The “Power Outage” Covered Cause of Loss is where there could be coverage for this claim. The coverage states: “Power Outage, meaning change in temperature or humidity resulting from complete or partial interruption of electrical power, either on or of the described premises, due to conditions beyond your control.”
This is very broad coverage and does have some specific exclusions that could come into play in this loss. Specifically there is speculation that this was not an accident but was an intentional act. In the Boston Globe article written on June 11, 2012 they reported: “Benes said the situation is so unusual – the perfect storm of alarm and thermostat failure and the concentration of samples – that she cannot rule out foul play. She said she has not spoken to law enforcement officials, pending the completion of the internal investigation.” The article went on to say that they believe that the loss was not human error but just one of those glitches that sometimes happen.http://www.disabilityscoop.com/2012/06/11/autism-research-set-back/15821/
If the refrigeration was disconnected or deactivated there are specific exclusions in the Spoilage Form that would eliminate coverage. The form provides that there is no coverage for loss or damage caused by:
a. The disconnection of any refrigerating, cooling or humidity control system from the source of power
b. The deactivation of electrical power caused by the manipulation of any switch or other device used to control the flow of electrical power or current.
If the refrigeration system was “vandalized” we could then look to the vandalism coverage in the Commercial Property Form mindful that the form is written on a Replacement Cost basis and, in this case, that valuation would be difficult to prove.
Time will tell what caused the claim and we will then determine if there is any coverage that could apply. But, the real question is how this claim could ever be evaluated. If we are looking at the brains, themselves—the Spoilage Form values loss at “selling price”. How could we possibly determine a sales value of brains donated for research.
We then would have to look if there was any Loss of Income coverage that would apply AND, if there was, how a value could be determined on the claim. These brains were utilized in ongoing research over a long period of time—research that was backed by federal funding for the most part. Even under the best of circumstances it is difficult to assess a business income loss for a “research and development” operation. Even under an R & D form the “potential” loss of income, maybe in the form of grants or future income based on potential drugs that would be developed would be almost impossible to assess as a direct result of this occurrence.
It is hard to end this article on such a grim note. This is a major loss in autism research and one that cannot be measured as to its potential impact. I believe it falls through the cracks on most insurance forms. The failure of the backup alarm systems to alert the research facility of the temperature loss is, as they reported, a glitch—an expensive, devastating and most probably uninsured “glitch”.