One million dollars of coverage for $100 million in losses? Unfortunately, that appears to be the case for the West, Texas fertilizer plant that recently exploded. Reportedly the owners of West Fertilizer Co. hold a negligible amount of insurance compared to the estimated cost of the damage caused by the blast. The plant did not hold excess or umbrella insurance policies. The fact that the company’s owner has not breached any applicable regulation has been the subject of heated debate on the national level regarding regulating mandatory insurance coverage for companies that handle hazardous materials.
The April 17, 2013 blast reportedly killed 14 and injured more than 250. The explosion destroyed 142 buildings and caused major damage to 51 others, according to the Texas Department of Emergency Management. Nonetheless, the plant’s owner reportedly carried only $1 million in liability insurance, which is commonly the minimum policy for a business according to the Insurance Council of Texas. The council estimates total losses from the explosion to be $100 million.
Reportedly, there is no state requirement that companies that handle hazardous materials such as fertilizer carry insurance. Likewise, the city of El Paso does not require such insurance. The lack of an insurance requirement was one of several regulatory gaps identified this week by state Rep. Joe Pickett, chairman of the House Homeland Security and Public Safety Committee, when he convened a hearing into the blast.
Reportedly, the Red Cross has received 200 requests for assistance from those without insurance. The Federal Office of Emergency Management this week announced that it would provide assistance for those with uninsured losses, but the assistance is likely to be limited. The plaintiff’s bar has also taken notice of the lack of coverage. One of the lawyers for the plaintiffs pursuing recovery from the blast said he will look for other potential avenues of recovery including other companies that may be liable for the explosion. He also noted that it is “not uncommon to see very serious operations conducted with minimum insurance or, in fact, no insurance.”
This somber example provides an opportunity to reconsider your policy, bearing in mind that insufficient coverage can be nearly as troublesome as no coverage. Particularly those with significant exposure must consult with an appropriate insurance professional to secure sufficient coverage to address foreseeable risk.