Workers at West Fertilizer Co. were not injured by the hugeblast at the plant that killed 15 people and devastated a wideswath of a small Texas town, but the explosion did bring to thefore an emerging Workers Compensation issue of deep concern to theinsurance industry.

The only West Fertilizer employee involved was a first responderkilled in the blast who was covered by a workers compensation fundthat covers all employees of the state's 2,700 municipalities,according to Carol A. Loughlin, executive director of the TexasMunicipal League Intergovernmental Risk Pool, based in Austin.

The city employees of West, Texas, and the 11 first responderswho were killed, were covered under the state plan's Large LossFund, she said. “It won't deplete our fund; we can handle it,”Loughlin says.

West Fertilizer was covered by an alternative-benefit planworkers compensation system unique to Texas, but now being debatedby the Oklahoma legislature for use there.

According to Mike Seney, senior vice president of policyanalysis and strategic planning for the Chamber of Commerce ofOklahoma, employers in Texas can opt out and “go bare” with nocoverage for their workers.

But, he said, the proposal being debated by the Oklahomalegislature requires that any employer choosing to removethemselves from the Oklahoma workers compensation system, muststill provide equivalent benefits to their workers.

The proposal is being pushed by PartnerSource, a Dallasbrokerage that is a unit of Arthur J. Gallagher Risk Services,Inc.

William J. Minick, III, a principal at PartnerSource, says fromthe Risk and Insurance Management Society conference in Los Angelesthat PartnerSource is not the broker for West Fertilizer, but theplant does have alternative workers compensation coverage.

Minick and PartnerSource are lobbying the Oklahoma legislaturefor an overhaul of the Oklahoma workers compensation system thatwould allow “free-market competition for the benefit of injuredworkers and employers” in Oklahoma.

According to a report by the Texas Department of Insurance lastyear, one-third of Texas employers opt out of the WorkersCompensation system.

State-linked Texas Mutual Insurance Co. serves 35 percent of theTexas market, and there are practical advantages for being in thesystem.

For example, Terry Frakes, a spokesman for TMIC, says employerscan't do business with federal, state and local governments unlessthey are members of the workers' compensation system.

Willem Rijksen, a spokesman for the American InsuranceAssociation in Washington, said the trade group opposes opt-outeven if alternative coverage is mandated.

“AIA opposes legislation that will allow for an opt-out systemin Oklahoma and we will continue to work against its passage forthe remainder of the session,” he says.

Earlier, Bruce Wood, AIA associate general counsel and directorof workers' compensation programs, said the opt-out proposal inOklahoma is being promoted by “non-subscriber interests in Texas”and certain employers, particularly in the oil and gas and retailindustries.”

Wood said. “There is no substitute plan, no opt-out plan thatcan provide that protection that Workers Compensation does.”

He said that Workers Compensation benefits provided by insuranceare backed by a state guaranty funds, so that, if an insurer goesinsolvent, the guaranty fund, which is financed by all carriersparticipating in that state, will ensure the payment of claims.