One million dollars.
That's how much cover the West Fertilizer Co. in West, Texas, carried in liability insurance. At an operation where the chemical compound ammonium nitrate—known to be highly volatile—was stored, and where it's estimated that hundreds of tons of fertilizer were kept on hand at the plant at the time of the massive, April 17 explosion that took the lives of 15 people and caused property losses of approximately $100 million, according to the Insurance Council of Texas.
That $100 million figure includes estimated insurance payments for the plant, 140 homes, an apartment complex, a middle school and a retirement center. A criminal investigation into the blast is under way.
How could it come to pass that such a facility would be permitted to carry so little insurance cover, especially considering the risks involved? We're working to get to the bottom of it, and in the weeks to come at PC360 and in next month's issue we'll be taking a good hard look at how a business that dealt with large amounts of potentially deadly chemicals could ever become so grossly underinsured—and what impact the fallout from this terrible event will have on all the parties involved. This story may have disappeared from the radar of the national media, but at National Underwriter we're just rolling up our sleeves on this one.
Here's what we do know: As Chad Hemenway reports, the fertilizer retailer's coverage was provided by United States Fire Insurance Co., a member of Morristown, N.J.-based Crum & Forster, part of the Fairfax Group. Lawsuits have already been filed against West Fertilizer's parent company, Adair Grain, including a subrogation suit brought by several companies within the W.R. Berkley Corp. group of carriers—claiming negligence on the part of the Adairs and looking to recoup money paid by Berkley to insureds including individuals, a bank, a car dealership, a TV & appliance store, a bakery, an auto parts store, two churches and an inn.
Paul A. Grinke, the attorney for the group of W.R. Berkley Corp. companies hoping to recoup its losses, calls the surprising lack of adequate insurance in this case "irresponsible" and predicts his clients and others involved in lawsuits against West Fertilizer Co. will "be left holding the bag."
Unfortunately, Grinke is likely quite right. And while such inadequate insurance protections should be the exception, not the rule, we all know that's not always the case.
As the details of this story are revealed by NU, this tragedy presents a learning opportunity for producers to ask themselves: Do my clients understand their coverage, and is it sufficient cover for a worst-case scenario of loss? Do my clients have exposures that I see, of which they might not be aware? Am I doing my job to the best of my ability in educating them on how to better protect themselves, their property and their business? If not, a serious gut-check might be in order.
If you're not helping your clients better understand the protections available to them and opening a serious dialogue about the risk-control measures your clients have in place and practice, taking this opportunity to do so would be most prudent—and it might just save a life.
Shawn Moynihan is Executive Managing Editor of NUP&C. He can be reached at smoynihan@sbmedia.com.
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