West, Texas blast reveals lack of insurance rule

West, Texas blast reveals lack of insurance rule

Source: El Paso Times, May 5, 2013
Posted on: http://fpn.advisen.com

The insurance on the fertilizer plant that blew up in West, Texas, on April 17 was a “drop in the bucket” next to the damage it caused, the spokesman for an industry group said Friday.

Meanwhile, the state agency that regulates insurers said there is no state requirement that companies that handle hazardous materials such as fertilizer carry insurance the way Texas drivers do.

The city of El Paso also doesn’t require insurance, and it doesn’t appear the city has the power to do so.

The lack of an insurance requirement was one of several regulatory gaps that were identified this week when state Rep. Joe Pickett, chairman of the House Homeland Security and Public Safety Committee, convened a hearing into the

blast. The El Paso Democrat has been the first state official to hold a public session to ask what other areas might be at risk for disasters like the one that occurred in West.

The state and federal investigation into the blast, which killed 14 and injured more than 250, continues. The explosion destroyed 142 buildings and caused major damage to 51 others, according to Texas Department of Emergency Management statistics.

Even so, the plant’s owner carried only $1 million in liability insurance — commonly the minimum policy for a business, said Mark Hannah, spokesman for the Insurance Council of Texas, an industry group.

The council estimates total insured losses from the explosion to be $100 million, Hannah said.

“It’s just going to cover a drop in the bucket,” Hannah said of the fertilizer company’s coverage.

The damage estimate includes only losses that insurers will have to pay.

“There are a number of uninsured people in West,” Hannah said. “In fact, there’s a high number of uninsured people.”

Hannah said the Red Cross so far has received 200 requests for assistance from uninsured people. He said most were probably renters, although some could be people who had paid off their mortgages and were not required to carry homeowner’s insurance.

The Federal Office of Emergency Management this week announced that it would provide assistance for those with uninsured losses, but Hannah said the assistance is likely to be limited.

The West Fertilizer Co. was contacted by telephone Friday. A man who declined to give his name said questions should be submitted in writing. An email with questions went unanswered.

The company is probably not the only one that stores hazardous materials without carrying enough liability insurance to cover the risk those materials pose.

During Wednesday’s hearing before the Homeland Security Committee, Texas Insurance Commissioner Eleanor Kitzman said fertilizer plants such as the one in West aren’t required to carry liability insurance.

On Friday, Texas Department of Insurance spokesman Jerry Hagins was asked in an email whether companies that handle hazardous materials other than fertilizer are required by the state to carry liability insurance.

“There are four state agencies that have some regulation over these facilities: State Health Services, Texas State Chemist, Texas Commission on Environmental Quality, and Texas Agriculture Department,” Hagins responded. “None of these agencies require general liability insurance for these facilities.”

Asked whether his department believed the Legislature should pass a law requiring companies handling explosive materials to carry insurance, Hagins said it did not have a position on the matter.

At the local level, if a plant is within city limits, the city government has zoning power to regulate what kinds of uses land can be put to.

“I have not researched the issue, but I am not aware of any insurance requirements for that type of business in the City of El Paso,” City Attorney Sylvia Borunda Firth said in an email. “Zoning regulations would help insure a facility would not be placed in an inappropriate site and fire codes and building standards would come into play as well.”

City Rep. Steve Ortega, a lawyer, said he didn’t believe city governments have the power to require that businesses carry insurance.

Two El Paso County companies that carry fertilizer — El Paso Valley Cotton Association Inc. in Clint and Helena Chemical Co. in Fabens — did not return calls Friday asking what materials they had and whether they were insured.

Hanna, of the state Insurance Council, said there is no public database listing whether companies have insurance or how much.

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