Gov. Rick Perry has long proclaimed Texas as a state favorable to business and has limited environmental protections and regulatory rules. Just how favorable is evident in the news that West Fertilizer Co. had only $1 million in insurance after an explosion that killed 15 people and injured 200 — and caused an estimated $100 million in damages. The insurance lobby has long opposed mandatory insurance laws and this case may be an example of the public cost of that success.
Texas is not unique in allowing companies to maintain minimal insurance coverage. The question is now who will pay for the damage if the company is insolvent. The state and county has already paid millions in recovery costs and are unlikely to accept responsibility. United States Fire Insurance Co. says that it will only extend $1 million for the damage under its policy.
The company maintained this ridiculously low level of insurance despite the fact that it housed extremely dangerous chemicals on its property. West Fertilizer reportedly had 270 tons of ammonium nitrate on site as of the end of last year. Texas Insurance Commissioner Eleanor Kitzman issued a statement insisting that her role is to “assess and quantify risk; we regulate the insurers that help consumers and businesses insure their risk.” Apparently they do not regulate well in the case of a company with a huge amount of potentially explosive material.
Lawyers note that if you want to drive a truck on the interstate, you need $750,000 in coverage, but this plant was allowed to maintain just $250,000 more.
The article below notes that a local resident insured her 5-acre property for $1 million because it had a stock tank on it.
In this case, Texas was great for business, just lousy for citizens.
Source: Dallas News
Ralph, are you trying to call Texas a leftist system? Because, uhm….. No.
For all those who do not follow the Texas follies that is our state Leg, they are considering a bill to exempt even more businesses from any oversight at all in terms of pollution and hazards. As I recall, the standard liablity for light aircraft is one million dollars. That businesses can get away with this is absurd when they are knowingly storing such hazardous materials. Since the GOP controls everything in Texas, our insurance rates are among the highest in the nation, and we have less coverage too. AH the wonders of free market capitalism where the citizens subsidize the rich and make the poor poorer.
Am I the only one that thinks that the Federal government shouldn’t pay any kind of relief to a state when something like this happens? It’s up to the state to properly regulate a business and if the business causes harm, within or without the bounds of regulation, then any cost is up to the state. Even if the Federal government has some regulations that apply it’s ultimately a state issue once the Federal government standards are met. This wasn’t a natural disaster by any means. (Yea, I know, the Federal regs regarding notification of DHS regarding the Ammonium Nitrate weren’t met- why not start putting owners and managers in jail too?)
There seems to be a serious lack of security at this plant as well as others, the Federal and state regulators need to address that if the chemical industry lobbyist’s will allow it. (sarcasm) The theft of anhydrous ammonia is fairly common and dangerous and was also a problem at this plant.
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“Ammonium nitrate was trigger for Texas blast, state agency says”
http://www.reuters.com/article/2013/05/07/us-usa-explosion-texas-idUSBRE9460GP20130507
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“Texas fertilizer plant where blast killed 14 was repeat target of theft, tampering”
“The Texas fertilizer plant that exploded two weeks ago, killing 14 people and injuring about 200, was a repeat target of theft by intruders who tampered with tanks and caused the release of toxic chemicals, police records reviewed by Reuters show.
Police responded to at least 11 reports of burglaries and five separate ammonia leaks at West Fertilizer Co over the past 12 years, according to 911 dispatch logs and criminal offense reports Reuters obtained from the McLennan County Sheriff’s office in Waco, Texas, through an Open Records Request.
Advertise | AdChoicesSome of the leaks, including one reported in October 2012, were linked to theft of or interference with tank valves. ….
Thefts of anhydrous ammonia are common in McLennan County, where burglars siphon fertilizer from trailer tanks into 5-gallon propane containers, said McLennan County Chief Deputy Sheriff Matt Cawthon, who took up the position in January.
After reviewing crime reports from the past 12 years and speaking to deputies who responded to some of the break-ins, Cawthon said security was clearly lax at the plant.
The perimeter was not fenced, and the facility had no burglar alarms or security guards, he said. “It was a hometown-like situation. Everybody trusts everybody.” ”
http://openchannel.nbcnews.com/_news/2013/05/03/18040602-texas-fertilizer-plant-where-blast-killed-14-was-repeat-target-of-theft-tampering?lite
http://www.dallasnews.com/opinion/latest-columns/20130505-thomas-mcgarity-west-explosion-proves-texas-needs-a-state-version-of-osha.ece There has been no inspection in thirty years. The state has no OSHA and the Chamber of Commerce has weakened OSHA at the national level.
Michael Val,
Good point.
Maybe should have read:
“The chemical industry lobby has long opposed mandatory insurance laws and this case may be an example of the public cost of that success.”
“The insurance lobby has long opposed mandatory insurance laws and this case may be an example of the public cost of that success.”
This doesn’t make any sense to me. Why would the insurance industry not favor laws requiring people and businesses to purchase insurance? In Texas, the insurance industry supported recent laws raising the mandatory minimum liability auto insurance because it’s more profitable for them. I dislike the insurance industry as much as the next guy, but I think they’re blameless here. More likely it’s the Chamber of Commerce types that oppose mandatory insurance requirements for businesses.
Swarthmore,
interesting video. I guess he must be a real leader and a real man because he can shoot a gun!
$1 million insurance? I have an umbrella policy for $1 million, in case my other policies are insufficient! Of course, my policy is dirt cheap as the odds of it ever being needed are slim, but that’s no excuse for not maintaining adequate insurance, particularly if there are serious hazards. The executives and the board involved in the company’s decisions should be held personally liable. Or do they get away scott free in Texas?
Isn’t it great when power is concentrated in the hands of an “elite” few? That’s the “beauty” of the Leftist system: centralized control. Too benefit the masses? Most Leftists seem to think so. But that’s why I conclude that Leftists–of whatever stripe–don’t think.
But I always heard that regulations are bad, and Texas is the land of opportunity!
I think Gov. Perry should pay the damages and the owners of this corporation which we know is a person should spend time in jail for the reckless actions which lead to deaths and destruction.
Let the hunt for other assets begin.
Perhaps if they are reached there will be an outcry for decent insurance coverage.
The wealth of the owners is the first place to start looking.
Start studying non-dischargeability in Bankruptcy statutes too.
Is there some criminal negligence in failing to maintain this insurance? If not there should be.
And now the taxpayers of Texas will pick up the tab for Governor Goodhair’s policies.
For the record there was only 50 tons at the facility on the date of the explosion…. But it’s really a distinction without a difference….. But I do know some of the folks involved as well as a principle…. So I will follow this……
It is highly ironic that this situational disaster is parallel to, and an exact model for the global financial arguments over securing and regulating risk.
One could argue, of course, if the fertilizer and the financials are ONLY parallel risk factors and not actually mostly IDENTICAL!
see Baseline: http://baselinescenario.com/2013/05/06/the-cost-of-equity-capital/#comment-139311…The Cost of [Equity] Capital.
BarkinDog: You know darn well that it was in Texas. The State that kills people in the name of The People of The Great State of Texas. So you know darn well that those people are disposed to take care of their own and that the Great State will step in and take care of the victims. By the way, what other assests does that company have now that the plant is gone? Maybe the victims can sue and go after whatever assets are left.
Insurance is a form of socialism. But you combine private profit with the socialization of losses. The only insurance in Yemen is that owned by shipping companies that have ships at sea which go by their coast. When the pirates take the ship they drive her to a port in Yemen at a dock in front of God and everyone and demand the insurance or ransom. If no insurance the owner of the ship pays the ransom. Pirate territory. Now where was this uninsured factory you speak of?
Chrissake, I had more liability coverage for my small agency. Outrageous.