One Year After the West TX Explosion, Operational Risk Remains a Factor

April 17, 2014 marked the one-year anniversary of an unforeseen ammonium nitrate explosion at The West Fertilizer Company in West, TX.

People in the small community are still reeling from the ordeal, slowly rebuilding and assessing what steps need to be put in place so something like this doesn’t happen again. The blast killed fifteen people and caused more than $100 million in damages to the surrounding residential neighborhoods.

And yet there is another element to this story that went largely underreported but put many manufacturing business across the country on notice—the plant’s lack of insurance coverage needed to pay for the damages.

Underinsured Business Risks

According to the Associated Press, Tyler-based lawyer Randy C. Roberts and other attorneys who filed lawsuits against West Fertilizer's owners were told that the plant carried only $1 million in liability insurance.

The plant underestimated certain inherent risks that were present and consequently, underinsured these risks. Ironically, the plant reported just months prior to the blast that it had the capacity to store 270 tons of ammonium nitrate. It was unknown how much was there at the time of the explosion.

Businesses with high levels of operational risk can opt for conventional insurance, but most of these policies carry exclusions. Some insurance policies may have nuances that allow for carriers to deny coverage in the event of a claim.

Captive Insurance Eliminates Operational Risks

Essentially, businesses that opt for these policies can be underinsuring their risks because they do not cover their spread of risk. It makes their businesses and bottom line vulnerable. Forming a captive insurance company can eliminate these risks as the captive insurance risk protection policies are custom-tailored to each business’s needs.

Equipment breakdown and repair, legal expense reimbursement, weather-related business interruption and pollution liability are all policies that can be procured with a captive insurance risk protection policy. Although businesses cannot always predict the unexpected, they can be active participants in their own risk management.

Amidst tragedy, it’s a positive message that businesses everywhere can benefit from.

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