The West Fertilizer Co., scene of an explosion last month that killed 15 people and injured 200, carried only $1 million in liability insurance.
The cause of the blast is still under investigation. Should the company be found negligent, that amount of coverage probably would pay only a fraction of the claims.
Property damage alone in West could reach $100 million, according to the Insurance Council of Texas, an industry association. The April 17 explosion destroyed an apartment complex and seriously damaged a nursing home and a school. Several hundred homes also sustained damage, with some leveled to the foundation.
An attorney for United States Fire Insurance Co. of Morristown, N.J., confirmed Friday that West Fertilizer had $1 million in liability coverage "with no excess or umbrella coverage."
Fertilizer facilities like the one in West are not required to have liability insurance that would compensate for damage they might cause, state insurance officials say, even if hazardous material is on hand.
West Fertilizer had reported having 270 tons of ammonium nitrate on site as of the end of last year. Outside experts have said it appears the chemical exploded during a fire on company property.
The office of state Insurance Commissioner Eleanor Kitzman issued a written statement late Friday saying the Texas Department of Insurance "does not have actual knowledge of the existence of or details regarding any liability insurance coverage" of the West facility.
"Others have estimated the damages at $100 million," Kitzman's office said, "far more than the amount of insurance we have heard the company may have had."
Kitzman's office said it isn't the department's role to "assess and quantify risk; we regulate the insurers that help consumers and businesses insure their risk."
Tyler lawyer Randy C. Roberts, who has filed two negligence suits against West Fertilizer on behalf of victims, said the company's policy was deeply inadequate.
"A million dollars is a pathetic amount for this type of dangerous activity," Roberts said.
"If you want to drive a truck down the interstate, you've got to have $750,000 in coverage, even if you're just carrying eggs," Roberts said. "But if you want to put this ammonium nitrate into this town next to that school and that nursing home and those houses, you're not required to carry insurance."
‘Fair shake' doubted
Roberts said he and other attorneys who have filed suit against West Fertilizer were notified of the policy limits Thursday. "So many people have suffered, I don't think anyone's going to get a fair shake," he said.
The lawyer for West Fertilizer's insurance company acknowledged that $1 million would not begin to cover losses. A spokesman for Donald Adair, the plant owner, declined to comment.
In West, investigators continued to examine the blast scene this week.
Cindy Grones, 52, lives just a few hundred feet from the plant. The home where she lived with her husband and two teenage children is unsalvageable, but she said she doesn't plan to sue.
For those who decide to file a lawsuit, particularly those who were uninsured, she said, the plant's coverage wouldn't make a dent.
"If you did sue, what would you get?" she said. "One thousand dollars? Two thousand dollars? If that. Then you have to pay the lawyer to take it to court."
If the money goes to anyone, Grones said, it should go to people such as the family of Buck Uptmor, 45, a volunteer firefighter who died in the explosion. "They should give it to the firemen. ... It should go to the families," she said.
Frederick Owen, 45, lives on North Davis Street a few blocks from West Fertilizer. He said he and his ex-wife insured her 5-acre property for $1 million because it had a stock tank on it.
"I'd have thought they'd have at least have $100 million" in coverage, he said of the plant.
In the future, Owen said, he hopes officials pay more attention to fertilizer storage complexes like the one here.
"Anywhere there's a train track and a small town you're gonna find a fertilizer plant," he said. "If any good comes out of it, they just start inspecting these places better."
Like Texas, many states don't have legal requirements for liability insurance of this sort, said Tom Baker, an insurance and risk expert at the University of Pennsylvania law school.
‘That's not very much'
States that have requirements often set amounts that "tend to be much less than the potential harm," Baker said. When told about the $1 million, he said, "Wow. That's not very much, is it?"
Baker said companies that opt for liability insurance do so because they're profitable and want to protect those assets, or a partner wants it. The amount they get is usually enough to cover their property, he said.
"I'm sure there are tons of businesses that have just $1 million worth of coverage, and we don't make them buy more," Baker said. "And so when something really bad happens, there isn't enough money for the victims."
The insurance industry hasn't supported forced liability insurance, in part because "they've been afraid that would lead to regulation of their rates," Baker said.
Even if states don't mandate it, most businesses end up getting liability insurance of some form, said Bob Hartwig, president and economist at the Insurance Information Institute, an industry nonprofit group. Liability coverage is among "the most fundamental rules of risk management," he said.
"The plant owners may have assessed the likely maximum loss at $1 million, never contemplating a disaster of the magnitude that occurred last month," Hartwig said.