Last April, in West, Texas, a massive explosion decimated the local operations of West Fertilizer Company. Felt more than 20 miles away, the blast killed 15 people and damaged 2 schools, more than 100 homes, an apartment complex, and several businesses. That physical disaster was made worse – it became a financial disaster – when it was determined that the company carried only $1,000,000 in liability insurance. Many of the victims will very likely prove damages exceeding that amount; which means none of the victims are likely to receive full compensation. West Fertilizer Company on the other hand, is capped out at $1,000,000. Anything in excess of this amount, they must assume the cost; not their insurance company.
In fact, one group of plaintiffs has already filed suit. A number of insurers organized under the W.R. Berkley agency has filed a subrogation lawsuit seeking reimbursement for claims already paid to their insureds, which includes several individuals as well as a local bank, car dealership, appliance retailer, bakery, auto parts store, two churches and a small motel. That would not include the apartment building next to the plant that suffered the brunt of the explosion and in which most of the fatalities were incurred. As reported by the Dallas Morning News, a spokesperson for Adair Grain, the parent company of West Fertilizer, has admitted that the company has no other insurance and very few assets with which all claims can be paid.
We bring this to your attention because we see many companies that lack liability insurance sufficient to protect their assets and ensure their financial viability. A common mistake of those businesses is a failure to increase their coverage limits as the company grew. For example, that $1,000,000 policy may have been adequate for West Fertilizer at one time – but at the time of the accident, while it was still a small company, its annual revenues of about $4,000,000 and the value of its investment in the physical facilities would have justified a higher coverage amount. Instead, the company will be bankrupted, and the owners will lose everything they’ve worked for.
The insurance professionals of Nahai Insurance are available to consult with your company regarding the appropriate amount of liability insurance you need to ensure one disaster does not become a second disaster for your company. Your agent will conduct a thorough needs analysis that considers the value of your company and the potential risk associated with your industry before making his or her recommendation. To learn more about Nahai Insurance, visit nahai.wpengine.com.
Make sure that your company has the proper coverage for your current needs and risk. Contact one of our commercial insurance specialists today.