On the morning of March 15, 2018, a large explosion erupted at the Tri-Chem Industries chemical plant in Cresson, Texas, approximately 25 miles southwest of Fort Worth. The explosion left two workers badly injured and another presumed dead. According to 2017 Hood County records of the company’s chemical inventory, it has been reported that Tri-Chem’s Cresson plant stored chemicals that were toxic, flammable and corrosive yet the company had no emergency response plans in its files.
Ironically, the Tri-Chem plant explosion occurred just one day before the D.C. Circuit Court heard arguments in a case challenging the Environmental Protection Agency’s decision to delay major chemical plant safety regulations implemented under the Obama administration. The regulations at the center of that litigation were designed to prevent and mitigate chemical accidents and strengthen emergency protocols for chemical plants. In that lawsuit, the United Steelworkers, the Sierra Club and other environmental groups sued the EPA, claiming that the EPA’s delay of the rule violated the Clean Air Act.
Industry groups opposing chemical risk management rules have argued that the regulation’s requirements are overly broad and could result in disclosure of sensitive information to criminal and/or terrorist groups. The chemical plant safety regulations at issue in the case are only one set of environmental regulations where the current EPA has sought to roll back the prior administration’s push. Environmental groups have pointed out that chemical plant explosions, like Tri-Chem’s, are an example of what can happen in the future without the regulations.
What are the insurance implications?
Unfortunately, hazardous chemical incidents are not uncommon. Texas, as well as other states, have suffered a series of chemical plant explosions in the last decade. From 2004 to 2013, more than 1,500 incidents of chemical releases or explosions were reported.
As the frequency of chemical plant explosions increases, it is likely that more insureds will look to the insurance marketplace for coverage. This could take several forms. Companies that own the chemical plants might attempt to seek coverage for their property damage under their environmental insurance policies. Emergency workers, neighboring residents, or company employees could also try to seek coverage for their injuries and losses. Claims against a chemical plant could include claims that the company improperly stored or handled dangerous chemicals or that the company failed to create adequate safety procedures. A company whose negligence was the cause of a chemical plant explosion and resulting injuries may be liable to emergency and medical first responders, neighboring residents and community members who were injured or became ill from chemical exposure, as well as employees and contractors injured at the facility. Insurance carriers can work with their insureds to educate them about prevention and the importance of having emergency protocols in place in the event an accident does occur.
The relaxation of regulation by the EPA or other governmental agencies may also lead to the implementation of protective safeguards in insurance policies to minimize the risk of incident. Insurers may wish to adopt a listing of regulation-like terms that would be preconditions to affording coverage. For instance, insurers may take the position that where the insured – a chemical plant – does not have an emergency response plan or proper equipment on hand for such a response, the insured’s negligence in maintaining such items would be a basis for limiting coverage and/or for the outright barring of indemnity recovery or defense in the event of a third-party action.
The explosion at Tri-Chem was a terrible tragedy. Chemical plant explosions and fires present significant risks to workers andfor the potential for large-scale property damage and public health impacts. Even if companies make greater efforts to implement safety and risk management programs, some accidents may prove unavoidable. Therefore, regardless of how the legal action over the EPA regulations plays out and how the industry players choose to behave, one thing is certain: chemical plant explosions will remain a significant risk for both insureds and insurers alike.
