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May 19, 2014

1he Ponorable Cralg LsLes, Chalrman
SenaLe CommlLLee on AgrlculLure, 8ural Affalrs & Pomeland SecurlLy
osL Cfflce 8ox 12068
AusLln, 1exas 78711

8e: WrlLLen LesLlmony, lnLerlm charge on regulaLlon and lnsurance requlremenLs for
ammonlum nlLraLe sLorage faclllLles.

uear Chalrman LsLes:

1exas WaLch ls a non-proflL, non-parLlsan clLlzen advocacy organlzaLlon LhaL focuses on
lssues relaLed Lo publlc safeLy and clvll [usLlce. We wrlLe Loday Lo provlde wrlLLen
LesLlmony on your lnLerlm charge concernlng Lhe regulaLlon and lnsurance requlremenLs
for ammonlum nlLraLe sLorage faclllLles.

lndusLrlal faclllLles llke Lhose LhaL sLore ammonlum nlLraLe and oLher volaLlle maLerlals
are vlLal Lo Lhe economy of our sLaLe, buL Lhelr operaLlons musL be conducLed ln a safe
and responslble way.

1hls ls a publlc safeLy lssue. As such, lL ls reasonable Lo empower sLaLe and local
auLhorlLles noL only Lo lnspecL Lhese faclllLles, buL also Lo enforce meanlngful safeLy
regulaLlons. lL ls slmllarly reasonable Lo requlre faclllLy owners Lo Lake baslc sLeps Lo
ensure Lhe safeLy of Lhe publlc and face accounLablllLy lf Lhey fall Lo do so.

Much of Lhe dlscusslon Lo daLe has focused on beeflng up dlsclosure of Lhe locaLlon of
dangerous faclllLles. 1hls ls a good flrsL sLep, buL lL ls noL enough [usL Lo know where Lhe
danger exlsLs wlLhouL Laklng meanlngful sLeps Lo mlLlgaLe Lhe rlsk.

ln addlLlon Lo lmprovemenLs ln noLlflcaLlon, publlc dlsclosure, and non-enforcemenL
lnspecLlons of ammonlum nlLraLe faclllLles, Lhe publlc deserves addlLlonal safeLy and
accounLablllLy measures.

lor lnsLance, Lhe SLaLe llre Marshal's recommendaLlon LhaL ammonlum nlLraLe sLorage
faclllLles have baslc sprlnkler sysLems and/or be consLrucLed of non-combusLlble
maLerlals ls senslble and should be codlfled.

AddlLlonally, Lo ensure LhaL affecLed famllles and buslnesses have sufflclenL resources Lo
rebulld, we recommend requlrlng Lhese faclllLy owners Lo carry llablllLy lnsurance ln an
amounL sufflclenL Lo cover Lhe faclllLy's rlsk exposure. 1he WesL dlsasLer reporLedly
caused up Lo $200 mllllon ln properLy damage, however, Lhe faclllLy owner carrled only
$1 mllllon ln lnsurance proLecLlon. 8emarkably, even LhaL meager level of coverage lsn'L
requlred by sLaLe law. 1hls lack of lnsurance proLecLlon has Lhe effecL of shlfLlng Lhe
burden of Lhe dlsasLer away from Lhe responslble parLy Lo lnnocenL properLy owners
and Laxpayers. 1he cosL and level of lnsurance should be scalable based on each
faclllLy's slze and/or rlsk exposure, lncenLlvlzlng faclllLy owners Lo locaLe ln areas
removed from developmenL.

1hank you for our conslderaLlon.

Slncerely,



n. Alex Wlnslow Ware v. Wendell
LxecuLlve ulrecLor ulrecLor of LeglslaLlve Affalrs

cc: Members of Lhe CommlLLee

West Fertilizer Co. was insured for only $1
million, a fraction of the estimated losses
By DOUG J. SWANSON and REESE DUNKLIN
Staff Writers
Published: 03 May 2013 11:03 PM
Updated: 09 May 2013 07:43 AM

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, Kitzmans office
said, far more than the amount of insurance we have heard the company
may have had.
Kitzmans office said it isnt the departments 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 companys 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, youve got to have
$750,000 in coverage, even if youre 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, youre 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 dont think anyones going to get a fair shake, he said.
The lawyer for West Fertilizers 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 doesnt plan to sue.
For those who decide to file a lawsuit, particularly those who were
uninsured, she said, the plants coverage wouldnt 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.
Id have thought theyd 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 theres a train track and a small town youre 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 dont have legal requirements for liability
insurance of this sort, said Tom Baker, an insurance and risk expert at the
University of Pennsylvania law school.
Thats 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. Thats not very much, is it?
Baker said companies that opt for liability insurance do so because theyre
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.
Im sure there are tons of businesses that have just $1 million worth of
coverage, and we dont make them buy more, Baker said. And so when
something really bad happens, there isnt enough money for the victims.
The insurance industry hasnt supported forced liability insurance, in part
because theyve been afraid that would lead to regulation of their rates,
Baker said.
Even if states dont 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.
Staff writers Sarah Mervosh and Matt Jacob contributed to this report.
dswanson@dallasnews.com;
rdunklin@dallasnews.com