Karl Magerheimer owns a family bounce house business for which Texas law requires him to carry $1 million in liability insurance. Of course, kids get hurt by bounce houses that are not properly secured and flip over. So this law is not unreasonable. Other businesses required to have insurance covering injuries, deaths and property damage include home exterminators, air conditioning repairmen, tow truck drivers and many more.
Conversely, plants that house and mix dangerous materials like West Fertilizer Co. in West, Texas are a different story. On April 17, 5 people were killed and 200 more were injured due to fire and explosion of mammoth proportions in West. Three state agencies couldn’t explain why NO liability insurance coverage was required for such companies. Additionally, the Texas Department of Insurance reported that it only oversees insurance companies and the amusement ride industry. According to insurance spokesman Jerry Hagins, “We don’t make law. We implement law.”
The tragedy in West, Texas brings to light how flawed the system truly is in regard to insurance coverage. During a hearing last week of the House homeland and security and public safety committee, this issue was discussed. As is standard protocol with any governmental agency, change will be super-slow. Joe Pickett, an El Paso Democrat who chairs the committee, said it was “too late in the legislation session” to get anything done in a timely manner. “We don’t even have enough information,” he said. Pickett called for a mid-June hearing to give all agencies and lawmakers more time for information.
There is apparently no governmental list of which businesses must have liability coverage. However, most businesses carry liability coverage as standard industry practice. In the case of West, Texas, the fertilizer company had only $1 million in coverage. What’s worse, if the plant is found negligent, its policy would only pay $100 million in property losses that were estimated by the Insurance Council of Texas. So why did West Fertilizer only carry $1 million in coverage when there was such potential for hazardous disasters? We have no answers from either the company or its insurer to date. The awful explosion literally took down hundreds of homes and structures in a 35-block radius. Imagine the magnitude of 35 blocks! The cause of the blast is yet to be determined, but it is speculated that the plant’s storage of ammonium nitrate, which is widely used as a crop fertilizer and part of an explosive mixture in mining, is the culprit. West stored around 270 tons of this hazardous substance last year – one of the largest stores in Texas.
Two negligence suits have been filed against West Fertilizer on behalf of its victims by Tyler attorney Randy C. Roberts, who said his clients are in a real bind. $1 million dollars is a drop in the bucket for compensation of their losses
Mark Hanna, a spokesman for the Insurance Council, sounded like he was making excuses by saying that $1 million is a common amount for commercial property coverage, and that explosions triggered by ammonium nitrate don’t happen frequently. In the defense of West Fertilizer and its insurance company, he claimed that they may have balanced that fact against the risks. He went on to say that lawmakers do not like to tell businesses how much insurance to purchase.
Really? Then why are amusement ride owners required to have proof of minimum insurance and an annual safety inspection? In fact, the amounts are at least $1 million per incident for bodily injury and $500,000 for property damage. Additionally, the Department of Agriculture has similar requirements of residential and business pest companies, with at least $200,000 in liability for bodily injury and property damage.
According to the Dallas Morning News, no one in our state government keeps a centralized list of businesses required by law to have liability coverage. But here is a list the publication identified:[table]
|*combined bodily injury and property damage per occurrence
**insurance required by law but amount not proscribed
|Amusement ride operators||$1.5 million|
|Elevator/escalator contractors||$1.5 million|
|Residential appliance installers||$600,000|
|Emergency medical services providers||$500,000|
|Tow trucks (non-accident work)||$300,000|
|Structural pest control||$300,000|
|Used automotive parts recyclers||$250,000|
|Emergency/personal fall alarm responders||$200,000|
|Air conditioning (lowest level)||$200,000|
|Substance abuse treatment facilities**||N/A|
NOTES: Certain companies, such as those handling hazardous waste, must show proof of financial responsibility to cover third parties. Combative sports like mixed-martial arts and boxing provide surety bonds and medical coverage.
SOURCES: Departments of Insurance, Agriculture, Licensing and Regulation, and State Health Services; and Texas Commission on Environmental Quality
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