Factory Mutual Insurance Co. (FM Global) must address a $100 million business interruption claim stemming from a 2019 explosion at a Texas petrochemical plant that damaged a nearby power substation and restricted site access for months, according to a federal court order.
In August 2019, Indorama Ventures Holdings LP agreed to buy storage tanks and equipment from Huntsman International Inc. at a TPC Group facility across from two Indorama plants.
Before the January 2020 closing, an explosion on Nov. 27, 2019, caused more than $600 million in damages, sparked months-long fires, and triggered a civil authority evacuation.
Huntsman’s FM Global policy covered November 2019 to November 2020. At closing, Huntsman assigned policy rights to Indorama with FM Global’s consent. Fires were extinguished Jan. 4, 2020, and Indorama regained access Jan. 29. The company claimed $100 million in losses to its plants, property at the TPC site, and a dock.
FM Global paid $50 million under the policy’s “contingent time element extension” sublimit. Indorama disputes this, saying civil authority and business interruption coverage should not be limited to that provision.
Litigation over insurance claims stemming from the 2019 TPC explosion has occurred in other contexts, including a separate suit brought by a homeowner against USAA GIC, which was ultimately dismissed with prejudice due to discovery violations.
Meanwhile, industry data also places the dispute within a broader loss trend – fire and explosion account for roughly 30% of global business interruption losses by value, averaging $6.7 million per claim.
FM Global moved to dismiss, arguing Indorama could not sue directly and that the claim fell under a reinsurance agreement requiring litigation in Rhode Island. The court denied the motion, finding coverage under the policy and assignment agreement, and citing adjustment emails as evidence FM Global handled the claim.
The court said the policy did not reference a reinsurance agreement and declined to review it. It ruled Indorama could sue a reinsurer when a specific agreement exists through conduct, with FM Global’s $50 million payment cited as supporting evidence.
Elsewhere, FM Global has faced high-profile disputes over coverage scope in other major incidents, including a $63 million lawsuit filed by Washington State University seeking recovery for COVID-19-related income losses.
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