WV Supreme Court Denies Insurers’ Appeal in Chlorine Leak that Damaged Plant

A group of 12 insurance companies cannot yet appeal a trial court’s finding that contamination exclusions did not bar coverage for a chemical plant that was damaged when 90 tons of liquid chlorine leaked from a ruptured rail car in 2016, the West Virginia Supreme Court of Appeals said this week.

“We conclude that the circuit court’s orders are not final orders subject to appeal at this stage of the proceedings,” the court wrote in its opinion that was released Thursday. Issues of causation and damages remain unresolved, the justices said.

National Union Fire Insurance Co. of Pittsburgh, Allianz Global Risks, Ace American, Zurich American Insurance and other insurers had appealed three orders from a Marshall County Circuit Court judge stemming from the chemical spill, which sent a cloud of chlorine gas over Natrium, West Virginia and forced an evacuation of hundreds of residents.

The chemical firm, Axiall Corp., had purchased 13 all-risk policies from the 12 carriers, each of which had subscribed to quota shares of the insurance program, the court explained.

The recently repaired rail car ruptured inside the Axiall plant, causing as much as $400 million in corrosion and other damage to equipment, according to the chemical company’s claims. The insurers denied the claims, noting that policies excluded corrosion, faulty workmanship and contamination. Axiall and Westlake Chemical Corp., which had purchased the plant shortly after the accident, sued the insurers for breach of contract and bad faith.

The Marshall County judge agreed, granting partial summary judgment to the chemical companies. The judge, in a decision that insurers strongly objected to, wrote that the policies’ corrosion exclusions did not exclude corrosion damage from a loss, but only excluded coverage for claims where corrosion was the cause of the loss. He also said that faulty workmanship exclusions barred recovery only for damage to the rail tank car, not for the damage to the chlorine manufacturing facility.

Lastly, the trial court found that the contamination exclusions were designed to address only environmental pollution, “which is not what this case is about.” The insurers appealed those orders.

The state Supreme Court found that the orders were not final and that the complex litigation is continuing.

“The applicability of any of the policy exclusions at issue, which is the focus of the declaratory judgment count, is dependent on a determination of causation, one of many issues which are not yet resolved in this case,” Justice William Wooten wrote in the opinion.

Although a Pennsylvania jury in a separate case decided against the rail-car repair firm awarded $6 million to Axiall and Westlake, other parts of the litigation are far from over.

“Stated succinctly, because the facts of this case are so complex (we are told that more than a million documents have been disclosed and exchanged during the discovery process), because the petitioners will still have to litigate the breach of contract and bad faith claims regardless of what happens with the declaratory judgment claim, because all three of the causes of action are so factually and legally intertwined, and because significant factual and legal issues remain as to damages, piecemeal review of any issues by this Court would serve only to delay final resolution of the matter, including all claims and all defenses presented by the parties,” the high court opinion reads.

Related: Rail Car Leak at the Axiall Plant Led to Safety Recommendations

Topics Carriers West Virginia