Factory Mutual Insurance Co. must defend against a $100mn business interruption claim tied to a 2019 explosion at a Texas petrochemical plant.
The blast damaged a nearby power substation, triggered months of access restrictions, and caused more than $600mn in losses.
In August 2019, Indorama Ventures Holdings LP agreed to buy storage tanks and related assets from Huntsman International Inc. at a TPC facility across from two Indorama plants. Before the deal closed, a massive Nov. 27 explosion at TPC shook areas up to 30 miles away.
Fires burned for weeks, leading civil authorities to order evacuations and restrict access. The transaction finalized in January 2020, after Huntsman’s property and business interruption policy with FM Global had taken effect.
Huntsman assigned the policy to Indorama during closing, with FM Global’s written consent. Indorama claims it suffered $100mn in damages to its plants, property at the TPC site, and a dock.
The insurer acknowledged the claim but paid $50mn, applying the policy’s “contingent time element extension” coverage—its lowest sublimit—for both civil authority actions and business interruption.
FM Global sought dismissal, arguing Indorama had no standing to sue directly because it was pursuing benefits akin to those under a reinsurance deal. The carrier also pointed to a forum-selection clause that would require litigation in Rhode Island.
The U.S. District Court for the Eastern District of Texas rejected those arguments. The judge found that the policy and assignment agreement clearly covered the losses and that FM Global had adjusted and paid the claim directly.
Alleged reinsurance arrangements were not referenced in the policy or complaint, and the court exercised discretion to exclude them.
The court also held that Indorama could bring a direct claim against a reinsurer based on the parties’ course of conduct, even without explicit contractual language.
