BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
RICHMOND, Va. (Bloomberg)—Massey Energy Co., owner of the mine in West Virginia where 25 people were killed after an explosion, opted against buying insurance for risks including business interruption, a company filing shows.
The accident may depress sales and increase costs tied to lawsuits and worker claims, Standard & Poor's Corp. said Tuesday. The ratings firm placed Massey's BB- credit grade on watch for a downgrade, citing lost production, the “workers compensation liability and any impact potential lawsuits brought against the company may have.”
Jeff Gillenwater, a spokesman for Massey, didn't return calls seeking comment.
“Our operations are subject to certain events and conditions that could disrupt operations, including fires and explosions, accidental mine water discharges, coal slurry releases and impoundment failures, natural disasters, equipment failures, maintenance problems and flooding,” Massey said in its annual report last month. “We maintain insurance policies that provide limited coverage for some, but not all, of these risks.” While the firm self-insures underground equipment, “We do not currently carry business interruption insurance.”
Massey, the largest coal producer in Central Appalachia, slipped $1.13, or 2.3 percent, to $47.32 at 11:24 a.m. in New York Stock Exchange composite trading after slipping 11% Tuesday. The April 5 mining accident was the worst since a fire killed 27 workers at the Wilberg complex in Utah in 1984, according to the U.S. Mine Rescue Assn.
‘It's come in handy'
Competitor Consol Energy Inc. has purchased business interruption insurance and “frankly, it's come in handy,” said Jeremy Sussman, a coal analyst at Brean Murray Carret & Co. in New York. Consol said in its most recent annual report that it was notified by its insurers it would be paid $50 million in a final settlement related to a 2007 mine closure.
Mr. Sussman said it's “not a cut-and-dry decision” to buy business-interruption coverage in the mining industry. “There are a lot of companies that don't have this type of insurance, and there are companies that do,” he said.
Coal companies are less likely than other businesses to have protection against interruptions because insurers perceive mining as risky, said Mark Dwelle, an insurance analyst with RBC Capital Markets.
“Mine production is often interrupted for various issues, whether safety, labor or geologic,” said Dwelle in an e-mail. “And insurance companies don't want to cover things that might be regarded as regular or recurring.”
“Our top priority is the safety of our miners and the well-being of their families,” Massey said in a statement on its Web site. “We are working diligently on rescue efforts and continue to partner with all of the appropriate agencies.” Four additional miners were reported missing.
Lost production tied to the accident could lower earnings before interest, taxes, depreciation and amortization by as much as $50 million, S&P said in its statement. The ratings firm previously estimated 2010 EBITDA of more than $600 million.
Massey has workers compensation coverage through a combination of self-insurance, participation in a state-run program and commercial insurance, the company said in its filing.
Dependents of deceased employees are entitled to receive recurring payments of two-thirds of the miner's average weekly wage under state rules, said Jason Butcher, a spokesman for the West Virginia insurance commissioner's office. The maximum monthly benefit is about $2,940, he said.
Massey said in its annual report that it maintains property insurance, which is expected to cover losses from an Aug. 27 fire at a plant near Logan, W.Va. The company received $15.4 million of insurance proceeds during 2009, Massey said. Asked during an Oct. 28 conference call if insurance policies compensate for the company's lost profits after the fire, CEO Donald Blankenship answered “They won't cover business interruption.”
The Upper Big Branch mine where the explosion occurred, located near Montcoal, W.Va., about 46 miles south of Charleston, W.Va., is run by Performance Coal Co., a Massey unit. The mine, which opened on Oct. 15, 1994, has had two prior fatalities in the past decade, a state Web site shows.
On its Web site, Massey says “2009 marked the sixth consecutive year and the 17th year out of the past 20 years in which Massey's safety performance was stronger than the industry average.”
&Copy;2010 Bloomberg News