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Former exec's conviction puts spotlight on safety for high-risk industries

Deadly mine explosion resulted in underwriting rethink by insurers

Former exec's conviction puts spotlight on safety for high-risk industries

Workplace safety experts had mixed reactions to the split verdict in the trial of a former top official accused in a 2010 explosion that killed 29 coal miners in West Virginia.

Don Blankenship, the former CEO of Massey Energy Co., last week was acquitted of all felony charges, but convicted of a misdemeanor conspiracy charge — a conviction his attorney vowed to appeal — for willfully violating U.S. mine health and safety standards.

Mr. Blankenship faces up to one year in federal prison when he is sentenced in March 2016, prosecutors said in a statement.

“It's really a cautionary tale,” said Patrick McCarthy, a partner at Day Pitney L.L.P. in Parsippany, New Jersey. “When you're dealing with people's well-being, it's very important to be mindful of your obligations.”

The U.S. Mine Safety and Health Administration concluded that preventable methane accumulation and a massive coal dust explosion caused the miners' deaths and injured two other workers.

Abingdon, Virginia-based Alpha Natural Resources Inc., which acquired Massey Energy in 2011, eventually paid $209 million to settle its corporate criminal liability in the Upper Big Branch mine explosion, but the settlement did not bar criminal charges against individuals such as Mr. Blankenship.

“On the one hand, there is a desire to see that somebody is held accountable for it,” said Daniel Murdock, a Charleston, West Virginia-based attorney at law at Fogle Keller Purdy P.L.L.C. “On the other hand, there's a question whether there's a little bit of scapegoating going on in terms of finding somebody to blame even though there may not have been any responsibility on his part.”

While some experts believe the outcome will improve workplace safety, others say some employers see workplace accidents as a cost of doing business.

“I think I would call it a mixed reaction,” said John Leonard, president and CEO of Portland, Maine-based insurer Maine Employers' Mutual Insurance Co. “I think it's a wake-up call for some people, but others see it as burden. That's the type of employer we don't want to do business with.”

While local prosecutions in fatal workplace accidents have been a fairly common exposure, accusing Mr. Blankenship of criminal conspiracy allowed federal prosecutors to elevate the case beyond the typical fines and citations, Mr. McCarthy said.

Increased enforcement by the federal mine safety agency and criminal charges brought against the mine manager and supervisor of Upper Big Branch have rightfully increased attention on mine employers, said Meagan Noel Newman, a Chicago-based partner and co-chair of the environmental, safety and toxic torts practice group at Seyfarth Shaw L.L.P.

“If anything good can come from this, it is personal accountability and attention paid at these work sites,” she said. “I'm sure the outcome will have an impact, but the enforcement action itself has the greater impact.”

There were 48 coal mining fatalities in 2010, according to the federal mine safety agency; 20 each in 2011-2013; 16 in 2014; and 10 as of Dec. 2 for 2015, according to the Mine Safety and Health Administration.

The Upper Big Branch explosion triggered a major internal review at the federal mine safety agency, leading to 100 reform recommendations that included enforcement rule changes when inspectors identify a pattern of violations. Previously, inspectors were limited to citations, but they now can shut mines down, Fred W. Smith IV, director of natural resources and head of mining and metals of the U.S. at Willis Group Holding's P.L.C. in Knoxville, Tennessee.

“By and large, these mines do care about their people,” Mr. Smith said. “It's the outliers that get splashed across the media.”

The mine safety agency also has brought in extra inspectors to assess an entire mine from top to bottom in a single shift, targeting mines with poor safety records or a reputation of trying to thwart inspections, in a “SWAT-team type of experience,” Mr. Smith said.

From a liability insurance perspective, the multimillion-dollar payouts made to the miners' families reset the thinking on the probable maximum loss for such incidents beyond the $15 million to $25 million previously seen as the norm, Mr. Smith said. In addition, insurers generally lowered their limits from $25 million to about $10 million, although several major carriers continue to write the coverage with no exclusions outside of punitive damage limitations on some policies.

“It didn't really constrain capacity for excess employer liability, but it did increase pricing,” Mr. Smith said.

The Upper Big Branch tragedy did not have much impact from a workers comp perspective be­cause West Virginia already has a deliberate intent law that allows employees to sue their employers outside of the exclusive remedy of the workers comp system if the employer knew of the existence of a health and safety violation in the workplace and still exposed employees to the hazard, Mr. Murdock said.

“It's an exceptionally dangerous industry, and these accidents are extraordinarily expensive for these companies,” he said. “As a general practice, they work very hard to ensure workers are as safe as they can possibly be given the dangerous nature of the work.”