Texas Imperial Sugar Settles Property Claim for 2008 Georgia Explosion

Sugarland, Texas-based Imperial Sugar Co. has settled the property insurance claim for the February 2008 industrial explosion at its Port Wentworth, Georgia refinery for an aggregate of $345 million.

A final $45 million payment on the claim is expected to be received in early January. Through Sept. 30, 2009, the company had received advances on its property insurance claims totaling $294 million and it received an additional $6 million in October.

Imperial Sugar, one of the largest processors and marketers of refined sugar in the U.S., suffered an explosion and fire on Feb. 7, 2008, at its Georgia sugar refinery, which is located near Savannah. Production at the refinery, which comprises approximately 60 percent of its capacity, was suspended after the accident until the summer of 2009. The company expects the reconstruction to be completed in January 2010.

The company’s property damage insurance provides replacement cost coverage for affected facilities or a reduced amount to the extent not replaced. The policy also provides for business interruption insurance based on lost income and certain costs incurred during a reasonable period of reconstruction. The combined policy coverage for property damage and business interruption is subject to deductibles and a number of exclusions and sub-limits, as well as an overall policy limit of $350 million per event. The replacement cost of the damaged facilities at the Port Wentworth refinery is estimated in the range of $220 million to $230 million and the company said it had spent $154 million on the project through Sept. 30, 2009.

Other insurance issues relating to the Georgia explosion are still in negotiation or litigation, according to the company.

The company is party to a number of claims, including 45 lawsuits brought on behalf of employees or their families and third parties, for injuries and losses suffered as a result of the Port Wentworth accident. The company said it believes that its workers compensation and liability insurance coverages are adequate to provide for damages arising from such claims. Trial dates for two of the 45 lawsuits have been set for May 2010.

The company has been notified by its workers compensation carrier that it anticipates charging the company approximately $6.4 million as a result of certain loss-based assessments the carrier expected to receive from the state of Georgia’s Subsequent Injury Trust Fund (SITF). The company’s insurance contract provides that it reimburse the carrier for such SITF assessments.

The U.S. Occupational Safety Health Administration (OSHA) conducted an investigation related to the explosion and also conducted an investigation of Imperial’s Gramercy, Louisiana refinery. OSHA issued numerous citations with total proposed penalties of $5.1 million in Port Wentworth and $3.7 million in Gramercy. Imperial has contested all of the citations and proposed penalties, which would not be covered by insurance.