Lawsuit Reveals 2012 Plant Fire Could Cost Welspun $14.5 Million

by Arkansas Business Staff  on Monday, Jul. 29, 2013 12:00 am  

Welspun Pipes in Little Rock. (Photo by Stephanie Dunn)

A fire that ripped through the control panel room at Welspun Pipes Inc.’s Little Rock plant a year ago could cost the company $14.5 million.

After the fire on July 14, 2012, the plant closed because of the damage, according to the lawsuit Welspun and Welspun Tubular LLC filed in U.S. District Court against its insurance company, Liberty Mutual Fire Insurance Co. of Wausau, Wis.

At the time of the fire, Welspun didn’t know how long it would take before the plant was up and running. The equipment in the control room was vital to operating the plant.

“Welspun hoped to start production again in late September of 2012, but that date was extremely uncertain through the summer of 2012,” Welspun said in its lawsuit.

That wasn’t good news to Welspun’s customers, who still wanted more than 180,000 metric tons of pipe to be produced on time, the lawsuit said.

To meet its order with Seaway Crude Pipeline Company LLC, Welspun asked its sister company, Welspun Trading Ltd. in India, to lend a hand in the production. It did, but by the time all the extra expenses were added, such as shipping the pipes from India to Little Rock, the additional expenses totaled $14.76 million, the lawsuit said.

By the time the plant was operational again on Sept. 25, Welspun said the fire had cost it $15.5 million.

(We’re unsure exactly how much financial damage the fire caused because Liberty paid some claims, and that amount wasn’t mentioned in the lawsuit.)

Welspun, which had nearly $70 million in a blanket loss of income coverage, submitted the $15.5 million bill to Liberty. Liberty “claimed that the Mitigation Cost did not constitute a loss of business income, but instead was an ‘extra expense’ under the Policy,” the lawsuit said.

Liberty paid Welspun $1 million, which was the limit of the “extra expense” coverage, leaving a balance of $14.5 million.

Welspun is suing for the rest and is claiming breach of contract and failure to honor the policy.

A spokesperson for Liberty didn’t immediately return a call for comment.

 

 

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