Today, we’re thrilled to sit down with Simon Glairy, a leading authority in insurance law and Insurtech, renowned for his deep expertise in risk management and AI-driven risk assessment. With years of experience navigating complex industrial claims, Simon offers unparalleled insight into the intricate world of property insurance disputes. In this interview, we dive into the high-profile Westlake Chemical Corporation chlorine spill case, exploring the nuances of insurance policy exclusions, the impact of court rulings on industrial claims, and the broader implications for insurers and policyholders. Our conversation unpacks the legal intricacies of coverage denials, the role of specific policy clauses, and the evolving landscape of bad faith claims in the insurance industry.
Can you walk us through the key events of the 2016 chlorine spill at Westlake’s Natrium Plant and the scale of the damage it caused?
Absolutely. In 2016, a major incident occurred at Westlake Chemical Corporation’s Natrium Plant in West Virginia, where a railroad tank car, recently repaired, ruptured and released a significant amount of chlorine. This spill caused extensive damage to the facility, disrupting operations and leading to substantial financial losses. Westlake later filed claims estimating the damages at a staggering $278 million, highlighting just how severe the impact was on their infrastructure and business continuity. It’s a stark reminder of how a single failure in industrial equipment can cascade into a massive financial and operational crisis.
What led the insurers to deny Westlake’s $278 million claim, and what specific policy terms did they lean on for their decision?
The insurers, a group of major players in the commercial insurance space, denied coverage based on several exclusions in Westlake’s multi-layered property insurance program. They pointed to clauses related to corrosion, faulty workmanship, and pollution as their primary justifications. Essentially, they argued that the damage stemmed from pre-existing issues or errors in the repair process of the tank car, as well as the nature of the chlorine release itself, which they classified under pollution. These exclusions are common in industrial policies, but their application often becomes a battleground in court because the language can be open to interpretation, as we saw in this case.
Turning to the West Virginia appeals court ruling on November 13, 2025, what were the major takeaways from their decision?
The Intermediate Court of Appeals of West Virginia delivered a nuanced, mixed ruling in this case. On balance, they leaned toward Westlake on several key issues, particularly around certain exclusions not fully barring coverage. However, it wasn’t a complete win for Westlake. The court affirmed some aspects of coverage, reversed others, and even sent specific issues back for further review, like a jury trial on corrosion damages. What stood out was how the court provided clarity on interpreting complex policy exclusions, which is going to be a reference point for future industrial claims. I wasn’t entirely surprised by the mixed outcome, given the layered nature of the policies and the factual disputes at play.
One of the exclusions debated was faulty workmanship. How did the court interpret this clause in relation to Westlake’s claim?
The court took a close look at the faulty workmanship exclusion, which typically denies coverage for losses due to errors in construction or repairs. In Westlake’s case, the insurers argued that the tank car rupture stemmed from substandard repair work. However, the court ruled that this exclusion didn’t fully block the claim because the chlorine spill itself was considered a covered peril under the policy’s ensuing loss clause. This meant that even if faulty workmanship initiated the problem, the resulting damage from the spill was still eligible for coverage. It’s a critical distinction that shows how courts often prioritize the chain of events over a single triggering factor.
The pollution exclusion was another focal point. Can you explain how the court handled this and why one insurer’s policy was treated differently?
The pollution exclusion was a significant hurdle, as it generally bars coverage for damages tied to contamination or seepage. The court acknowledged that the language in most of Westlake’s policies was broad and clear on this point. However, they also noted an exception in many of the policies that allowed coverage for damages resulting from pollution if the initial loss was covered. This preserved some of Westlake’s claim. The outlier was the National Union policy, which had a stricter pollution exclusion without such an exception. Because of this, the court ruled that National Union could deny coverage on those grounds, setting their policy apart from the others. It’s a great example of how subtle differences in policy wording can lead to vastly different outcomes.
Corrosion was a contentious issue in this case. How did the court approach the corrosion exclusion, and what’s next for this aspect of the dispute?
Corrosion was indeed a sticking point. The insurers argued that much of the damage was due to corrosion, which their policies excluded. The court, however, applied what’s known as the efficient proximate cause doctrine, which looks at the primary cause of the loss. If the chlorine spill—a covered peril—was the main trigger for the corrosion, the exclusion wouldn’t apply. But there was a catch: the court found a factual dispute over whether some corrosion existed before the spill. Because of this uncertainty, they remanded this issue for a jury to determine the cause and extent of the corrosion damage. It’s a pivotal part of the case that could significantly affect the final payout.
There was a parallel lawsuit in Pennsylvania against the repair vendors. How did that outcome influence the insurance dispute?
Westlake pursued a separate lawsuit in Pennsylvania against the vendors responsible for the tank car repairs, and they won a verdict of $12.8 million, with $5.9 million specifically for plant damage. However, the West Virginia appeals court ruled that these damages couldn’t be directly tied to the insurance claims. The reason was that the measure of loss in the Pennsylvania case differed from what the insurance policies covered. Essentially, the court said you can’t just transfer one set of damages to another legal context without aligning the metrics. This decision kept the insurance dispute focused on the specific terms of the policies rather than external rulings.
Westlake also accused the insurers of bad faith in denying coverage. What was the court’s perspective on this claim?
Westlake’s bad faith claim was an attempt to argue that the insurers acted unreasonably or maliciously in denying coverage. The appeals court, however, dismissed this claim, finding that the insurers had reasonable grounds to contest the coverage given the complexity of the exclusions and factual disputes. From my perspective, Westlake’s argument for bad faith was always going to be an uphill battle. Courts typically require clear evidence of unfair conduct, and here, the insurers could point to legitimate policy language as their basis for denial. It wasn’t a frivolous denial, even if Westlake disagreed with it.
Looking ahead, what is your forecast for the future of industrial insurance disputes like this one, especially regarding policy exclusions?
I think we’re going to see more disputes like Westlake’s as industrial operations become increasingly complex and the stakes grow higher. Policy exclusions, especially around corrosion, pollution, and workmanship, will remain hot-button issues because they often involve gray areas that courts and juries have to untangle. Insurers may start tightening their language or offering more tailored policies to avoid ambiguity, but that could also lead to higher premiums or pushback from policyholders. On the flip side, insureds will likely become more diligent in negotiating exceptions to exclusions. The Westlake case also signals that courts are willing to dive deep into causation doctrines, which could mean longer, more detailed legal battles. Overall, I expect this area of law to evolve with a sharper focus on clarity in contracts and a growing reliance on technology, like AI, to assess and predict risks before they turn into courtroom dramas.
