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Massey Energy Bought Workers Comp Insurance Coverage Shortly Before Mine Explosion

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By Dave Lindorff

Massey Energy Corp., owner of the Upper Big Branch Mine in West Virginia where at least 25 miners were killed April 5 in a methane gas explosion, apparently arranged for and purchased disability compensation insurance coverage only a month before the disaster, according to one source with inside knowledge about the company's risk management operations.

Prior to that, the company, known for its aggressive challenges to workers' comp claims, was self-insured for workers compensation.

But given the number of safety violations at its mines--there were 53 in March alone, 495 in 2009 and 1300 since 2005, at just the Upper Big Branch Mine and 2,074 over the past year at other mines owned by Massey across the Appalachian region--perhaps the money spent buying insurance to cover workers' injury claims might have been better spent fixing chronic problems with methane gas build-ups in the mine. Then again, maybe the company felt that violation citations were no big deal--it has reportedly challenged two out of three instead of fixing them as a matter of course.

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The company certainly has not shown particularly good judgement when it comes to its insurance decisions. Last year, despite noting in its annual report that its operations were "subject to certain events and conditions that could disrupt operations, including fires and explosions," Massey Energy decided not to purchase business interruption insurance, according to Business Week magazine. With some analysts suggesting that the accident at the big West Virginia mine, where metalurgical coal used in the production of steel is extracted, could lead to a shutdown of that mine, and to a nearly 50% loss in overall corporate earnings this year, that decision could prove costly to Massey investors. The ratings agency Standard & Poors earlier this week placed the company, which already sports a junk-bond-level BB- credit rating, on watch for a downgrade, citing lost production, the "workers' compensation liability and any impact potential lawsuits brought against the company may have."

The accident could also prove costly for Massey CEO Don Blankenship, who only recently had the performance pay portion of his compensation package upped significantly by the company's board of directors from $900,000 in 2009 to $1.5 million for 2010 and 2011. Blankenship reportedly would also be in line to receive 81,500 Massey shares if certain performance targets are met for the year, and another 32,250 shares if a second set of targets are met. Among the performance areas considered are financial results, sales volume, and safety performance, all of which are likely to be problematic this year in the wake of the West Virginia disaster.

Blankenship, a local boy who made good and became the first non Massey family member to head the giant mining firm, has been aggressively anti-union, as has the entire company. A bitter strike by the United Mineworkers in 1984-85, in which the company, backed by the Reagan administration, brought in scab workers and hired private armed guards backed by West Virginia State Troopers to harass and intimidate unionized workers, lead to a breaking of the union at the company, which is now largely non-union, and across the country.

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A call to Massey asking for comment had gone unanswered as of this posting.
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DAVE LINDORFF is a Philadelphia-area journalist. His latest book is "The Case for Impeachment" (St. Martin's Press, 2006). His work is available at www.thiscantbehappening.net


 

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Dave Lindorff is a founding member of the collectively-owned, journalist-run online newspaper www.thiscantbehappening.net. He is a columnist for Counterpunch, is author of several recent books ("This Can't Be Happening! Resisting the (more...)
 

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