Sept. 18, 2002 – A St. Croix labor leader and a lawyer representing workers furloughed last week from the Hovensa refinery for lack of liability insurance are demanding compensation for their clients. Meanwhile, one of seven companies whose workers were laid off has found insurance on its own and a second is expecting to reach agreement on coverage by Thursday.
And Hovensa has disputed statements made about the layoffs and about the refinery's recently adopted policy requiring new non-union hires to agree to binding arbitration of disputes between workers and management.
Some 800 workers employed by the seven Hovensa contractors were taken off the job as of midnight last Thursday when their personal injury liability insurance coverage from American International Insurance Co. of Puerto Rico expired.
Hovensa announced the furloughs on Thursday evening, saying the insurance company had given advance notice of its intention not to renew the policy, but that, despite extensive efforts over several weeks, Hovensa had been unable to secure replacement coverage.
The layoffs were of workers for Addison Construction, Best Construction, Jacobs-IMC, Longview Inspection, M&M Construction, Triangle Construction and Maintenance, and V.I. Industrial Maintenance Corp. Four other contractors who also had been covered by American International — CBI, St. Croix Basic Industries, Turner St. Croix Maintenance and Wyatt V.I. — were able to get new coverage for their operators through mainland affiliate companies, a Hovensa release said.
"Although four of the contractors have the word 'construction' in their name, none of them is under a contract to perform construction service," Alex A. Moorhead, Hovensa vice president for government affairs and community relations, said on Tuesday. "They were all providing primarily maintenance services to Hovensa, except Longview Inspection, which provides non-destructive testing of mechanical equipment. The immediate impact will be that work on several projects has been interrupted and certain clerical, janitorial and groundskeeping services will be unavailable."
Longview Inspection has now been successful in obtaining insurance, allowing its equipment inspectors to get back to work.
Leroy Mitchell, general manager for Triangle, said on Wednesday morning he was hopeful that an agreement on coverage could be reached within hours. "I'm very optimistic that either late today or tomorrow, we'll be close to an agreement," he said.
Triangle workers account for 350 of those laid off — pipe fitters, welders, sand blasters, carpenters and masons. Mitchell declined to name the potential insurer but described it as a local company. He said talks have been going on "for over a month."
Once agreement is reached, he said, Triangle management would notify its workers to return to their jobs. Asked about compensation for the time they have been off the job, he said, "I don't know about that. We'll be talking about that later. The first thing is getting them back in the gate."
Severance pay sought for one contractor's workers
According to lawyer Lee Rohn, she has filed a class-action lawsuit in Territorial Court claiming that Hovensa used the insurance situation as an excuse to lay off 450 employees of Jacobs-IMC three weeks in advance of the scheduled end of its contract with the refinery. Rohn said she charged that Hovensa denied the Jacobs-IMC workers some severance pay they were entitled to.
Because of a disagreement between Jacobs and refinery executives, Rohn said, a decision was made well in advance of the layoffs that its contractor would not be renewed. "They were going to lose their jobs, no matter what," she said. Moorhead said on Tuesday that Hovensa's contract with Jacobs expires on Sept. 27 and that Jacobs gave notice to its employees to that effect.
The lawsuit alleges that contractors in the past have acted as "labor brokers" for Hovensa, transferring groups of workers from one company to another as old contracts expired and new ones were created, and that those workers were assured of continuing benefits and seniority. But when the Jacobs-IMC workers were sent home on Sept. 12 instead of Sept. 30 as expected, Rohn said, Hovensa told them they were not entitled to any more benefits. And that, she said, violates the good faith and fair dealing provisions of V.I. labor law.
The lawsuit asks the court to order Hovensa to pay severance and punitive damages to the workers.
At a press conference held on Tuesday by Our Virgin Islands Labor Union, Terrence "Positive" Nelson, union president, called the abrupt layoffs an illegal lockout. "Hovensa is ultimately locking out their subcontractors," he said. "It is the union's perspective that this is all politics as big corporations — as they do — bully around small governments."
Our Virgin Islands represents unionized workers employed by Triangle and Addison. Nelson said the contractors were not properly notified what the consequences would be if Hovensa failed to secure replacement insurance. The union wants its workers to be compensated for lost wages. "Our union members want to be paid for their time out, because this is no fault of their own," he said. "And in the future, we would like for this type of activity to be handled more responsibly."
Regulatory officials comment
The territory's two top insurance officials also went public this week with their views of the Hovensa insurance crisis. Lt. Gov. Gerard Luz James II, whose position includes serving as the territory's commissioner of Banking and Insurance, and Maryleen Thomas, director of the Banking and Insurance Division, held a press conference on Monday.
In prepared remarks, James said it was apparent "that until last Thursday, no one outside of Hovensa seemed aware of or concerned about the loss of personal liability insurance."
He added, "If the subcontractors through Hovensa were timely informed of the decision not to renew the policy, it is reasonable to ask if the subcontractors took any steps to seek new carriers. None of the affected subcontractors contacted my office, and no insurance agent sought assistance on behalf of these subcontactors."
His conclusion, James said, is that "One must begin to wonder if the subcontractors were informed of this insurance difficulty prior to Thursday, Sept. 12."
In an interview on Tuesday, James said Hovensa had to know American International was going to terminate its policy at least 30 days in advance of the action. "What happened to Hovensa is they received notice on or about the 11th or 12th of August from their insurance carrier that they would discontinue the coverage," he said. Hovensa executives have not disputed this.
James also said he has no indication that any other company in the Virgin Islands is having a problem obtaining liability insurance, although the cost may be very high. Rohn and Nelson have suggested that if Hovensa is having problems getting coverage for its contractors, it is because of unsafe working conditions that have resulted in permanent disability for skilled workers making $25 to $30 an hour.
At the Monday press conference, Thomas said her division "is not required to take regulatory action on Hovensa's insurance situation … It is obvious that Hovensa does not need our assistance."
Thomas also commented on the wider issue of insurance availability. "We have heard that insurance companies do not want to come to or are leaving the territory because of our regulatory style," she said. "I challenge the persons who have made such statements to identify these companies." Division records, she said, "show that from July 1999 to present, 42 insurance companies (includes property and casualty and life and health companies) have applied for licenses or approval to conduct business in the terri
tory."
Hundreds of court cases, most of them settled
Rohn said she handles at least 80 percent of workers' liability claims against the refinery and has taken at least 250 such cases to court against in the last 10 years, with most of them settled out of court. Last month, she said, she represented a worker who won a liability case in court with the jury awarding her client $1 million, although a negotiated settlement with the company after the trial resulted in a smaller award.
According to insurance industry executives, aggressive litigation and the excessive damages awarded by juries in the Virgin Islands is the reason that Hovensa can't get insurance. (See "Without tort reform, V.I. could be in big trouble".) "We have reached the point that few insurance companies are interested in writing in the Virgin Islands," David C. Ridgway, president of Marshall & Sterling Insurance, said. "For every $1 million collected in premiums, $10 million is paid out in settlements," Tom Fitzsimmons, president of St. Croix Insurance, said, adding that in the territory, insurance companies often opt to make excessive payments to avoid going to court.
According to Moorhead, American International had been providing coverage for three years. "No reason was given in the notice of non-renewal or in any other written communication," he said.
But he said American and "prospective carriers that have been contacted have expressed concern about the aggregate size of claims pending against the contractors." He added, "This has apparently overshadowed the fact that the rate of injuries among contractors in the refinery has declined in recent years."
Rohn, however, charged that "Hess is not a safe place to work." She said, "I probably get five calls a week from people who get injured at Hess by negligence."
(Hovensa is a joint venture of Hess Oil Virgin Islands Corp. and a V.I. subsidiary of Petroleos de Venezuela, the South American nation's giant state-owned oil company that supplies most of the crude oil processed at the St. Croix refinery.)
Nelson charged that problems occur because the refinery is generally understaffed and "sometimes there seems to be a rush to meet deadlines in projects." He added, "There are over 254 chemicals used there."
Refinery to reimburse companies that find carriers
Moorhead conceded there may not have been clear communication from the refinery about what contractors would be expected to do if efforts to obtain replacement insurance failed, and he said they should not be penalized for that. "If they secure the insurance on their own, we would have to reimburse," he said. "They don't have to dig into their profits to pay the cost for something they didn't have to pay for before."
But he denied that Hovensa either misrepresented or hid its situation. "We had a search made nationally and internationally in order to find replacement insurance," he said.
And, Moorhead said, "We are continuing to solicit proposals from insurance companies nationally and internationally. As soon as Hovensa secures a binder of adequate general and auto liability insurance covering the contractors who do not yet have such coverage, all the remaining contractors will be allowed to resume work in the refinery. Alternatively, if an individual contractor secures such a binder of insurance covering its own employees, that contractor will be allowed to resume work in the refinery."
Rohn said a new problem for the contractors may be one of finding liability coverage at a cost Hovensa will find acceptable. She said Hovensa has already turned down as too expensive some insurance estimates presented by contractors.
"So far as I know, that is not the case," Moorhead said. Costs will be a factor, he said, but individual agreements with the companies will be reached through negotiations.
Hovensa is asking its contractors to provide liability coverage of up to $5 million for any single incident resulting in worker injury or death and $10 million for the life of the policy, he said.
Nelson and Rohn say the timing of the insurance crisis is suspect, suggesting it was planned to coincide with Gov. Charles W. Turnbull's consideration of the Omnibus Act of 2003, part of the territory's budget for the coming fiscal year, which begins on Oct. 1. The voluminous bill, passed by the Legislature on Aug. 28, contains a provision restricting the circumstances under which binding arbitration may be used to resolve labor-management disputes.
The provision apparently is directed against Hovensa, which as of July 1 began requiring applicants for non-union positions to agree in writing to have disputes resolved by arbitration. It instituted the policy after a similar requirement implemented by one its contractors, Wyatt V.I., was upheld in District Court. (See "Hovensa hires now must sign arbitration pact".)
Moorhead has issued public statements warning that the arbitration provision of the Omnibus Act would be rejected in court as a violation of the Federal Arbitration Act.
Last weekend, Rohn placed a full-page advertisement in a local print newspaper disputing Moorhead's claims and challenging the validity of Hovensa making agreement to have labor disputes resolved by arbitration a condition of employment. Moorhead responded on Monday, calling Rohn's statements "blatantly false."
Turnbull has not yet acted on the Omnibus bill or other FY 2003 budget bills on his desk.
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