Sept. 26, 2002 – Hovensa, which furloughed some 1,045 workers employed by seven of its contractors on Sept. 13 when its liability insurance covering them expired, announced on Thursday that two of the companies are still without coverage but that rehiring of their employees by other firms is effectively addressing that problem.
At the same time, Hovensa spokesman Alex A. Moorhead said that because of reduced demand for its petroleum products and increases costs for heightened security since Sept. 11, 2001, the refinery has not made a profit since August of last year.
As far as the layoffs, all of the contractors except for Jacobs Industrial Maintenance Co. and V.I. Industrial Maintenance Corp. "have now secured general liability insurance coverage, and their employees have resumed work at the refinery," a Hovensa release stated.
The case of Jacobs-IMC is unique because a decision had been reached earlier to terminate the company's maintenance contract with Hovensa. The contract expires on Monday, and as far as Jacobs obtaining insurance now, "Hovensa believes this effort is hopeless," Moorhead said in the release, issued Thursday.
Therefore, he said, Hovensa "has begun focusing on getting Turner [Turner St. Croix Maintenance], the company that will replace Jacobs-IMC on Oct. 1, to begin hiring Jacobs-IMC employees."
Meanwhile, the laid-off V.I. Industrial Maintenance Corp. employees were hired earlier this week by two other companies that have general liability insurance, Pinnacle Services and Triangle Construction and Maintenance, Moorhead said. "Pinnacle previously has been providing services to Hovensa only in the operation of a training program at the St. Croix Vocational School to upgrade the skills of maintenance workers," he said.
The contractors whose workers were laid off two weeks ago and now are back on the job are Addison Construction, Best Construction, M&M Construction, Longview Inspection, and Triangle. Addison and M&M obtained insurance on Wednesday, according to Moorhead; the others had done so last week.
Four other contractors, CBI, St. Croix Basic, Turner and Wyatt V.I., secured their own replacement coverage before the three-year policy covering all Hovensa contractors expired, and their employees were not affected by the Sept. 13 layoffs.
Except for some Jacobs personnel, all of the employees of Hovensa maintenance contractors have resume work, Moorhead said, adding that he expects that by Tuesday, most of the Jacobs workers will have been hired by Turner.
A class-action lawsuit filed in Territorial Court last week charges that Hovensa used the insurance situation as an excuse to lay off 450 Jacobs-IMC employees three weeks before the company's contract expired. Attorney Lee Rohn asked the court to order Hovensa to pay severance and punitive damages to those workers.
The lawsuit also says that contractors previously have acted as "labor brokers" for Hovensa, transferring groups of workers from one company to another as old contracts expired and new ones took effect, with those workers being 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. She said that violates V.I. labor law.
Insurance remains a problem
According to Moorhead, Hovensa's vice president for government affairs and community relations, while "the employment problem for the maintenance workers is over," the insurance availability problem remains. He said Turner's coverage is in effect for just 45 days and will expire at the end of October.
Hovensa had held a single liability policy covering its contractors since 1999 with American International Insurance of Puerto Rico. Moorhead said American did not state a reason for its decision not to renew the policy. However, local insurance industry executives have cited the high incidence of litigation and the excessive damages awarded by juries in the Virgin Islands as reasons that many carriers do not want to write policies in the territory.
Moorhead said American and other carriers approached by Hovenas "have expressed concern about the aggregate size of claims pending against the contractors" despite the fact that "the rate of injuries among contractors in the refinery has declined in recent years."
When Hovensa's efforts to replace the American policy were unsuccessful, refinery officials asked the contractors to try to arrange their own insurance. Moorhead has said Hovensa will reimburse the companies for the added costs they are incurring.
In Thursday's release, Moorhead said that "the cost to Hovensa of general liability insurance, including auto liability, on the operations of its maintenance contractors has increased more than 100 percent from last year's cost of approximately $5 million."
This economic setback is added to others, he said: a significant decline in demand for its petroleum products since Sept. 11, 2001, and an increase in its costs to maintain a higher level of security since the terrorists attacks.
"These factors are affecting all oil companies," Moorhead said. "However, most oil companies are engaged in both oil exploration and production as well as refining and are, therefore, often able to maintain a profit when their refining operations experience an operating loss."
Hovensa is involved solely in oil refining. The company is a joint venture of Hess Oil Virgin Islands Corp. and PDVSA, a local subsidiary of the giant state oil exploration and production company Petroleos de Venezuela.
In the last year, Hovensa has continuously sought to reduce operating costs where possible, Moorhead said, and to motivate its contractors to increase productivity and decrease operating costs.
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