Petrochemical Plant Power Loss - Unexpected Lights-Out and Associated Implications

Litigation, North America

When a continuous process plant stops operating abruptly due to an unplanned loss of power, in addition to the lost production, equipment can be damaged. In order to assess this business interruption claim, Baker & O'Brien calculated the lost production, evaluated the lost profit, and assessed the mitigation costs of the response to the event. We presented the total business loss impact in an expert report.

When a process plant experiences an unplanned shutdown, returning to normal operations can be a challenge. A loss of power to the site is a typical cause for this type of event. When a large petrochemical facility experienced a power outage, the facility suddenly shut down. This resulted in damage to equipment that had been operating normally prior to the event. Subsequently, following necessary repairs over a number of days, the plant was able to return to normal operations; however, not without incurring lost production and mitigation costs associated with the event.

Baker & O'Brien was requested to assess: (1) the lost profits due to lost production and sales; (2) the costs associated with mitigating the loss; and (3) equipment damage costs directly associated with the power interruption. In order to complete our assessment, we calculated the lost production of various chemicals produced at the facility and their historical variable profit margins to calculate the lost profit from operations. In addition, we reviewed mitigation costs, such as increased maintenance and labor overtime cost associated with the event. Finally, we reviewed the equipment damage costs to arrive at a total business loss impact as a result of the power outage.

Following the development of an expert report, the matter was mutually settled between the parties.

Gary N. Devenish

Vice President

Petroleum Refining
Insurance Claims / Litigation / Expert Witness Testimony / Quantum/Damages Assessment
North America