Buncefield: The cost of a crisis
A business insurance case study
The Buncefield oil depot explosion happened nearly 5 years ago in December 2005. However, sentencing has only recently been concluded and the costs of the crisis are starting to emerge. Five firms have now been ordered to pay £9.5million between them for their involvement in the disaster. The £1.3 million in fines for pollution are a record in the UK. Although incidents of this scale are rare, they can still act as a warning for all businesses to ensure they’re covered financially for the worst case scenario.
Disaster struck early on the morning of December 11th 2005. Luckily, this was a Sunday morning and not part of the working week – a fact that Judge Sir David Calvert-Smith claimed was ‘little short of miraculous.’ That morning, a number of explosions occurred at the Buncefield Oil Storage Depot in Hemel Hempstead, Hertfordshire – causing extensive damage to the site and the surrounding area. At least one of the initial explosions was of massive proportions – it measured 2.4 on the Richter scale and could be heard 125 miles away. A huge fire followed, injuring over 40 people and disrupting the lives of families and businesses in the local area. Those affected by the blast have struggled to cope with the affects of this disaster long after the flames have gone.
Thorough investigations uncovered some serious failings that led to gallons of petrol being released in a large vapour cloud. After a four month trial, it was concluded that the 5 companies involved had shown inefficiency and a complacent attitude towards safety.
The results of the sentencing are as follows:
- French oil giant Total UK Limited was ordered to pay a total of 6.2 million (£3million for safety, £600,000 for pollution and then costs of £2.6 million).
- Supply company British Pipeline Agency Ltd must pay £780,000. It was fined £300,000 for environmental offences and also ordered to pay costs of £480,000.
- Hertfordshire Oil Storage Ltd was fined £2.4 million (£1million for safety, £450,000 for pollution and then costs of £1 million).
- Installation and maintenance company Motherwell Control Systems 2003 Ltd was fined £1,000 and ordered to pay costs of £500.
- TAV Engineering Ltd was found guilty of one offence and fined £1,000 and ordered to pay £500 costs. TAV Engineering was the company who designed a crucial safety switch that failed.
Local businesses and the MP for Hemel Hempstead are reported to be disappointed with the outcome – claiming the sentencing is too lenient. It seems that local people are still waiting on compensation for the disruption to their businesses, lives, homes and health.
Although incidents on this scale don’t happen frequently, they serve as a valuable lesson for all business owners. Are you fully aware of all the risks associated with your business? Are efficient systems in place to prevent these risks? Are these systems working effectively? Prevention is obviously a key factor, but if things go wrong – do you have sufficient public liability insurance, professional indemnity insurance and employers liability insurance to protect yourself financially? Your business might not be at risk of an explosion, but without adequate business insurance, your investment could still go up in smoke.
