By Isha Marathe

May 23 - (The Insurer) - Tokai Carbon Co has sued six insurers for denying coverage of losses from the explosion of two high-speed fans at its Borger, Texas, facility, with the carbon black manufacturer seeking payment from policies providing combined limits of $400 million.

The lawsuit was filed in the U.S. District Court for the Northern District of Texas, Dallas Division.

The named insurers include GuideOne National Insurance Company, Liberty Surplus Insurance Corporation, Scor subsidiary General Security Indemnity Company of Arizona, Chubb subsidiary Ace American Insurance Company, Tokio Marine America Insurance Company and HDI Global Specialty SE.

The manufacturer is suing the insurers for breach of contract, engaging in unfair or deceptive acts or practices as defined by section 541.061 of the Texas Insurance Code, breach of the duty of good faith and fair dealing, and violation of the Texas Insurance Code’s prompt payment statute.

"As a result of the Insurers’ breach, Tokai Carbon has sustained substantial damages in the form of its uncompensated, covered losses," the lawsuit states.

The insurers provided policies for the December 2020 to December 2021 period with a combined $200 million of occurrence limits and for the December 2021 to December 2022 period also with $200 million of limits.

Tokai Carbon has demanded a jury trial, the damages incurred by each stated cause of action, pre-judgment and post-judgment interest, costs of court, and any further relief determined at trial.

In October 2021, one of the two high-speed fans that are essential to produce carbon black exploded, destroying the fan and portions of the environmental control system. With only one fan, the Borger Facility could operate at 60% of its usual efficiency for about nine months. While the system was brought back online by June 2022, the second fan exploded shortly thereafter, the complaint said.

Tokai Carbon's insurers hired EFI Global, a forensic engineer, which determined that the root cause of the explosions was likely a physical design flaw in the facility's air ducts, causing excess heating of at least one fan, the complaint said.

On October 7, 2024, the insurers sent Tokai Carbon a letter denying coverage, the complaint said.

Tokai Carbon said that because the issue wasn't with the fans, but the facility itself, according to the insurers' forensic analysis, their property policies warrant coverage of "all resulting damage".

HDI Global, Scor, and GuideOne declined to comment. Tokio Marine, Chubb, and Liberty Mutual did not immediately respond to requests for comment.

Tokai Carbon did not immediately respond to a request for comment. The lawsuit states that Tokai is one of the few manufacturers of carbon black, an ingredient used to make tires, in the U.S.