Case Studies details
Dispute Over a Flare Tip—What Constitutes Normal Wear and Tear?
Insurance Claim, North America
April 1, 2016
Unexpected emergency shutdowns of process plant equipment have the potential to cause premature degradation and loss of operating life by subjecting the equipment to damaging operational conditions. Such unplanned shutdowns can also result in extensive costs to clear, repair and restart the equipment, as well as lost profits due to production outages. Of course, process equipment also becomes gradually “damaged” over its normal operating life, even if it is always operated within its original design parameters. The latter is typically referred to as normal “wear and tear.”
A sour gas processing plant experienced an unplanned shutdown caused by an electrical power interruption. The plant owner filed an insurance claim for both direct costs to repair or replace damaged equipment, as well as lost profits. As part of its claim, the owner requested reimbursement for damages to the plant flare tip, steam nozzles, piping and welds near the tip of the flare, alleging they were caused by the shutdown. Baker & O’Brien was retained to assess whether such damages were actually associated with the shutdown or largely the result of normal wear and tear.
As part of their assignment, Baker & O’Brien consultants reviewed the damage in light of what would typically be expected for a flare with a similar operating history. This evaluation included examination of the old flare tip to determine whether erosion was typical for the flare’s age, and historical wind and flame patterns during normal operations. We also examined the wear patterns on the stainless steel to carbon steel welds near the tip. Our opinions were presented in a report submitted during mediation proceedings. The owner and the insurance company eventually settled the claim.