The trustee of the former Weirton Steel Corp. is suing Zurich Specialties London Ltd., claiming the insurance company refused to pay a legitimate claim and now owes the bankrupt steelmaker’s creditors $39 million.
The complaint, filed in U.S. District Court in Wheeling, accuses Zurich of breach of contract on a policy that covered Weirton following its May 2003 Chapter 11 bankruptcy filing.
Lawyers for Weirton’s liquidating trust say the steelmaker incurred unforeseen losses after an August 2003 fire at West Virginia’s Pinnacle Mine halted the delivery of coke.
The mine, owned by U.S. Steel Corp. of Pittsburgh, supplied about 80 percent of the coke Weirton needed to produce raw steel. Koppers Inc. supplied the other 20 percent, but it told Weirton that it would not continue that supply beyond Dec. 31, 2003.
The company filed a claim with Zurich in February 2004, detailing losses more extensively that November, but it was never paid. Though Weirton Steel says its losses exceeded $44 million, the company had a $5 million deductible, so the claim is for a lesser amount.
The bankruptcy settlement approved by a judge in 2004 provided only $30 million to Weirton Steel’s creditors, which include a trust set up to benefit employees.
If the trustee were to win the lawsuit or reach a financial settlement with Zurich, the creditors would share the proceeds.
Zurich declined comment on the lawsuit, which demands a jury trial and legal fees. No court dates have been set.
A year after the Chapter 11 filing, Weirton Steel was sold for $237.5 million to Ohio-based International Steel Group, which six months later sold the operation to Mittal Steel USA.
Netherlands-based Mittal Steel Co. NV is now merging with Belgium’s Arcelor SA to create ArcelorMittal, the world’s largest steel company by sales.
No raw steel has been produced in Weirton since 2005, and the mills that once employed 13,000 people now employ roughly 1,200.
That number may soon drop. In August, Mittal officials told United Steelworkers Local No. 2911 that the hot mill is not in the company’s 2008 business plan and will be shut down at the end of December.
The number of affected workers still has not been determined, President Mark Glyptis said Thursday. The union is still hoping to avoid the shutdown.
Earlier this year, Mittal considered selling Weirton. But federal regulators ultimately ordered the sale of the Sparrows Point mill in Maryland to settle antitrust concerns over the merger with Arcelor.
E2 Acquisition Corp., a joint venture led by Illinois-based Esmark Inc., is buying Sparrows Point. Privately held Esmark and Wheeling-Pittsburgh Corp., which Esmark is acquiring, are the lead partners in E2.
Topics Lawsuits Virginia West Virginia
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