Fair Is Fair: The Fifth Circuit Decides Fair Market Value In The Absence Of A Market

When Alon's Big Spring, Texas oil refinery exploded on February 18, 2008, destroying Veolia's waste treatment facility, Alon did not even bother to contest its liability for the damages to Veolia's facility. Nor did Alon dispute that the only proper measure of damages for the completely destroyed facility was its fair market value immediately prior to the explosion. However, the problem faced by the Fifth Circuit in Factory Mutual Insurance Co. v. Alon USA L.P. is that there is a market for the facility's used parts but no "market" for the facility system itself.

After stipulating to liability, Alon contended that Veolia's insurer, FM, was only entitled to the cost of the facility's component...