Jefferson Block 24 Oil & Gas LLC v. Aspen Ins. UK Ltd.
(E.D. La. January 29, 2010)
In November 2008, plaintiff filed a lawsuit claiming that defendants were obligated to reimburse it for nearly $3 million in cleanup costs relating to an oil spill in the Gulf of Mexico. The leak occurred on November 2007 while plaintiff was testing a recently acquired pipeline. Plaintiff responded to the leak from November 2007 until April 2008. Plaintiff and its insurers disputed whether the pipeline constituted a covered facility under the terms of the Oil Pollution Act policy.
The court decided the insurers’ summary judgment motion under New York law. The court held that the federal Oil Pollution Act requires an offshore facility that has an oil spill discharge of more than 1,000 barrels to establish and maintain $10 million worth of insurance. More than 75% of the pipeline in question is located outside of leases listed by plaintiff on forms related to the insurance policy. Accordingly, the court held that the policy did not unambiguously and clearly cover the losses with respect to the specific 16-inch pipeline at issue, finding the meaning of “location” to be ambiguous.
Finding the policy terms ambiguous, the court looked to extrinsic evidence of the parties’ intent. The court noted that plaintiff did not include the facility in its coverage forms because it wished to minimize the insurance premium that it would have to pay. The court held that the normal presumption in favor of the insured where the policy was ambiguous did not apply, because plaintiff, not the insurer, was responsible for filling out the forms.
The court granted summary judgment in favor of the insurers, finding nothing in the record suggesting that either party expected the policy to provide broader coverage than what was necessary.
A copy of the decision can be found here
Toni Frain and Thomas Segalla