NEW ORLEANS (CN) - Cameron International, which made the failed blowout preventer on the Deepwater Horizon oil rig, claims an insurer tried to hold its settlement negotiations with BP "hostage" by refusing to shell out the $50 million it owes.
Cameron International Corp. sued Liberty Insurance Underwriters aka Liberty International Underwriters, in Federal Court.
Cameron claims Liberty made a "calculated decision to disregard its obligations to provide insurance to Cameron in connection with hundreds of lawsuits arising from the Gulf oil spill."
Cameron says that in December 2011 it reached a tentative settlement with BP "that would largely eliminate Cameron's exposure and make an additional $250 million available to the victims of the disaster."
For the settlement to work, Cameron had to pay BP $250 million and waive its right to sue Transocean for indemnity from the April 20, 2010 oil spill that killed 11 and unleashed the worst oil spill in U.S. history.
Cameron says several insurance carriers would also waive their right to sue BP or Transocean, and would pay Cameron the money they owed under the insurance policies.
Cameron says Liberty owed it $50 million.
"All of Cameron's other insurers paid, but not Liberty," the complaint states. "When Cameron needed it the most, Liberty refused to provide Cameron the $50 million in insurance limits it sold Cameron. Instead, Liberty offered Cameron a choice: either continue the Gulf oil spill litigation and face potentially crippling liability, or agree to accept much less than what Liberty was contractually obligated to pay under its insurance policy. Liberty's manifest objective was to put Cameron between a rock and a hard place, holding a hugely important settlement with BP hostage for its own financial gain.
"Cameron rejected this dangerous game and reached into its own pocket to settle because it was the right thing to do for its shareholders and the victims of the Gulf disaster. Cameron now brings this action to seek redress for Liberty's blatant and bad faith breach of its contractual obligations to pay Cameron $50 million in insurance limits, and for a declaration that Liberty's policy obligates Liberty to pay for Cameron's defense expenses going forward in addition to those insurance limits."
Cameron made the failed blowout preventer used in the Deepwater Horizon. A working blowout preventer would have cut through the drill string to seal off the flow of oil. Underwater robots were used later to try to trigger the blowout preventer's blind shear ram preventer, but the attempts were unsuccessful.
The complaint states: "Due to the nature of Cameron's business, Cameron faces many significant risks. Oil and gas exploration can be dangerous, and blowouts or other accidents can result in lawsuits and potential liability. To protect against such liability, Cameron, like most responsible companies, purchases insurance from the world's largest insurance companies.
"Liberty is one such insurance company."
Cameron claims that since 2006 it paid Liberty for excess liability coverage, "that is, insurance coverage that is available for large losses once the limits of the underlying insurance policies have been reached."
Cameron says it never filed a claim for coverage from Liberty before the Deepwater Horizon rig explosion.
"Under the Liberty Insurance Policy, Liberty agreed to provide excess casualty insurance coverage to Cameron in the amount of $50 million if Cameron suffered a