Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Saturday, May 25, 2024 | Back issues
Courthouse News Service Courthouse News Service

Insurer Sued for $50 Million in BP Oil Spill

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


'Loss,' which was defined as 'those sums which you are legally obligated to pay as damages, after making proper deductions for all recoveries and salvage, which damages are covered by the First Underlying Insurance Policy.' Liberty further promised Cameron that, '[w]hen the amount of "loss" has finally been determined, we will promptly pay on your behalf the amount of "loss" covered under this policy.'"

Cameron says the $50 million excess casualty policy was part of a "tower" of insurance it purchased, to cover losses above $103 million.

"By all accounts, the damages arising from the Deepwater Horizon incident total in the tens of billions of dollars. If Cameron were held responsible for even a small fraction of that amount, its liability could have run into the billions of dollars," the complaint states.

Cameron says it complied with Liberty's investigation of the oil spill.

"Cameron supplied Liberty with information about the blowout preventer that gave rise to its potential liability. Cameron provided various documents and other materials relating to the blowout preventer, sent the relevant contractual agreements governing its use in connection with the Deepwater Horizon, and made itself available to answer numerous queries from Liberty."

Cameron says it also kept Liberty current on its involvement in the litigation.

"Moreover, when it was time to discuss the possibilities of settlement with BP, Liberty's counsel was intimately involved in the process. Not only did Cameron send Liberty draft settlement agreements and provide reports on the progress of negotiations, but Cameron also took suggestions from Liberty's counsel, such as what arguments to raise with BP."

Cameron says it believed that it and Liberty were on the "same side" and that Liberty would pay what it owed under its policy.

According to the operation agreement Cameron and Transocean shared, Transocean agreed to indemnify Cameron under certain circumstances.

Since the oil spill, however, "Transocean has vigorously denied and continues to deny that it has any obligation to indemnify Cameron for pollution and related claims. Not only did Transocean dispute that it owed Cameron any indemnity, but Transocean also sued Cameron for damages and for a declaration that it owed no indemnity," the complaint states.

Cameron says it negotiated with BP to try to reach a settlement "pursuant to which BP would provide Cameron a near-global release and indemnification for any future losses arising out of the Deepwater Horizon incident."

Cameron says BP made it clear it would not settle with Cameron unless Cameron agreed to waive any contractual indemnification claims it might have with Transocean that might flow to BP. Also, Cameron's insurers had to agree to waive their subrogation rights.

"This was essential to any settlement because BP would not settle if there were a possibility that BP would be responsible either to Transocean for a judgment obtained by Cameron, or to Cameron's insurers as subrogees of Cameron, for the very amount paid to settle the action," the complaint states.

The most recent settlement negotiations between Cameron and BP took place the week of Dec. 12, 2011.

But after BP offered to settle with $250 from Cameron - money Cameron expected its insurers would provide - Liberty refused to pay.

"At the risk of scuttling the entire deal, Liberty sought to hold the settlement hostage to advance its own interests and negotiate a steep discount on the amount that it owed Cameron," ostensibly because "other insurance" was available to Cameron, the complaint states.

It adds: "Liberty's reliance on 'other insurance' provisions is plainly pretextual. No other insurance, even broadly defined, was available to cover the loss that Cameron had incurred. While Cameron had a claim against Transocean for contractual indemnification ... serious issues had been raised as to whether Cameron would actually receive indemnification."

Cameron claims Liberty insisted that before it would pay any money it owed Cameron, Cameron had to obtain a court decision that it was not entitled to indemnity from Transocean.

"Liberty thus demanded, as a precondition to paying its insurance coverage, that Cameron forgo an extremely favorable settlement, continue to litigate, and bet the company's future and all its employee's jobs to test the validity of an indemnification claim that had been steadfastly rejected by Transocean."

Cameron says it went ahead with the BP settlement by paying itself the $50 million Liberty refused to pay.

It seeks a declaration that Liberty owes the $50 million, plus attorney fees.

Cameron International is represented by Phillip Wittmann with Stone Pigman Walther Wittmann, of New Orleans.

Follow @SabrinaCanfiel2
Categories / Uncategorized

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.