Articles Posted in Bad Faith

In the District Court of Harris County, Texas, a jury awarded over $40 million to owners of oil production facilities nearly 12 years after Hurricane Rita struck the Gulf Coast. The oil company plaintiff hired experienced trial lawyers to bring their claim before the civil justice system and hold their insurer accountable for the damages suffered.

In 2005, Prime Natural Resource owned oil and gas drilling platforms off of the coast of Morgan City. These platforms were insured by underwriters at Lloyd’s, London. Hurricane Rita struck Prime’s wells in September 2005 causing over $20 million in damages, including debris removal and restoration. Despite being aware of the damages for over 10 years, the insurance company repeatedly claimed its policy did not cover this particular damage. The policy covering the oil and gas drilling platform was a Wellsure policy, one often used in the energy industry. The Underwriters admitted that they insured the platform, but refused to pay for any individual parts of the well damaged by the Hurricane.

Both the trial court and court of appeals refused to look beyond the language of the insurance contract granting summary judgment in favor of Lloyd’s. The court’s looked to the intent of the parties in interpreting the policy. On appeal Prime brought four causes of action in front of the District Court: (1) breach of contract, (2) unfair or deceptive acts under the insurance code, (3) failure to promptly pay claims, and (4) breach of common law duty of good faith. After a six-week trial, the jury awarded $27.3 million in punitive damages, while also finding the insurers both breached a contract, as well as, violated the state insurance code. In addition to the punitive damages, Prime was awarded $10.9 million in bad faith, $1.8 million in actual damages, and $1.6 million in legal fees.