Articles Posted in Bad Faith

The Louisiana Sportsmen Coalition is in a battle with the Louisiana oil industry over rights to use coastal marshwaters for their respective enterprises. Representatives of local fisherman argue that oil companies who own nearby lands have unjustly also claimed ownership of adjacent waters that flow in and out of manmade channels. The sportsmen state that the waters, though very good for fishing, are being treated as off-limits, and the fishermen themselves are being treated as trespassers. Specifically, they say, “It has gotten to the point where [oil companies] are having local law enforcement agencies, like the sheriff’s office and justices of peace, write criminal trespassing tickets to people.”

The conflict came to a head last year when a professional Bassmaster fishing tournament was held in these areas. The world-renowned fishermen, individuals who make a living by these tournaments, unknowingly wandered into “privately owned” waters and were met by authorities. Following the tournament, the Bass Angler Sportsmen Society (B.A.S.S.), the national organization responsible for the well-known Bassmaster tournaments officially announced that it would no longer schedule professional tournaments in Louisiana tidewaters, a decision that will, without doubt, negatively impact the state’s fishing industry. Thus, as the sportsman’s coalition argues, the battle over water access is more than a debate about who can travel where; it is actually a battle over the prioritization of industries, and favor traditionally lies with the oil industry.

Unfortunately for the fishermen, a recently proposed bill that would have granted public access to the marshwater failed in Louisiana’s House of Representatives. The bill argued that because the waters are “running waters”—they freely flow into positively public waterways such as the Gulf of Mexico—they cannot be partitioned as either public or private, and therefore, their default status would be considered public. Opponents of the bill argued that just as one can claim ownership of dry land, one can claim ownership of the bottomlands underneath the water, for coastal erosion is constantly converting dryland into bottomland. The House’s vote reinforces Louisiana’s status as one of the only coastal states that does not consider tidal waters open for public use.

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.

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