An Arkansas federal jury has awarded an oil company nearly $72 million in damages from lost income and expenses stemming from the breach of a pipeline carrying oil from Louisiana to Arkansas.
In litigation heard in federal court in the Western District of Arkansas, Lion Oil Co. had been seeking $80 million in claims from 14 different insurance companies stemming from the rupture in 2012 of a pipeline delivering oil to a Lion refinery, according to attorneys from the law firm Pillsbury who represented the oil company.
Lion sought coverage for business income losses and expenses incurred.
The crude oil supply pipeline was built in 1956 and operated by Exxon-Mobile subsidiary EMPCo, according to Lion’s attorneys.
As a result of the rupture, the pipeline was shut down for 10 months – a period insurers argued should not be covered.
Lion asserted that the all-risk policies purchased from 14 different insurance companies should collectively cover the company for its massive business disruption while its refinery was forced to operate at a lower capacity and find alternative sources of crude oil.
The insurance carriers denying Lion’s claims – principally AIG – argued that the rupture was not the predominant cause of Lion Oil’s loss. AIG maintained, rather, the loss was the result of an independent decision by Exxon to test the pipeline, Lion’s attorneys said in a statement.
Jurors apparently felt otherwise. After deliberating for two hours, the jury returned a verdict finding that damage to EMPCo.’s property was the “dominant, direct and efficient cause” of Lion Oil’s losses and expenses, the court document shows.
Lion Oil was awarded $60.4 million for income loss and an additional $11.3 million to cover expenses it incurred as a result of the breach.
Pillsbury partner Peter Gillon, head of the firm’s insurance recovery practice who served as trial co-counsel, stated: “Proving a company’s rights to insurance for damages to a supplier can be challenging, and we are pleased that both the jury and the court understood the way these policies are supposed to work and awarded our client the compensation they were owed.”
In addition to AIG, other insurance companies denying Lion’s claims included Lloyd’s, ACE and XL Insurance America, according to Pillsbury.
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