The number of lawsuits being filed over the Gulf of Mexico oil spill is reportedly rising, as are the estimated losses expected from the event. Before we get ahead of ourselves, Randy J. Maniloff of law firm White and Williams offers his perspective on the spill and its insurance coverage implications in a May 4 article titled Gulf Oil Spill: Gusher of Insurance Claims.
Maniloff observes that while the claims picture is currently much more speculative than certain, one thing is sure Ã¢â‚¬“ efforts will be made to place as much of the tab for the losses as possible at the feet of insurance companies and insurers are well-prepared to handle the claims.
Maniloff goes on to note that the BP oil spill is likely to give rise to a host of claims under first- and third-party insurance policies. His observations include:
- Third-party claims: Maniloff notes that oil companies and owners and manufacturers of oil rigs tend to have very complex insurance programs, including self-insured components. These companies likely have unique policies and perhaps policies that are specifically designed to address pollution exposures. It remains to be seen what the limits of these policies are and whether all of those limits are applicable to the relevant claims.
- First-party claims: Impending first-party claims offer more predictability, according to Maniloff, because businesses that are covered by commercial property and business interruption insurance often have policies that are written on standardized forms published by ISO. Maniloff predicts a lot of activity surrounding business interruption claims, but points out that under business interruption policies the suspension of the insuredÃ¢â‚¬â„¢s business operations must be caused by direct physical loss or damage to the insuredÃ¢â‚¬â„¢s property. This is likely to be a significant issue, he says, given that the consequences of an oil spill can be far reaching without any need for the oil itself to actually reach those affected.
- Another dynamic at work in the claims picture, according to Maniloff, is that history has shown that when there is a large-scale societal problem that requires significant funding to solve it, insurersÃ¢â‚¬â„¢ policy language faces pressure to become more malleable than what was intended. As a result, sometimes the insurance industry finds itself being required or pressured to pay more than its appropriate share.
Maniloff concludes that on the one hand, both the litigation and insurance claims arising out of the BP explosion are in the opening minutes of a very long play. On the other hand, itÃ¢â‚¬â„¢s one that weÃ¢â‚¬â„¢ve all seen before.