Brokers and Buyers Beware: Underwriters Are Nickel-and-Dimed by Strict Interpretation of Language in Excess and Umbrella Policies of Offshore Energy Companies

L. Taylor Coley | Note

Hurricane Ike swept through the Gulf of Mexico in September 2008, leaving behind more than $150 million in damage to more than 150 offshore platforms in which W&T Offshore (W&T) had a commercial interest. In preparation for just such a storm, W&T purchased three types of insurance: (1) a commercial general liability policy (the “primary liability” policy), (2) five energy package policies (energy packages), and (3) four umbrella/excess liability policies. Whereas the energy packages covered claims regarding property damage, operators’ extra expenses (OEE), and removal of debris (ROD) expenses, the umbrella policies only allowed recovery for ROD expenses. After ascertaining that W&T had sustained over $150 million in OEE and property damages alone (the energy package’s total coverage amount over and above W&T’s self-insured retention of $10 million), its loss adjuster forecasted that W&T would submit over $50 million in ROD claims to umbrella policies.