Litigation and Regulatory Compliance



Lloyd's Syndicate Named as Defendant in U.S. Suit Against BP and Others

February 2, 2011 Published Work
Insurance Litigation Reporter, Vol. 33, No. 1

We have endeavored to provide periodic updates with regard to disputes involving insurance coverage of BP and others for the Deepwater Horizon Gulf oil spill. In June, we reported that TransOcean's insurer's had sued BP challenging BP's additional insured claims. Insurance Litigation Reporter, Vol. 32, No. 9 (June 18, 2010). In August, we reported that BP counterclaimed along with AIG in a subrogation claim because AIG had paid out on a BP claim. Insurance Litigation Reporter, Vol. 32, No. 14 (August 30, 2010).

Now, we have an additional development with regard to BP's coverage. On December 15, 2010, the United States Government brought a major claim against BP and a number of other parties involved in the operation of the mobile offshore drilling rig Deepwater Horizon, as well as a syndicate at Lloyd's of London which had provided a Certificate of Financial Responsibility (COFR) for the Deepwater Horizon under the Oil Pollution Act of 1990 (OPA). U.S. v. BP Exploration & Production Inc. et al (E.D. La. 10-cv-04536). In the suit, the Government seeks various damages in connection with the blowout and subsequent oil spill in April 2010. The action seeks penalties and damages from the operating defendants (all those with the exception of the Lloyd's syndicate) under the Clean Water Act (CWA) and a declaration that the defendants are liable for damages under OPA. The damages include damage to natural resources, clean up expenses, wreck removal expenses and other costs.

The sole claim against the Lloyd's syndicate is in its capacity as a COFR guarantor under OPA, and the complaint notes that suit may be brought directly against the insurer in its capacity as a guarantor (damages payable by the Lloyd's syndicate would be limited to "the amount of its COFR guarantee").

We will continue to monitor this proceeding as well.