McCarter and English LLP on Insurance Coverage for Damages Arising from the Gulf Oil Spill

McCarter and English LLP on Insurance Coverage for Damages Arising from the Gulf Oil Spill

   By Brian J. Osias and David C. Kane, Attorneys, McCarter & English, LLP

The recent oil spill in the Gulf of Mexico has become arguably the worst in United States history.  Spewing up to 30,000 barrels a day, it has surpassed even the Exxon Valdez disaster.  Third parties will invariably suffer damage from the oil onslaught and will seek reimbursement from their insurance carriers.

As the oil spill spreads, coastal property will be affected to a greater and greater extent.  Hundreds of millions, perhaps billions, of dollars will be necessary for cleanup.  Whole industries, from tourism to fishing to shipping, will suffer serious economic consequences.  For many businesses, financial harm will last well beyond the eventual completion of cleanup.  Thus, the damage levied by the spill will have far-reaching and long-lasting effects.

Many types of insurance policies may provide reimbursement for damages incurred due to the oil spill.  First-party property policies may cover damages to an insured’s property.  For companies that suffer a decline in revenue, business income coverage can provide the difference between what the policyholder earned and what it would have earned but for the oil spill.  Directors and officers coverage is available to protect corporate executives who face suits alleging breach of corporate duties such as negligent preparation for expected damages from the oncoming oil.  Finally, certain types of liability coverage, particularly Environmental Impairment policies, will cover liabilities third parties face from the oil spill.

Policyholders must review the coverage grants of their policies for potential application to oil induced damages.  Each of these policies, of course, may be subject to pollution, contamination, or oil exclusions.  An immediate review of these policies will allow policyholders to assess which losses will be reimbursed by their carriers.

Brian J. Osias is a Partner and Mr. Kane an associate in the Insurance Coverage Litigation Group of McCarter & English, LLP.  The opinions expressed in this article represent those of the authors and not necessarily those of McCarter & English, LLP or its clients.

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Karen C. Yotis
  • 06-19-2010

The full article here is filled with excellent analysis. Additional content about the Gulf Oil Spill can be accessed in our Gulf Oil Spill Information Hub on the LexisNexis Emerging Issues Law Community.