Prime Natural Resources Wins $41.6 Million in Wellsure Insurance Dispute

HOUSTON – A Houston jury awarded Prime Natural Resources Inc. $41.6 million in an insurance breach of contract dispute with certain underwriters at Lloyd’s, London, over offshore oil facilities damaged by Hurricane Rita 12 years ago.

After six weeks of testimony, the state district court jury in Harris County awarded a remarkable $27.3 million in punitive damages after finding the insurers not only breached the contract, but also violated the state insurance code. Actual damages were $1.8 million for the insurers’ failure to cover repairs from the 2005 storm and $10.9 million for bad faith. The jury also awarded $1.6 million in legal fees.

The underwriters insured Prime’s oil and gas drilling platform in the Gulf of Mexico under a Wellsure policy, one often used by the energy industry. Following Hurricane Rita, Prime spent millions in repairing its damaged platform, but the underwriters refused to pay.

“The insurers were claiming that they insured the offshore oil well, but they would not pay for any of the individual parts of the oil well that were damaged. It would be like saying your car is insured, but your bumper isn’t. The jury didn’t buy that argument,” said John Zavitsanos, founding partner of Houston-based AZA, or Ahmad, Zavitsanos & Mensing. Mr. Zavitsanos tried the case with associates Sammy Ford IV, Foster Johnson and Edward Goolsby.

Media coverage of this win include a Law360 story “Lloyd’s Hit With $41.6M Verdict In Offshore Rig Damage Row” (subscription required), a Texas Lawyer story  “Jury Awards $40M to Offshore Oil Well Owner in ‘Message’ to Insurer”  (subscription required)  a Houston Chronicle story  “Well owner awarded $41.6 million from insurer in Hurricane Rita case” (subscription required) and from London, an AM Best Europe story  “Houston Lawyer Sees Wide Effects From Lloyd’s Energy Rig Verdict” (subscription required).

Mr. Zavitsanos said a Lloyd’s witness acknowledged this was the first jury trial in Texas testing the way insurance companies pay under these Wellsure policies and could thus create a precedent for how these policies are interpreted in the future regarding offshore oil wells.

The case is Prime Natural Resources, Inc., v. Certain Underwriters at Lloyd’s, London et al., case number 2015-51137 in the 129th District Court in Harris County.

AZA, or Ahmad, Zavitsanos & Mensing, is a Houston-based law firm that is home to true courtroom lawyers with a formidable track record in complex commercial litigation, including energy, intellectual property, and business dispute cases. AZA is recognized in Chambers USA 2016 among the best in Texas commercial law; U.S. News & World Report and The Best Lawyers in America as one of the country’s best commercial litigation firms for 2017; and Law360 as one of only 13 Texas Powerhouse law firms. National corporate counsel named AZA one of the country’s best in client service among law firms serving the Fortune 1000. Read more about the firm at www.azalaw.com.