Gemini Insurance Company at al v. Drilling Risk Management Inc construed control-of-well and redrill/extra-expense provisions in an insurance contract.
The question and the rule
The question was whether an insurance policy covered post-blowout expenses (see facts below), and whether each blowout constituted a separate “occurrence”? If so, there would be two deductibles. The rule is simple: An insurance policy is a contract of indemnity whose scope is limited to that expressly set forth in the agreement.
Gemini denied coverage under the contract. The trial court granted summary judgment in favor of DRMI on the coverage and deductible issues. On appeal, the insurer’s denial of coverage was vindicated. Post-blowout casing and liner and associated expenses were required because of pre-existing hole conditions, not as a result of a well-control incident.
Rather than delve into the minutiae of the policy and the events, none of which would be helpful in your next insurance dispute, be reminded not to read too much into the meaning of one agreement. As with any contract, the meaning of an insurance agreement must be determined by the language of the agreement itself.
While drilling, DRMI encountered a kick in an unexpected high-pressure zone, resulting in uncontrolled subsurface flow. DRMI sidetracked the well, and encountered a second unexpected weak zone at a depth below the original blowout, resulting in a second underground blowout.
A second sidetrack was unsuccessful, never reaching the depth of the second blowout. DRMI drilled a third sidetrack and installed casing and a liner to isolate the zones that caused the second blowout. This one was drilled to total depth. DRMI sought coverage under the policy and a determination that there was one “occurance”.
Beware, home-town justice
Another issue is presented in this case, which was tried in Kendall County, Texas, in the 216th Court (County Court at Law judge presiding). The plaintiff sued in its own county rather than the county of the defendant or the location of the events (Houston or Louisiana). After denying a motion to transfer venue, the trial court granted partial summary judgment, construing the contract in favor of the hometown plaintiff. This put the defendants to trial with their case essentially gutted. The result was a $9 million+ judgment for plaintiff. The trial court got it wrong, ignoring testimony from hometown witness, DRMI president Alan Bloxsom, that undermined the company’s contentions.
To be sure, all trial courts don’t favor the homies. The other good news for the visiting team is that the appellate court can set it right. Full disclosure: Gemini drew my attention because I represented a party in the same court in a case with similar players, similar events, and a similar result.
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