Gulf Oil Corp. v. Mobile Drilling Barge or Vessel

• Decision Date: 18 November 1975
• Docket Number: Civ. A. No. 71-3278.
• Citation: 441 F. Supp. 1
• Parties: GULF OIL CORP. v. The MOBILE DRILLING BARGE OR VESSEL known as MARGARET, her Engines, Tackles, Apparel, Drilling Rig and Equipment, etc., Ocean Drilling and Exploration Co. and Shell Oil Co.
• Court: U.S. District Court — Eastern District of Louisiana

441 F. Supp. 1

GULF OIL CORP. v. The MOBILE DRILLING BARGE OR VESSEL known as MARGARET, her Engines, Tackles, Apparel, Drilling Rig and Equipment, etc., Ocean Drilling and Exploration Co. and Shell Oil Co.

Civ. A. No. 71-3278.

United States District Court, E. D. Louisiana.

November 18, 1975.

COPYRIGHT MATERIAL OMITTED

Robert B. Acomb, Jr., Glenn G. Goodier, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., for Shell Oil Co. and Travelers Indemnity Co.

A. R. Christovich, Jr., Christovich & Kearney, New Orleans, La., for Highlands Ins. Co.

Francis Emmett, Terriberry, Carroll, Yancey & Farrell, New Orleans, La., for The Home Indemnity Co.

EDWARD J. BOYLE, Sr., District Judge:

On December 1, 1970, a fire started on Shell's drilling platform off the Louisiana coast in the Gulf of Mexico. Shell contracted with Ocean Drilling and Exploration Company (ODECO) on December 4, 1970 for the drilling of a relief well near the burning platform.¹ Pursuant to the contract, ODECO provided the Drilling Barge Margaret to drill the relief well. On December 30, 1970, at approximately 8:00 A. M., an oil slick on the water near the Margaret was noted by Leo J. Guthrie, Shell's division construction foreman, and by Norris Dodge, Shell's division construction superintendent. Through the use of divers it was determined that the Margaret had been positioned on Gulf's underwater pipeline and had damaged the pipeline, allowing oil to escape.

Gulf then sued ODECO and Shell for damages to the pipeline. Shell filed a third party complaint against Highlands Insurance Company (Highlands) and The Home Indemnity Company (Home), alleging Shell had been named an additional insured in policies issued by Highlands and Home to ODECO.² Shell asked that Highlands and Home be held liable for any judgment rendered against Shell, and for penalties, costs and attorney's fees for their failure to defend Shell.

The parties then entered into a joint stipulation on May 20, 1974, which provided in pertinent part:

2. The parties agree that the claim of Gulf Oil Corporation in this matter is valid and recoverable from Shell Oil Company to the extent as herein set out below and that Ocean Drilling and Exploration Company is without fault: Gulf Oil Corporation's claim for damages in this matter is in the amount of $5,869,932.47; of the aforementioned sum, a reasonable settlement is $1,185,485.76.

(a) Of that figure of $1,185,485.76 the sum of $607,361.76 represents costs of repair to the pipeline.

3. Shell Oil Company agrees to pay Gulf Oil Corporation within thirty (30) days hereof or upon demand thereafter the sum of $1,185,485.76, and within ten (10) days after payment, Gulf Oil Corporation agrees to pay Shell Oil Company $185,485.76, which latter sum represents monies advanced by Shell Oil Company for temporary repairs to Gulf Oil Corporation's pipeline.

4. Shell Oil Company reserves all rights to assert claims as an assured under any Ocean Drilling and Exploration Company's policies of insurance including but not limited to Highlands Insurance Company, Policy No. GA 31 47 86 and The Home Indemnity Company, Policy No. HEC 9792522, but only as an assured, additional assured or co-insured, not by reason of any alleged breach of contractual obligations vis-a-vis Shell Oil Company and Ocean Drilling and Exploration Company, and any such insurers have the right to assert their defenses contrary to Shell's claim.³

Gulf demanded payment of $1,185,485.76 in accordance with the stipulation by letter dated June 27, 1974. Travelers Indemnity Co. (Travelers), which had issued a policy covering Shell, advanced the required amount to Shell. Shell paid Gulf $1,185,485.76, and Gulf then returned to Shell $185,485.76, which Shell had previously advanced for temporary repairs to the damaged pipeline.

Home and Highlands filed third party complaints against Travelers, alleging that Shell's loss was covered by the Travelers' policy issued to Shell.⁴ Travelers then filed a counterclaim against Home and Highlands.⁵

The questions for determination by the Court are what insurer or insurers shall pay Shell's loss, whether part of Gulf's loss was damage to oil or gas in place, and whether either Highlands or Home, or both, are liable for penalties and the cost of Shell's defense, including attorney's fees.

BREACH OF SETTLEMENT AGREEMENT

Shell and Travelers claim in the pre-trial order that an issue exists as to whether Highlands and Home breached the settlement agreement reflected in the pre-trial stipulation. Although it is not entirely clear what actions by Highlands and Home are claimed to be a breach of the settlement agreement, no such breach has occurred.

If Shell and Travelers claim that Highlands and Home breached the agreement by failing to pay the $1,185,485.76, which Gulf agreed to accept in settlement, their contention is clearly without merit. The stipulation provided that Shell would pay Gulf and thereafter assert its claims against Highlands and Home, whose defenses thereto were reserved to them. Shell did pay Gulf and asserted its claims against Highlands and Home, both of which asserted defenses thereto.

If Shell and Travelers contend that Home breached the settlement by proposing language whereby Gulf would be paid within thirty days after demand, the actions complained of took place before the stipulation was signed and, therefore, could not constitute a breach of the stipulation.

The assertion of the real party at interest defense by Highlands and Home is discussed hereafter.

REAL PARTY AT INTEREST

Home and Highlands contend that Shell is not a real party at interest under Rule 17(a), F.R.C.P., since the loss in question has been paid by its insurer, Travelers.

Shell, in turn, claims Home and Highlands have breached the settlement agreement reflected in the pre-trial stipulation by raising the issue of whether Shell was a real party at interest. (See Shell Trial Brief, pp. 4, 41-46). This contention is without merit. The stipulation expressly provided that Home and Highlands reserved all defenses to Shell's claims. (See Document # 93).

We, therefore, turn to the defense raised by Home and Highlands that Shell is not a real party at interest. The purpose of the requirement of Rule 17(a) that suit be brought in the name of the real party at interest "... is to enable the defendant to avail himself of evidence and defenses that the defendant has against the real party in interest, and to assure him finality of the judgment and that he will be protected against another suit brought by the real party at interest on the same matter." Celanese Corp. of America v. John Clark Industries, 214 F.2d 551, 556 (5 Cir. 1954).

There is no danger that Highlands and Home will later be subjected to another suit on the facts at issue here. Both Shell and Travelers are before the Court and will be bound by our decision here.

Since both Travelers and Shell are parties, Highlands and Home could produce any evidence or assert any defenses available as against either Travelers or Shell.

In addition, Shell has demonstrated that it has a substantial interest in the outcome of this litigation. Shell is required to reimburse Travelers for the first $25,000 paid out on Shell's claims under the Travelers policy. In addition, Shell eventually reimburses Travelers for the next $250,000 paid on its claims. Therefore, Shell has paid or will pay $275,000 of its own loss in this case. Shell is clearly a real party at interest.

INDEMNITY AGREEMENT

By a letter dated in January, 1971, Shell agreed to indemnify ODECO for losses thereafter arising out of the positioning of the Drill Barge Margaret on the Gulf pipeline.⁶

Highlands claims the indemnity agreement also indemnifies the insurers of ODECO. There is no such explicit statement in the indemnity agreement. Furthermore, Highlands is being sued, not as the insurer of ODECO, but as the insurer of Shell. Therefore, Highlands' contention is without merit.

DATE OF THE ACCIDENT

From the testimony of Leo Guthrie and Norris Dodge, we conclude the Drilling Barge Margaret damaged the Gulf pipeline on December 30, 1970. Both men testified they first saw an oil slick that day near the Margaret. In December, 1970, Guthrie made a daily helicopter tour of the area near the fire and it is likely he would have noticed an oil slick if one had been present earlier than December 30, 1970.

COVERAGE BY TRAVELERS

While there is a question regarding the specific Travelers policy which covered Shell on the date of the accident, there is no doubt that Travelers insured Shell and its policy limits on December 30, 1970 were $5,000,000 as to each occurrence of bodily injury and property damage.

COVERAGE BY HIGHLANDS

Shell claims it was also insured by Highlands, ODECO's insurer, through the following sequence of events: On December 4, 1970, Shell and ODECO entered into the contract for use of the Margaret to drill Shell's relief well.⁷ In a letter dated December 23, 1970, W. M. Marshall of Shell requested of ODECO that Shell be added "... as a co-assured, for all operations under the contract, in all of the general liability insurance policies ... required of you ODECO in the drilling contract." He further requested that the drilling contract be amended to reflect that agreement. Alden J. Laborde, president of ODECO, signed the bottom of Marshall's letter, indicating his agreement to the proposed amendment. Laborde's signature is dated December 28, 1970.⁸

On December 28, 1970, ODECO was covered by Highlands policy # GA 31 37 86, which by endorsement effective July 1, 1970, provided:

"The unqualified word `Insured' wherever used, includes the Named Insured and also any person or organization to whom or to which the Named Insured is obligated by virtue of a written contract to provide insurance such as is afforded by this policy, but only with respect to operations by or in behalf of or facilities used by the Named

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