Mobil Exploration v. Certain Underwriters, 2001 CA 2219.
| Citation | 837 So.2d 11 |
| Decision Date | 20 November 2002 |
| Docket Number | No. 2001 CA 2219.,2001 CA 2219. |
| Court | Court of Appeal of Louisiana (US) |
| Parties | MOBIL EXPLORATION & PRODUCING U.S. INC., Mobil Producing Texas & New Mexico Inc., Mobil Oil Exploration & Producing Southeast Inc., Mobil Exploration and Producing North America Inc., St. Mary Land & Exploration Company, St. Mary Operating Company and Samuel Gary Jr. & Associates, Inc. v. CERTAIN UNDERWRITERS SUBSCRIBING TO COVER NOTE 95-3317(A), Certain Underwriters Subscribing to Policy of Insurance 95-3317(B), Certain Underwriters Subscribing to Cover Note 96-3393(A), and Certain Underwriters Subscribing to Policy of Insurance 96-3393(B), Cliffs Drilling Company, Soriero & Company, Inc., and Aon Texas Acquisitions Corporation. |
George H. Robinson, Jr., George Arceneaux III, P. Matthew Jones, Lafayette, Counsel for Plaintiffs/Third Appellants Mobil Exploration & Producing U.S. Inc., et al.
Newman Trowbridge, Jr., Lafayette, Marc R. Brosseau, Denver, CO, Counsel for Plaintiffs/Appellees St. Mary Land & Exploration Co., et al.
Winston Edw. Rice, Covington, Dr. Saul Litvinoff, Baton Rouge, Counsel for Defendant/First Appellant Cliffs Drilling Company.
James L. Cornell, Houston, TX, Counsel for Defendant/Appellee Cliffs Drilling Company.
Kent E. Westmoreland, J. Clifton Hall III, Wendy T. Blanchard, Karen K. Milhollin, Houston, TX, Counsel for Defendants/Second Appellants Certain Underwriters.
Richard P. Ieyoub, Attorney General, Isaac Jackson, Jr., Assistant Attorney General, Baton Rouge, Patrick H. Martin, Clinton, Counsel for Intervenor State of Louisiana Through State Mineral Board and the Office of Mineral Resources of the Department of Natural Resources.
Before: WHIPPLE, LANIER,1 and KLINE.2 JJ.
This is an appeal from a judgment in favor of an oil company and its co-owners of various rights and interests, against a drilling company and its insurers for contractual and tort damages associated with the "blowout" of a well. For the reasons that follow, we affirm in part and reverse in part.
On February 14, 1995, Mobil Exploration & Producing U.S. Inc. ("MEPUS") issued an invitation for bids on the "turnkey" drilling of a well, denominated "St. Mary's Well No. 1," located in St. Mary Parish, Louisiana. On March 3, 1995, Cliffs Drilling Company ("Cliffs") forwarded a proposed contract to MEPUS with a letter indicating changes made from the original proposal. No other action was taken on the matter until MEPUS notified Cliffs in September of 1995 of its intent to go forward with the project. Cliffs responded with a letter dated October 3, 1995, which included a request to change pricing on three items. On October 20, 1995, MEPUS forwarded a revised contract to Cliffs for acceptance, stating,
The contract was signed by representatives of both Cliffs and MEPUS. Cliffs began drilling operations in November of 1995. Thereafter, difficulties were encountered during the drilling operation that resulted in a well "blowout" on or about January 13, 1996.3 Cliffs abandoned the drilling operation on or about August 1, 1996.
On January 13, 1997, a petition for damages was filed by MEPUS, Mobil Producing Texas & New Mexico Inc. ("MPTNM"), Mobil Oil Exploration & Producing Southeast Inc. ("MOEPSI"), Mobil Exploration and Producing North America Inc. ("MEPNA"), St. Mary Land & Exploration Company ("St. Mary-Land"), St. Mary Operating Company ("St. Mary Operating"),4 and Samuel Gary Jr. & Associates, Inc. "and its co-interest owners5 (hereinafter referred to collectively as "Mobil," excepting the St. Mary plaintiffs) against Cliffs, "Certain Underwriters Subscribing to Cover Note 95-3317(A),"6 "Certain Underwriters Subscribing To Policy of Insurance 95-3317(B),"7 "Certain Underwriters Subscribing To Cover Note 96-3393(A),"8 "Certain Underwriters Subscribing To Policy of Insurance 96-3393(B)" 9
(insurers referred to hereinafter collectively as "Underwriters"), Soriero & Company, Inc. ("Soriero") and Aon Texas Acquisions Corporation ("Aon").
Plaintiffs' petition alleged that St. Mary was the "fee owner" of the land situated in Section 25, Township 17 South, Range 9 East of St. Mary Parish, and that St. Mary and the remaining plaintiffs owned interests in mineral leases, mineral servitudes, or other rights to explore for and produce minerals on or beneath the property. Plaintiffs also alleged that in conjunction with their exploration program to identify and produce oil and gas reserves on the property, it received bids from Cliffs and other drilling contractors to drill exploratory oil and gas wells on the property. It was alleged that one or more of the plaintiffs entered into a "Turnkey Drilling Contract" with Cliffs, which required, among other things, that Cliffs drill the St. Mary Land Company No. 1 well on the property.
It was also alleged that Cliffs failed to provide adequate personnel, equipment, materials, services, and efforts to maintain control of the well, resulting in Cliffs' repeatedly losing control of the well and culminating in a failure to take adequate measures to regain control in order to complete the drilling or to fulfill its obligations under the contract. Plaintiffs claimed that Cliffs abandoned the project and failed to fulfill its contractual obligations. Plaintiffs asserted that they suffered serious and extensive property and other damage as a result of Cliffs' failure to fulfill its obligations under the drilling contract.
Additionally, plaintiffs charged that Cliffs settled with its insurers, while one or more of plaintiffs' claims pending against these insurers were denied, and that insurance coverage had been previously misstated or misrepresented. Plaintiffs claimed that one or more of the named defendants/insurers had "issued, delivered, subscribed to, or underwritten certain contracts of insurance and/or indemnity ..., which were issued, delivered, or assembled by or through Soriero" and which provided direct coverage to plaintiffs for all costs incurred in connection with the control of the well and for all costs and expenses incurred in restoring, redrilling or replacing the well, in addition to coverage for Cliffs' liability for damages. Nevertheless, plaintiffs contended that the insurers colluded with Cliffs to deny coverage to plaintiffs and that such denial was arbitrary and capricious.
Furthermore, plaintiffs alleged privity of contract with Cliffs' insurance brokers10 in the procurement of the insurance coverage at issue and claimed the brokers negligently, unreasonably, and without due care misled the plaintiffs concerning the insurance coverage and violated the brokerage contract, of which plaintiffs were the third party beneficiaries, by failing to procure the promised coverages.
Subsequently, amendments were made alleging additional causes of action for: failure to perform in a workmanlike manner; fraud; misrepresentation and other unethical conduct; damages under the Louisiana Unfair Trade Practices Law, La. R.S. 51:1401 et seq.; negligent damage to oil and gas reserves; and a violation of Cliffs' contractual obligation to disclose insurance claims. In additional amendments, a cause of action was also asserted against Cliffs' insurers for their arbitrary and capricious denial of the plaintiffs' claims and for a violation of their duty of fair dealing with an insured under La. R.S. 22:658 and 22:1220. Finally, recovery was sought from Cliffs' insurance brokers for misrepresentation of coverage and failure to procure the requisite coverage.11
An intervention was filed by the State of Louisiana ("State") seeking to join in the demands of the plaintiffs against the defendants, alleging that the State was the owner of certain lands and waterbottoms that were affected by the operations and drilling at issue in the suit. Various other third party and reconventional demands were asserted between the parties to the suit, which are not subject to this appeal.
Among numerous other pre-trial rulings not relevant to the instant appeal, the trial court rendered summary judgment in favor of plaintiffs, holding that the contract signed on October 22, 1995 was the law between the parties, and that Cliffs breached the contract "by walking off the well."
The remainder of the factual issues before the court were submitted to a jury for determination, with the exception of issues relating to the insurers, costs, penalties, and attorney fees, which were ruled on by the trial judge. The jury returned the following responses to the jury interrogatories:
* * The Court has previously ruled that Cliffs Drilling breached the October 22, 1995 Turnkey Contract by walking off the well.
YES ✓ NO ____
* * *
Excess cost to drill the St. Mary No. 2 well $4,756,598
YES ____ NO ✓
* * *
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PART II — Statutory Claims
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