BusinessWire – The Deepwater Horizon oil spill may now be capped, but much of its impact on commercial insurers has yet to be felt, according to legal, environmental and insurance experts participating in an Advisen webinar on Friday, July 23. In addition to companies involved in the drilling project itself, all of which already have been sued, salvage firms, cleanup contractors and others involved in the cleanup process are exposed to lawsuits that likely will result in insurance claims.
“BP is self-insured, but the other major players together have more than $2 billion in liability limits placed in the insurance market,” said Dave Bradford, an Advisen Executive Vice President and one of the webinar panelists. “The insurance exposure, however, is much broader than that small group of companies. Already some of the companies involved in the salvage effort have been sued, and almost any company taking part in the cleanup process is a potential target. Not only are general liability and environmental liability policies exposed, but also directors and officers liability policies.”
Attorney Stuart Smith of Smith Stag LLC, another panelist, predicted suits will be brought under various environmental laws such as CERCLA, Act to Prevent Pollution from Ships, Clean Water Act, Endangered Species Act, and Marine Mammal Protection Act in addition to more obvious areas like General Maritime Law and the Oil Pollution Act. He said that suits alleging improper disposal of oiled wastes by firms hired to clean up the mess are likely. Environmental consultant Tom Schruben noted that crude oil contains a number of toxic chemicals, and predicted that some cleanup workers will file lawsuits claiming they were injured by exposure to the substance.
In addition to third-party liability claims, insurers should expect claims from business interruption and contingent business interruption policies, according to Curtis Porterfield, a partner with Howrey LLC, who represents policyholders in disputes with their insurers. While a number of coverage issues need to be addressed, he advised policyholders to not assume there must be damage under their property policy in order make a claim. He also noted the potential for claims from other types of time element coverages such as civil authority coverage, ingress/egress coverage and extra expense coverage, as well as from event cancellation policies.
John O’Brien, President of the environmental product line at Ironshore, warned that current insured loss estimates are almost certain to rise. He noted that insurers’ response to large-scale disasters typically is to take away coverage with exclusions, and observed that some carriers are introducing exclusions tied to specific risks related to the oil spill. He advised insurers, however, to view the catastrophe as an opportunity to raise awareness of exposures that may presently be uninsured, such as the environmental exposures of hotel owners, as well as an opportunity for product innovation.