BP Oil Spill Victims Likely to Face Insurance FightsJun 29, 2010 | Parker Waichman LLP
Legal experts are warning victims of the BP oil spill to prepare for possible battles with their insurance companies, once the disaster is contained. Any business or individual who stands even a chance of being impacted by this disaster should immediately begin carefully reviewing all possible coverage to determine what might apply to the oil spill.
It is also vital that victims and potential victims of the Deepwater Horizon oil spill put all potential insurers on notice of a claim or of circumstances that may give rise to a claim. To improves chances for recovery, it would be wise to begin by consulting with an attorney who specializes in insurance coverage issues.
Various types of insurance policies may offer some coverage to individuals and businesses impacted by the BP oil spill. First-party property policies cover direct physical loss of or damage to covered property caused by or resulting from a covered cause of loss. Such a policy might encompass business interruption and other types of time-element coverage.
When dealing with BP oil spill claims, first-party insurers may cite exclusions or limitations on coverage for pollution, land and water to deny claims. As to business interruption claims, there could be a dispute with an insurer as to whether a complete cessation of the business occurred.
Of note, pollution exclusions may not apply to oil spills caused by certain causes of loss, such as fires and explosions. That's important, because a cause for the April 20 explosion aboard the Deepwater Horizon oil spill hasn't been determined yet.
In some cases, first-party policies may include additional coverages for pollutant cleanup and removal and debris removal. It is important to note that courts have ruled that removal of oil falls under "debris removal".
Some insurance policies might provide coverage for mitigation costs. For example, even in instances where the oil spill does not reach a property, some businesses may purchase booms and other equipment in an effort to protect property from possible contamination. Insurers may be obligated to pay for these measures to help prevent property damage.
Other types of insurance that might provide coverage for oil spill losses include event cancellation policies. They are triggered if the cancellation, interruption, or postponement is caused by factors that are beyond the policyholder’s control. With such claims, there could be a dispute with the insurer over whether event cancellation insurance applies to a drop in attendance.
Some businesses - usually larger ones - may have purchased separate environmental or pollution policies. They will likely have an easier road, and most experts expect few fights in this area.