KENDE Christophe_Transport Law_EN

Transcription

Union International des Avocats
The Deepwater Horizon Disaster
Update on the Legal Issues
and the BP Settlement
October 31, 2015
Presented by:
Christopher B. Kende
New York, NY
550 Attorneys • 22 Offices
www.cozen.com
© 2011 Cozen O’Connor. All Rights Reserved.
Roadmap
• Brief facts about the Spill
• Impact of the Spill (environment, businesses,
physical injuries, personal and real property)
• Applicable law
• BP Settlement
• Multidistrict litigation and status
• Ranger v. Transocean decisions
• Conclusion
2
550 Attorneys • 22 Offices • www.cozen.com
Introduction
3
Introduction (cont’d)
• The Deepwater Horizon was a drilling rig leased to BP.
• On April 20, 2010, a geyser of oil and gas shot out of the top
of the riser of the rig.
• 2 explosions occurred and the Deepwater Horizon was
immediately engulfed in flames.
• 17 workers were injured by the explosion and 11 were
killed.
• The Spill is the “worst environmental disaster the US has
faced”.
Carol Browner, White House energy adviser
4
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• On July 15, 2010 the leak was stopped by capping
the wellhead after it had released about
4,900,000 barrels (779,000 m3) of crude oil, or
about 205,800,000 gallons.
• The 1989 Exxon Valdez disaster was the worst oil
spill in US history, 258,000 bbl (10.8 million gallons)
of oil were spilled. At a rate of 60,000 bbl per day, it
would put the equivalent of the Exxon spill into the
Gulf every four days.
• On September 19, 2010, the federal government
declared the well "effectively dead".
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Areas of Impact
• Marine and Wildlife
• Fishing industry
• Tourism
• Physical Injuries/ Medical Claims and Monitoring
• Real Estate Values
• Business Losses
• Personal and Real Property
• State Tax Revenues and Additional Expenses of States and
Municipalities
7
Statutory and Regulatory Framework
Governing the Gulf Oil Spill
Oil Pollution Act of 1990
• OPA was passed in the wake of Exxon Valdez disaster
• OPA creates a strict liability scheme, with limits, for damage
caused by pollution discharges into U.S. navigable waters
• OPA governs pollution from vessels and facilities
• Responsible parties are strictly liable up to a certain limit
depending on their status
8
Statutory and Regulatory Framework
Governing the Gulf Oil Spill (cont’d)
• Limit for a vessel is the greater of $3,000 per ton for
a single hull tank vessel or $22,000,000 or the
greater of $950 per ton for a non tank vessel or
$800,000* (Transocean has been found to be a
vessel owner)
• Limit for “facility” owner is $75 million (the status
of BP)
• Limit for a “Deepwater Port” of $350 million
*Double Hull and smaller tank vessels have lower limits
9
Breaking of Limitation
• Limitation does not apply to:
– “Removal costs” incurred by the United States, a
state, or a person whose acts are consistent with
the National Contingency Plan
– Where the responsible party or a contractor
thereof is guilty of gross negligence, willful
misconduct or the violation of an applicable
safety construction or operating regulation
– Where a responsible party fails to cooperate in
the reporting of an oil spill or clean up efforts
10
Breaking of limitation (cont’d)
• BP has abandoned any claim to limitation but has
NOT acknowledged gross negligence or willful
misconduct and, in fact, was vigorously contesting
such a finding
• BP was found to have been reckless with regard to
spill while Transocean was not, on September 4,
2014
11
Categories of Recoverable Damages under
OPA
• Damage to natural resources for injury, destruction,
loss or loss of use
• Damage to real or personal property
• Loss of “subsistence use” of natural resources
• Loss of taxes, royalties, rents, fees, profits or other
revenues due to injury, destruction or loss of real or
personal property recoverable by the United States,
a state or a political subdivision
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Categories of Recoverable Damages under
OPA (cont’d)
• Damages equal to lost profits or impairment of
earning capacity due to damage or destruction of
real property, recoverable by any claimant
(predicate for the economic claims settlement)
• Damages for the net costs of providing increased or
additional public services during or after removal
activities
13
The Oil Spill Liability Trust Fund under OPA
• Fund established to pay for costs associated with oil
pollution based on revenues from a tax on
petroleum
• Amount of $1 billion per incident and $500,000,000
per incident for damage to natural resources
available to President for removal costs
• Expenditures are authorized for removal costs,
natural resource damage assessment,
uncompensated removal costs or damages and
federal expenses to implement or enforce OPA, up
to $25 million
14
Claims Procedure Against the Fund
• A private party or government may make a claim
against the fund where:
– Claimants have been notified by the President to
do so
• a Responsible Party is entitled to claim
• the governor of a state has incurred removal
costs
• a United States claimant has incurred damages
where a foreign offshore unit has discharged oil
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Claims Procedure Against the Fund (cont’d)
• Claimants may present a claim directly to the fund
or sue in federal court
• Normally the claim must first be made to the
Responsible Party before being presented to the
fund (“presentment”)
• However, if a claimant elects to sue a Responsible
Party, no claim may be brought against the fund
during the pendency of the litigation
• Intent is to discourage litigation
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Other General Aspects of OPA
• Nothing in OPA prevents insuring of liabilities under
OPA
• Subrogation principles should generally apply with
respect to insurance payments
• OPA does not preempt states from imposing
additional liability requirements regarding the
discharge of oil within state territorial waters
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General Maritime Law (where OPA does not
apply)
• Maritime jurisdiction applies since the matter
involves a tort on navigable water, which has
impacted maritime commerce
• Admiralty Extension Act extends jurisdiction to
damages on land caused by a maritime tort
• Strict products liability law applies in maritime
cases
• The economic loss doctrine would preclude pure
economic loss in the absence of a proprietary
interest for claimants not covered by OPA or non
OPA claims (Testbank case)
18
General Maritime Law (cont’d)
• OPA has expressly overruled the economic loss doctrine
with respect to pollution claims as described above
against Responsible Parties
• However non-OPA claims (possibly personal injury for
exposure to oil) will be governed by maritime law
• As an illustration, the Court dismissed so called “pure
stigma” claims, as not recoverable, either under OPA or
general maritime law, as well as “BP Dealer” claims and
“recreation claims” in October 2012. So OPA does have
limits
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Limitation of Liability Act
• Statute allows the vessel owner or bareboat
charterer to limit its liability to the value of the
vessel after the accident
• Limitation requires proof of a lack of “privity or
knowledge” with respect to the conduct causing the
damage
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Limitation of Liability Act (cont’d)
• OPA has repealed the ability to limit with respect to
pollution claims, but claims for property loss outside of OPA,
death or injuries would still be subject to limitation, with a
minimum of $420 per ton of vessel with respect to death or
personal injury claims
21
The March 2012 BP Settlement
• In February 2011, settlement negotiations began in
earnest with regard to economic and property
damage claimants
• On March 12, 2012, BP and the Plaintiff Steering
Committee reached an agreement in principle
• At the same time, the claims process was
transitioned from an earlier facility to the court
supervised settlement, although during the
transition process an additional $405 million was
paid for 16,000 claims
22
The March 2012 BP Settlement (cont’d)
• On December 21, 2012, the court granted final approval to
the economic and property damages settlement overruling
all other objections
• The terms of the settlement are complex. There is no limit
on the total dollar amount of the settlement, but BP will pay
no more than $2.3 billion to compensate qualified claimants
in the seafood compensation program
• The consolidated litigation against BP for claims not
resolved by the settlement, Transocean, Halliburton and
other defendants has continued with the Phase 1 trial
having begun on January 14, 2013, and lasting 2 months
23
The March 2012 BP Settlement (Cont’d)
• The settlement includes agreement to certification
of a class of claimants which includes private
individuals and businesses defined by geographic
bounds and the nature of their loss or damage
• The geographic bounds include Louisiana,
Mississippi, Alabama and certain coastal counties
and Eastern Texas as well as Western Florida. A
class member must have lived, worked or owned
property in the area between April 20, 2010, and
April 16, 2012, and businesses must have conducted
activities in that area.
24
The March 2012 BP Settlement (cont’d)
• There are 6 recognized categories of damage
– Specified types of economic loss for businesses
and individuals
– Specified types of real property damage
– So called “vessel of opportunity” charter
payments
– Vessel physical damage claims
– Substance damage
– The Seafood Compensation Program
25
• BP attempted to limit the categories of economic
loss claimants who it contended had no
compensable loss, but the 5th Circuit ultimately
upheld the terms as originally agreed
26
MDL Litigation in New Orleans and Recent
Rulings of Note
• Hundreds of thousands of claims for economic loss
and personal injuries were consolidated before
Judge Carl Barbier in federal court in New Orleans
in August 2010
• The claims were sorted according to categories into
various “claim bundles”, the largest of which
includes claims for various types of economic
damages as described earlier
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Rulings of Note (cont’d)
The main defendants are:
• BP
• Transocean, the owner of the Deepwater Horizon
• Halliburton, BP’s drilling contractor
• Cameron, the cement manufacturer
• several co-lessees of the drilling rights to the well
• Extremely aggressive discovery schedule
• First phase trial was set for February 27, 2012, was
but postponed to January 13, 2013 due to the BP
settlements
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• Phase 1 which was completed in March 2013,
addressed the cause of the blowout, the issues of
negligence, gross negligence and other possible
bases of liability among the defendants, and
allocation of fault
• The second phase began on September 30 and had
2 sub parts:
– Subpart 1: BP’s efforts to stop the flow of oil
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– Subpart 2: determined the quantity of oil spilled
into the Gulf
– As mentioned, in September 2014, the judge
hearing the case ruled that BP was grossly
negligent and apportioned 67% liability for the
spill to BP, 30% to the rig owners (Transocean)
and 3% to Halliburton, the drilling contractor.
30
– The judge also found BP acted recklessly in
causing the spill, thus could be subject to
punitive damages
– Transocean settled the government’s claim
shortly before the September ruling for $1.4
billion
• In July 2015, the federal government and Gulf
States agreed to an $18.7 billion settlement with BP
31
Recent Developments in Insurance Litigation
Involving Transocean Liability Cover
• BP filed a declaratory judgment in Texas contending
that it was an additional assured under
Transocean’s primary and excess liability cover of
$750 million
• In response, the primary carrier Ranger and the
excess insurers contended that coverage of BP as an
additional insured only extended to the extent that
Transocean was obligated in the drilling contract to
indemnify BP
32
Involving Transocean Liability Cover (cont’d)
• BP countered by arguing broader coverage to the
effect that the additional insured provision was not
limited by the drilling contract and should be
interpreted solely in reference to the terms of the
insurance policies
• The drilling contract in essence provided that
Transocean assumed full responsibility for above
surface oil pollution discharges without regard to
the negligence of any party while BP assumed full
responsibility for specified oil pollution damage
without regard to any parties negligence except
with regard to liability assumed by Transocean
33
Involving Transocean Liability Cover (cont’d)
• In essence, Transocean argued that because the source
of the pollution in the Deepwater Horizon was
subsurface and it had no indemnity obligation to BP. BP
was not an additional assured with regard to any BP
liabilities resulting from the Deepwater Horizon
explosion
• The district court agreed with Transocean,
distinguishing two important Texas cases (since Texas
law applied to the contract) and held that Transocean’s
insurers had no duty to defend or indemnify BP with
regard to liabilities that Transocean had not assumed
under the drilling contract
34
The Court of Appeal Reverses
• In a highly controversial decision rendered March 1,
2013, the 5th Circuit Court of Appeals reversed
holding that BP was an additional assured under
$750 million Transocean liability policies for all
purposes
• The Court of Appeals held that the district court
erred in construing Texas law and that it was
inappropriate to refer to the drilling contract
language which was extraneous to the coverage
provisions of the policy
35
The Court of Appeal Reverses (cont’d)
• Finally, the court ruled that Texas law required it to
interpret insurance coverage in favor of the insured
so long as the interpretation was reasonable and
that, given the separateness of the additional
insured provision, and the fact that the language
did not impose any limitation on the extent to
which BP was an additional assured, it was entitled
to full defense and indemnity under the Transocean
policies for all purposes
36
The 5th Circuit Retreats
• A few months later, the Court of Appeals withdrew its
opinion, no doubt sensitive to the consternation its earlier
opinion had created in the oil and gas industry
• Instead, it certified two questions to the Texas Supreme
Court as follows:
– Whether (certain previous Texas case law) compels a
finding that BP is covered for the damages at issue
because the language of the umbrella policies alone
determines the extent of BP’s coverage as an additional
assured if, and so long as, the additional insured and
indemnity provisions of the drilling contract are
“separate and independent”
37
The 5th Circuit Retreats (cont’d)
• Whether the contra proferentem doctrine applies to the
interpretation of the insurance coverage provisions of the
drilling contract under the facts presented
• In September 2014, the Texas Supreme Court answered no
to the first question and did not reach the second question
• Thus BP was unable to avail itself of Transocean’s coverage
38
General Conclusions
• Litigation arising out of this incident was massive,
complex and went on for many years
• The disaster has clearly created a feeding frenzy for
lawyers
• Total cost to BP is estimated at above $54 billion
• There is a serious question as to whether U.S.
Courts are equipped to handle mass disasters of
this size
39
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KENDE Christophe_Transport Law_EN

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