Jefferson Block 24 Oil & Gas, L.L.C. v. Aspen Insurance UK Ltd.
652 F.3d 584
5th Cir.2011Background
- Jefferson Block 24 Oil & Gas, L.L.C. (Jefferson Block) operated seven offshore leases, a platform, wells, pipelines, and an onshore-offshore connection in the Gulf of Mexico.
- In 2007 a 16-inch right-of-way pipeline leaked, causing an oil spill; Jefferson Block conducted a Coast Guard-directed cleanup costing about $3 million.
- Jefferson Block held a London OPA Insurance Policy for Offshore Facilities (OPA Policy) with Underwriters; coverage tied to liabilities under the Oil Pollution Act of 1990 (the Act).
- Item 10 of the Declarations references MMS-1021 (Covered Offshore Facilities) listing facilities by lease blocks HI-7 and HI-24, but does not expressly reference the 16-inch pipeline.
- MMS-1021 form identifies locations of facilities rather than listing every facility; the policy incorporates MMS-1021 as the schedule of covered offshore facilities.
- District court held the policy unambiguously limited to COFs identified on MMS-1021 and possibly not including the pipeline; it found ambiguity and later denied coverage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether OPA Policy unambiguously covers the pipeline | Pipeline is located on HI leases listed in MMS-1021, so within coverage. | MMS-1021 only lists locations, not facilities; pipeline may not be 'located' on the listed leases; policy ambiguity exists. | Policy is ambiguous; no unambiguous coverage conclusion. |
| What constitutes 'located' for a facility under MMS-1021 | MMS-1021 identifies HI area; pipeline located there should be covered. | MMS-1021 lists locations, not all cross-lease facilities; placement is uncertain. | Ambiguity remains regarding 'located' as to the pipeline. |
| Extrinsic evidence can resolve the ambiguity | Extrinsic evidence shows pipeline should be included under MMS-1021 designation. | Extrinsic evidence insufficient to resolve; etc. | Ambiguity persists; extrinsic evidence not conclusive. |
| Application of contra-insurer (contra proferentem) in NY law | Ambiguity should be resolved against Underwriters under contra-insurer rule. | Sophisticated parties and drafting context may bar contra-insurer relief; some authority disfavors application. | Court applies contra-insurer rule; ambiguity resolved in insured's favor. |
| Burden and effect of insurer's drafting role | Underwriters drafted the policy incorporating MMS-1021; ambiguity favors Jefferson Block. | Policy drafting conduct delegitimizes contra-insurer application. | Underwriters responsible for ambiguity; interpretation in insured's favor. |
Key Cases Cited
- Morgan Stanley Grp., Inc. v. New England Ins. Co., 225 F.3d 270 (2d Cir. 2000) (burden on insurer when policy ambiguous; extrinsic evidence allowed)
- Andy Warhol Found, for the Visual Arts, Inc. v. Fed. Ins. Co., 189 F.3d 208 (2d Cir. 1999) (ambiguous policy terms require external evidence; stepwise NY framework)
- U.S. Fire Ins. Co. v. Gen. Reinsurance Corp., 949 F.2d 569 (2d Cir. 1991) (contra-insurer considerations in sophisticated-party context)
- McCostis v. Home Ins. Co., 31 F.3d 110 (2d Cir. 1994) (contra-insurer rule applied to ambiguity resolution)
- 67 Wall St. Co. v. Franklin Nat'l Bank, 37 N.Y.2d 245 (N.Y. 1975) (baseline rule for contra proferentem in NY law)