Insureds should immediately examine their policies to determine whether they have coverage for current or future damage (including pollution damage) or business interruption loss resulting from the Gulf oil spill. While it seems counterintuitive to have a provision requiring that notice be provided before a loss has occurred, insurance carriers -- depending on applicable policy language -- may take the position that notice provisions in certain policies are triggered by the April 20, 2010, Deepwater Horizon Rig explosion. For example, at least one major insurance broker has alerted its clients that carriers are taking the position that an 80-day deadline under certain property policies with pollution exclusion carve-out coverage expires tomorrow, July 8, 2010, at 5 p.m. EDT.

The British Petroleum (BP) Gulf of Mexico oil spill catastrophe has caused substantial environmental degradation and property damage and has caused many companies with operations in the area significant economic losses. BP and the other responsible parties will be paying claims resulting from the disaster, and those affected may have the opportunity to make a claim against these parties through the compensation fund administered by Kenneth Feinberg. 

Moody's, an agency that rates insurance companies’ financial strength, estimates that total insured losses from the BP oil spill will range between $1.4 billion and $3.5 billion. Additionally, the start of the hurricane season raises the potential for losses related to the oil spill. As reported by the New York Times, the predicted severe hurricane season may carry the oil further inland, via rain and storm surge. Whether any individual company has insurance coverage for its oil spill losses will depend on the nature of its losses and the types of insurance coverage it purchased. 

Insurance policies typically contain provisions imposing deadlines – and often relatively tight ones - for performing certain conditions in order to obtain or preserve the policyholder’s right to coverage. For example, virtually all types of insurance policies generally require the policyholder to provide notice of a covered loss. Some policies require that notice be given “immediately,” “promptly,” or “as soon as practicable.” Other policies provide a more specific deadline, such as 30, 60, or 90 days from the loss or the inception of the loss.  Property insurance policies also typically require that policyholders provide a signed and sworn proof of loss within a specified time period thereafter.  For those insureds who have not yet incurred any loss, arguably the time for sending notice to the insurers has not yet started. Most policies do not require notice of an accident that merely has the potential to cause an insured loss in the future; a few might.

As noted above, however, some insurers issuing policies with pollution exclusion carve-out coverage require notice within 80 days of the event. Some insurers have announced that they will contend that the 80-day notice provisions expire on July 8, 2010, at 5 p.m. EDT. If you have this form of policy, you should quickly determine whether to submit a protective notice. Regardless, now is a good time for all insureds potentially affected by the Gulf oil spill to examine their insurance policies to comply with the applicable notice provisions.

Who We Are

Kilpatrick Stockton's Insurance Recovery team has attorneys in Atlanta, Washington, DC, New York City, and North Carolina, with decades of combined experience in handling some of the most complex and high-stakes insurance coverage matters in recent times. We assisted several major companies to recover their 9/11 World Trade Center losses. We have recovered hundreds of millions of dollars for clients with operations in the Gulf Coast region that suffered significant property damage and related revenue losses arising from Hurricanes Katrina, Rita, Wilma, Andrew, Ike, and Ivan, including our current representation of a Fortune 100 company with substantial Gulf Coast facilities that were damaged by Hurricane Katrina. We also regularly represent clients in the construction industry faced with complex property damage and business interruption losses. We also have substantial experience in the hospitality industry. 

In addition, we have developed close business relationships with top consultants in the key fields with whom we often partner to jointly develop and pursue insurance coverage for our clients’ property damage/business interruption claims, including engineers and forensic accountants.