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Appeals court irons out Prime Natural Resources' dispute with insurance firms for hurricane damage

State Court

By Charmaine Little | Dec 9, 2019

Texas First District Court of Appeals Justice Richard Hightower |

HOUSTON -- An appeals court ruled Nov. 26 that jurors with a lower court properly found there was enough evidence to support actual damages in a natural resource company’s lawsuit against insurance companies for claims amid the aftermath of Hurricane Rita damages.

Three judges with the Texas First District Court of Appeals affirmed in part and reversed in part a ruling from the Harris County District Court that determined the insured, Prime Natural Resources Inc. was entitled to $1.8 million, and that the insurance companies intentionally violated the insurance xode. The insurance companies are certain underwriters at Lloyd’s, London, Syndicate Numbers 2020, 1084, 2001, 457, 510, 2791, 2987, 3000, 1221, 5000 and Navigators Insurance Company UK (also known as underwriters).

“We conclude that the trial court properly instructed the jury on the interpretation of the policy and there was sufficient evidence to support the jury’s findings of actual damages,” wrote Appeals Court Justice Richard Hightower. Justices Peter Kelly and Julie Countiss concurred.

Still, the judges also ruled that there’s no proof the insurers intentionally violated the insurance code amid a $2.8 million payment to Prime in December 2007 to cover for claims from pipeline damage and debris removal, and more, shortly after Prime filed its first lawsuit.

As for having sufficient evidence to prove the amount owed, the judges pointed out that Prime’s expert witness, Andy Scott, provided enough proof. He evaluated 688 invoices that were related to the loss Prime suffered from the natural disaster and h determined Prime suffered costs for redoing an H-2 Well, along with making it safe. Those costs were more than the $2.7 million that the underwriters paid. 

A final statement of claim completed by Craig Nelson also determined Prime was still entitled to more than $1.8 million from the underwriters. Nelson pointed to roughly 221 invoices that the underwriters still had yet to pay for the repairs for the well in question and to restore it to the condition it was prior to hurricane.

Hightower also wrote, “As we concluded in connection with underwriters’ first issue, the jury properly found that Prime was entitled to additional benefits under the policy. Thus, based on the jury’s findings that underwriters’ denial of benefits owed under the policy was wrongful, Prime was entitled to the resulting damages in the amount of the policy benefits wrongfully withheld.”

The judges did side with the underwriters considering prejudgment interest. After ruling that the December 2007 payment was unconditional (Prime was given the payment, accepted it, and was able to use it from the time of tender), the judges determined any prejudgment interest for the December 2007 payment was an err.

The judges reversed the lower court’s judgment that awarded treble damages, as well as the judgment for the Insurance Code 542 prompt payment damages, and interest on the December 2007 payment.

The rest of the lower court’s ruling was affirmed.

The legal disagreement dates back to 2005 when Prime’s H-2 well and the coordinating platform (H platform) experienced devastating impact due to Hurricane Rita. Prime notified its insurance providers, the appellants and underwriters, of the losses it undertook. It filed a claim with Underwriters, which in turn covered part of the claim for the amount of $1,125,000. That amount included policy limits for the H platform losses. Two years later, Prime sued, asking for $4.7 million for the rest of the unpaid expenses via the policy. Then, in December 2007, underwriters paid $2,880,866 “for covered claims arising from pipeline damage and debris removal, as well as well-redrill operations,” according to the opinion.

In that case, the lower court and the current appeals court sided with the underwriters and ruled that the policy for the H-2 Well didn’t include covering losses for the platform. The underwriters then filed an appeal.

Prime responded with the current lawsuit, asking for about $1.8 million for unpaid policy benefits for redrilling and refinishing the H-2 well, including making the well safe from the continuous fallout of the hurricane. 

It also said the underwriters violated Insurance Code Chapter 542’s Prompt Payment Act, causing the underwriters to owe statutory and prejudgment interest, even on the December 2007 payment. While the underwriters said they overpaid Prime and asked for $1.8 million in damages, a jury for the lower court sided with Prime, stating that it was owed the $1.8 million in unpaid policy benefits. The jury also determined that the underwriters were guilty of violating the insurance code via the unfair practices it intentionally used. The jury also said that a December 2007 partial payment was made conditionally, which entitled Prime to statutory interest. The underwriters then appealed.  

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