US Gulf oil spill set to trigger lawsuit flood

HOUSTON/SEATTLE, April 30 (Reuters) - The explosion of the Deepwater Horizon drilling rig that caused a massive crude oil slick in the U.S. Gulf of Mexico will cost billions of dollars for the companies that worked on the rig.

Oil began washing up on Louisiana’s coast and commercial fishing areas on Friday as shrimpers and fishermen and survivors of the blast flooded courthouses with lawsuits.

“This is a multi-billion dollar event,” said Keith Hall, an attorney with the firm Stone Pigman in New Orleans. “There are going to be huge environmental clean-up costs.”

The explosion killed 11 workers and sank the rig. The oil well, which the companies have been unable to cap, was gushing about 5,000 barrels of crude per day.

The rig was owned and operated by Zug, Switzerland-based Transocean Ltd RIGN.S. British oil major BP Plc BP.L hired Transocean to drill the well, and oilfield services companies Halliburton Co HAL.N and Cameron International Corp CAM.N were also doing work on the rig.

BP Chief Executive Officer Tony Hayward told Reuters on Friday the company will compensate all those affected by the oil spill. [IDn:nLDE63T1SP] Oil majors generally do not buy coverage for clean-up costs from spills, as it is too expensive or unavailable.

The other companies on the project do hold insurance, but Hall said potential liability could outstrip any policy payouts.

Transocean said its insurance covers the total loss of the Deepwater Horizon and wreck removal. The rig had an insured value of $560 million.[IDn:nN26150882].

Cameron International Corp CAM.N, which supplied the device that failed to prevent the well blow out said it had a $500 million policy for any claims. [ID:nWEN3872].

The global insurance industry is already estimating that property insurance losses will likely exceed $1 billion, while liability claims could dwarf that and take years to play out.


Plaintiffs attorney have already targeted the companies with lawsuits seeking compensation for economic loss and loss of life or injury.

Brent Coon, the Texas lawyer who spearheaded civil litigation against BP in the aftermath of the 2005 explosion at its Texas City, Texas refinery that killed 15 workers, said his firm is representing a worker who survived the explosion in a lawsuit against BP, Transocean Halliburton and Cameron.

His firm is seeking a temporary restraining order against the companies to mandate that they preserve all documents and e-mails related to the disaster in anticipation of drawn-out litigation.

Coon’s client, Stephen Stone, 24, of Katy, Texas, was asleep when the explosion happened and escaped on a lifeboat.

“It’s like being in a war, to be caught in those kind of infernos with people screaming and not knowing whether you’ll live or die,” Coon said.

At least four lawsuits naming all or some of the companies have been filed in U.S. District Court in New Orleans, attorney Hall said.

Shrimpers in Louisiana and Alabama have filed class-action lawsuits against the companies claiming anticipated economic losses from the disaster. [ID:nN29134097].

Oilfield service company Halliburton Co HAL.N provided cementing on the well to stabilize its walls.

BP also faces costs related to the U.S. Oil Pollution Act of 1990 -- enacted after the Exxon Mobil Corp XOM.N Valdez spill -- and the U.S. Clean Water Act.

The Valdez spill of 250,000 barrels of oil into the Prince William Sound in Alaska cost Exxon about nearly $4 billion in compensatory payments, cleanup payments, settlements and fines, according to the company’s web site.


Oil rig accidents bring a patchwork of regular insurance coverage, reinsurance, and self-insurance mechanisms, said Claire Wilkinson at the U.S. Insurance Information Institute, the industry’s trade group.

“The great unknown here will be the environmental pollution liability issue. These kinds of events take many years to unfold,” she said. “You could draw a parallel with Exxon Valdez -- 20 years later, the final costs are still unknown.”

Munich Re MUVGn.DE, the world's biggest reinsurer, has said it could pay up to $100 million for the accident, but warned that it is too early to calculate the toll. Bermuda's PartnerRe PRE.N expects to pay claims of up to $70 million.

Even if losses exceed $1 billion, it does not appear to be an insurance industry-threatening event.

The closest comparison is the explosion of the Piper Alpha rig off the British coast in 1988, killing 167, which ended up costing insurers $3.6 billion in today’s dollars, according to Swiss Re.

By comparison, insurers put the price tag of the 2001 attack on New York’s World Trade Center at $23 billion in today’s dollars. Hurricane Katrina, which ravaged the U.S. Gulf Coast, cost insurers $71 billion. (Additional reporting by Kristen Hays) (Reporting by Anna Driver; Editing by Leslie Gevirtz))