bp / gulf of mexico

See article below from The Australian - may explain some of the recent poor price performance of QBE relative to the market.

I would have thought that any policy would clearly delineate / exclude consequential damages from component failure. Hopefully, BP are stretching and if this is an external event that is impacting QBE's share price we will see the appropriate price action when this event is removed.


Lloyd's of London syndicates to fight BP over oil leak insurance claims
Robin Pagnamenta From: The Times May 26, 2010 8:09AM

BP's attempts to limit the financial damage from the catastrophic oil spill in the Gulf of Mexico has suffered a blow when almost half the syndicates in the Lloyd's of London insurance market launched a legal action against the company.

The syndicates are attempting to block efforts by the oil giant to claim on cover held by the rig operator Transocean. BP, which had no external insurance in place for the accident, is trying to claim up to $US700million ($845m) through a policy held by Transocean, the owner of the Deepwater Horizon rig that BP has blamed for the April 20 blast.

A spokesman for BP said: "We believe we may be entitled to coverage for the incident under Transocean's insurance."

But in legal documents filed in a Houston court, 38 separate Lloyd's underwriting syndicates plus a string of other international insurers affected by the disaster, rejected BP's claim.

They have asked a US judge to declare the group has "no additional-insured obligation to BP" for the clean-up or for any damages resulting from the spill.

The Lloyd's syndicates claim that BP's contract to lease the rig from Transocean specifies that its insurers would only be held responsible for damage to the rig itself - not for pollution caused by a leak from it.

The filing states: "Because liabilities BP faces for pollution emanating from BP's well are from below the surface and from BP's well, those liabilities are not within the scope of the additional insured protection."

The syndicates involved include QBE Underwriting, Talbot and Amlin -- all of which declined to comment. Lloyd's also declined to comment on the case.

As well as about half of the 78 syndicates that operate on Lloyd's of London, the lawsuit was also brought by Axis Specialty Europe, Berkeley Insurance Company, Houston Casualty Insurance Company and Zurich American Insurance Company.

Phelps Dunbar, a New Orleans legal firm, is handling the case for the insurance group.

According to Catlin, one of the biggest players on the Lloyd's market involved in the legal action, the oil spill will be the biggest loss in the energy market since the explosion of the Piper Alpha platform in 1988. Spiralling losses from that incident cost Lloyd's $US8 billion ($9.6bn) between 1988 and 1992.

Even if BP succeeds in its attempt to secure insurance, it will cover only a small portion of the total costs to it from the accident.

Analysts for Swiss Re have estimated that the total insured losses from the accident could reach $US3.5bn. However, according to UBS, the final bill could be as much as $US12bn.

The oil company says 23,000 individual claims have already been filed, of which 9000 have so far been settled.

BP, which declined to comment further on the litigation, and Transocean are already facing more than 130 lawsuits relating to the spill.

On Monday, BP said the cost of the clean-up had hit $US760 million -- a figure that excludes claims from fishermen and other industries affected by it.