A federal jury in Arkansas returned a nearly $72-million verdict in Lion Oil Co.’s suit over insurance coverage for business interruption losses stemming from the rupture of an Exxon Mobil-owned pipeline. The jury found that the rupture, and not a regulatory shutdown, directly caused the damages. The case turned on whether a set of policies that covered Lion Oil’s losses caused by physical damage to suppliers were triggered by an April 2012 rupture at a pipeline owned by Exxon Mobil Corp. subsidiary EMPCo. The insurers have argued that it was a regulatory shutdown after the spill, not the rupture itself, that caused the losses.
The jurors found that the rupture actually caused Lion Oil’s losses, which it set at $60.4 million in income and $11.3 million in expenses. Lion Oil, a subsidiary of Delek US Holdings Inc., sued the insurers in 2013. The refinery operator argued that 16 essentially identical all-risk policies it bought from insurers including XL Insurance America Inc., ACE American Insurance Co. and Ironshore Specialty Insurance Co. should cover business interruption losses resulting from Exxon Mobil’s 10-month shutdown of its North Line pipeline system after the 1,900-barrel oil spill.
The pipeline running from the Louisiana oil hub of St. James to Longview, Texas, was the primary source of crude oil feedstock for Lion’s 80,000-barrel-per-day refinery in El Dorado. Lion said it kept the facility up and running during the 10-month shutdown but nonetheless lost $44 million in earnings and incurred $36 million in additional expenses for costly alternative transportation, sale and storage contracts. However, the parties stipulated to limit the damages request to $72 million.
The insurers had argued the refiner’s losses were caused, not by the damage to the pipeline, which was repaired within a month, but by an order from the Pipeline and Hazardous Materials Safety Administration that kept the system dormant while it was inspected for further problems. The insurers include National Union Fire Insurance Co. of Pittsburgh, Pa., Berkshire Hathaway International Insurance Ltd., Great Lakes Reinsurance UK PLC, Arch Insurance Co., Lexington Insurance Co., Landmark Insurance Co., and Certain Underwriters at Lloyds. Lion Oil is represented by Geoffrey J. Greeves, Peter M. Gillon, Vernon Thompson Jr. and Vincent E. Morgan of Pillsbury Winthrop Shaw Pittman LLP and Julie DeWoody Greathouse, Kimberly D. Logue and Brian H. Ratcliff of PPGMR Law PLLC. The case is in the U.S. District Court for the Western District of Arkansas.