Bad Faith Sentinel - August 2014

In This Issue:

- Northern District of Texas Dismisses Bad Faith Claims in Well-Control Policy Dispute

- District of South Dakota: Denying a Claim for Reasons Known to be False is Not a Reasonable Basis to Deny a Claim

- Northern District of Ohio: No Reasonable Jury Could Conclude That Insurer’s Denial of Coverage For Two Arsons Was Not Justified

- Excerpt from Northern District of Texas Dismisses Bad Faith Claims in Well-Control Policy Dispute:

Defendant Travelers Property Casualty Company of America (“Travelers”) issued a Control of Well Policy to Plaintiff Eagle Oil & Gas Company (“Eagle Oil”), which, among other things, provided protection against oil well blowouts and reimbursement for expenses incurred in bringing the well under control related to a well in Reeves County, Texas. Plaintiffs Eagle Wolfbone Energy Partners, LP and Eagle Oil & Gas Partners, LLC were non-operating working-interest owners in the well and were additional insureds under the Travelers policy. Following a September 22, 2011 well blowout, Plaintiffs incurred costs and expenses in attempting to regain control of the well, drilling a replacement well, cleaning up pollution, and in regard to damaged oil field equipment owned by others. Plaintiffs submitted their losses to Travelers, and Travelers assigned BC Johnson Associates (a trade name of Defendant York Risk Services Group) to investigate the claims. BC Johnson’s preliminary report concluded that Eagle Oil may have violated the policy’s “due care and diligence” clause and, in so doing, caused the blowout. Travelers then hired Greg Sones, a petroleum engineer, to further review the information regarding the cause of the blowout. Sones concluded that Eagle Oil caused the blowout, and Travelers denied coverage.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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