Louisiana Jury Orders ExxonMobil & Subcontractor To Pay Landowner $1.056 Billion

There has been an interesting court award handed down in a pollution case which will be particularly interesting fro insurers providing General Liability and/or Commercial Umbrella coverage to the oil patch/petroleum extraction insureds and their subcontractors hired to clean used drilling equipment.

On May 22, 2001, a New Orleans jury ordered ExxonMobil and Intracoastal Tubular Services to pay a landowner $1.056 Billion for radioactive soil contamination on land leased by Intercoastal to store and clean used pipes (Grefer v. ExxonMobil). Intercoastal leased the land from the late 1950s to 1992. The plaintiff argued that the oil company knew about the potential for such contamination since the 1950s but failed to reveal the information. The extent of contamination and the cleanup costs necessary to remediate the radium 226 and 228 were contested. Defendants argued that only one percent of the 33 acres leased was contaminated and could be remediated for $46,000. The jury ordered the defendants to pay the landowner $56 million in cleanup costs, $146,000 for property diminution and $1 billion in punitive damages for not warning anyone about the potential for radium contamination. Intracoastal, which was contracted to clean the piping, was held liable for 15% of the verdict or $158.4 million. ExxonMobil will appeal. According to the plaintiff's attorney, "evidence in the record indicates that this is a widespread problem affecting oil fields throughout the United States."

On the question of whether this loss would be covered, it is possible that some courts will not apply the nuclear exclusion to this type of claim and instead treat this as a typical pollution claim. Please note that the award was handed down in Louisiana, where there is state court precedent for not enforcing absolute or total pollution exclusions. On appeal, the punitive damages award may be dramatically reduced, but even if the punitives are cut in half its still a big number - especially given that this will not be the only site contaminated in this manner in Louisiana, Texas, Oklahoma, California, etc.

It is also worth noting that the Louisiana Supreme Court has held that punitive damages are covered unless specifically excluded.