A federal appeals court on Friday upheld a lower court ruling in favor of a Great American Insurance Group unit that alleged a policyholder was misled about whether it had coverage for a natural gas well blowout.
In Castro, Texas-based Finger Oil & Gas Inc. was insured under a policy issued by Great American Unit Mid-Continent Casualty Co., according to a ruling Friday by the 5th U.S. Circuit Court of Appeals in New Orleans. Finger Oil & Gas Inc. vs. Mid-Continent Casualty Co.
In July 2019, the company was drilling its own natural gas well when a valve malfunctioned and the well exploded. In response, It is Marsh asked its business tax account manager at USA Inc. to investigate whether it was closed for the explosion.
In this matter the agent approached a mid-continent underwriter who confirmed that the insured had explosion and crater coverage, and this information was forwarded to Finger Oil.
Subsequently, Midcontinent informed Finger Oil that it was reviewing its policy on coverage. The company hired several contractors on the well and billed a total of $641,590, based on the Marsh agent’s email confirming the incident.
Midcontinent, however, denied Finger Oil’s claim on the basis of the lien waiver and “oil and gas consent” in its policy.
The lawsuit alleges Finger Oil Mid-Continent and Marsh charging claims of misrepresentation, breach of contract and failure to investigate the claim in a timely manner.
The U.S. District Court in San Antonio ruled in favor of the insurer and Marsh. The oil company appealed the decision. Marsh was not a party to the appeal.
A three-judge Court of Appeal panel ruled in favor of the insurer. “We agree with the magistrate judge’s conclusion that Mid-Continent’s statement was not an actionable misrepresentation under the circumstances presented here,” it said.
“Finger Oil’s agent asked Mid-Continent if it had blowout and crater coverage, and Mid-Continent responded correctly.
“Mid-Continent’s statement was more akin to a general statement that the policy contained such coverage than a misrepresentation of specific policy terms,” the panel said.
Attorneys in the case did not respond to requests for comment.