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Jury awards oil company $71.7 million in lawsuit against insurers

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An Arkansas jury has awarded an oil company $71.7 million in a lawsuit filed against insurers in connection with lost income and expenses stemming from a 2012 oil pipeline breach.

On Wednesday, a jury in the U.S. District Court in El Dorado, Arkansas, awarded Brentwood, Tennessee-based Lion Oil Co. $60.4 million in income loss and $11.3 million in expenses in connection with the incident, in litigation filed by the company against 16 insurers, according to court papers in Lion Oil Co. v. National Union Fire Insurance Co. of Pittsburgh, Pa., et al.

Lion Oil owns and operates a refinery in El Dorado that was supplied crude oil primarily by a pipeline owned and operated by ExxonMobil Pipeline Co., a unit of Irving, Texas-based Exxon Mobile Corp., according to the original complaint, filed Oct. 8, 2013.

A rupture on April 28, 2012, resulted in the pipeline's immediate shutdown, according to the complaint. The company began receiving shipments of crude oil through the pipeline again on March 18, 2013.

Lion Oil contended in its lawsuit that it suffered losses of more than $80 million as a result of the incident and that it was a covered loss under an “all risk” policy issued by the defendant insurers.

The insurers denied coverage, according to the complaint, contending the claim fell into two policy exclusions: one that states the policy did not insure against the cost of making good defective design or specifications, and a second that applies to “ordinary wear and tear.”

The jury verdict in Lion Oil's favor came after a six-day trial. Plaintiff attorney Geoffrey J. Greeves, a partner with Pillsbury Winthrop Shaw Pittman L.L.P. in Washington, said in a statement that he was not surprised “the El Dorado jury concluded that Lion Oil's insurers breached their obligations by failing to live up to their all-risk insurance contracts.”

The insurers' attorney had no comment.

Insurers named as defendants were: National Union Fire Insurance Co. of Pittsburgh, Pa.; Great Lakes Reinsurance UK P.L.C.; Ace American Insurance Co.; XL Insurance America Inc.; certain underwriters at Lloyds (Talbot Syndicate 1183); Torus Specialty Insurance Co. Inc.; certain underwriters at Lloyds (Navigators Syndicate at Lloyds 1221 and Pembroke Syndicate at Lloyds 4000); certain underwriters at Lloyds (SJC 2003/Catlin); and certain underwriters at Lloyds (Chaucer Marine Syndicate 1084).

Also named as defendants were Berkshire Hathaway International Insurance Ltd.; Arch Insurance Co.; Lexington Insurance Co.; Ironshore Specialty Insurance Co.; and Landmark American Insurance Co.