LONDON-A ruling by the House of Lords brings to an end more than a decade of litigation stemming from the costly loss of the Piper Alpha oil platform in 1988.

The Law Lords last month unanimously upheld a lower court ruling that the insurers of the Piper Alpha oil platform's operators can collect more than £136 million ($193.3 million) in compensation payments they made after the disaster from 24 contractors working on the rig and from their insurers.

The North Sea oil platform was destroyed by a series of explosions and fires on July 6, 1988, killing 167 men and resulting in insured losses of $1.4 billion, making it one of the costliest man-made disasters ever.

The ruling upholds a 1999 decision by the Inner House of the Court of Session in Scotland that the insurers of the rig's operators-which had funded the original settlement with the disaster's survivors and victims' relatives-could seek reimbursement on behalf of the operators from the contractors that employed the victims.

The litigation was brought in the name of rig operator Caledonia North Sea Ltd., on behalf of insurers of the Piper Alpha's four operators (BI, Feb. 20, 2000).

The Scottish court had reversed a 1997 lower court decision that the insurers could not recover on behalf of their policyholders because the operators had already been indemnified for their loss.

"The ruling of their Lordships has confirmed a principle which had been thought to be enshrined in English and Scots law for over 200 years. The oil industry and insurers alike will be relieved that the long-established knock-for-knock principle of operations in the North Sea and elsewhere has been fully reinforced and confirmed by this decision," said David Reynolds, partner of London law firm Clyde & Co., which represented the operators and their insurers.

The insurers include units of ACE Ltd. and CGNU P.L.C., as well as Lloyd's of London reinsurer Equitas Ltd.

"This House of Lords decision is extremely important as it provides clear guidance on the operation of indemnities in offshore contracts," said Penelope Warner, a lawyer with London-based law firm CMS Cameron McKenna.

The operators of the Piper Alpha oil rig settled claims stemming from the contractors' employees and then sought recovery under its contractual indemnities with the various contractors. The contractors, however, declined to indemnify the operators.

The issues considered by the House of Lords were:

c Whether a contractor was correct to argue that it was not liable because it had not been responsible for causing the incident, which resulted in the death or injury in question.

c Whether Caledonia North Sea was entitled to indemnity under the contract between the parties for claims arising from the death or injury of the contractors' employees in regard to payments made by their insurers. The Lords also considered whether insurers can sue for relief in the name of the policyholder under Scottish law.

c Whether recovery in excess of the Scots Law value of the claims was prevented by the consequential-loss exclusion in the contract.

The operator's settlement was called a "mid-Atlantic settlement" because it provided compensation amounts higher than normally awarded under Scots Law but less than that typical in the United States.

The House of Lords ruled that the contractor should bear the risk of injury or death of its own employees in all circumstances, except where an employee's death or injury was caused by the sole negligence or willful misconduct of the operator. In this case, the explosion was caused by the combined negligence of a contractor and the operator.

The Lords recognized and accepted the general principle of mutual offshore indemnities and the right of the operator's insurers to subrogate.

The contractors had argued that the settlement's increased compensation award was a consequential loss, but the Lords ruled that it was irrelevant that the award was higher than the contractors might have expected.