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Ruling upholds exclusion in marine drilling rig injury dispute


A “drillship” is a type of drilling rig, says a federal appeals court in upholding an exclusion in a marine excess insurance policy.

Raylin Richard was injured while working on a drillship in the Gulf of Mexico in 2009, according to Monday's ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Raylin Richard. v. Dolphin Drilling Ltd. et al. A drillship is a ship equipped with a drill rig that is engaged in offshore oil and gas exploration, among other uses.

Broussard, Louisiana-based Offshore Energy Services Inc., which was brought in as a third-party defendant in the case, filed cross claims against its primary insurer, Boston-based Liberty Mutual Insurance Co., and Valiant Insurance Co., its excess insurer, which is now in runoff.

Offshore eventually settled with Mr. Richard but continued its litigation for reimbursement against Liberty Mutual and Valiant. The appellate court's ruling applies only to Offshore's claim against Valiant.

Valiant moved for summary judgment in the case, arguing that a drilling rig exclusion in its policy precluded coverage for Mr. Richard's accident. Offshore argued in part that a drillship is not a drilling rig.

The U.S. District Court in Alexandria, Louisiana ruled in Valiant's favor, and a three-judge panel of the 5th Circuit upheld the ruling.

“The district court was correct in finding that the drilling rig exclusion in Valiant's policy precluded overage for Richard's accident,” said the ruling, which described a drillship as “a type of drilling rig.”

“We are unpersuaded by Offshore's argument that construing the plain language of the exclusion in this way will lead to 'absurd consequences,' ” the ruling said.

“We reiterate that if parties do not wish for the exclusion to apply to accidents on drilling rigs or on drilling barges or on other listed locations, then they are free to contract accordingly,” said the decision, in affirming the lower court ruling.