AIG unit loses ruling over well site fire

A federal appeals court has affirmed a lower court’s summary judgment against an American International Group Inc. unit in litigation over a well site fire.

Houston-based Baker Hughes Inc. contracted with another firm to conduct 34 stages of hydraulic fracturing at an oil and gas well site in Loving County, Texas, according to Wednesday’s ruling by the 5th U.S. Circuit Court of Appeals in Houston in AIG Europe Ltd. v. Caterpillar Inc; Dragon Products LLC.

When one of the pumping units began to overheat, it was removed and replaced with another unit, but about 30 minutes later BHI personnel saw the replacement unit was on fire. BHI shut down all 16 pumping units, but before the fire was extinguished it damaged many of them, according to the ruling.

The replacement unit was manufactured by Deerfield, Illinois-based Caterpillar and Jacksboro, Texas-based Dragon Product had assembled the unit with BHI, according to the ruling.

Caterpillar had recommended that the unit’s oil be changed after 250 hours of run time, while BHI’s own policy called for an oil change every 800 hours, according to the ruling.

The unit’s oil was changed for the only time in May 2016. At the time, BHI’s hour meter showed the engine had run for about 800 hours, although its internal hour meter showed it had run for 1,911 hours.

After the fire, an investigation indicated it had originated from the replacement unit and that the engine had a disconnected crankshaft counterweight and a broken connecting rod.

As BHI’s insurer, AIG filed suit against Caterpillar and Dragon on charges including negligence, design defect, manufacturing defect and breach of implied warranty. 

The U.S. District Court in Beaumont, Texas, among other rulings, granted summary judgment for Caterpillar and Dragon on each of AIG’s claims.

The lower court’s rulings were affirmed by a unanimous three-judge appeals court panel. In discussing the negligence claim, the ruling said AIG “argues that, had the meter worked, BHI would have been able to take action to prevent the fire.  Even so, AIG points to no evidence that the meter’s inoperability or BHI’s lack of knowledge of the discrepancy in engine-hours caused the fire.”

“The district court was correct to grant summary judgment Caterpillar on the causation element” it said.

In addition, “AIG sets forth no specific facts attempting to show Dragon’s negligence,” the ruling said.

Attorneys in the case did not respond to requests for comment.