Underwriter/Newfield v. OSCA Inc

• Court: Court of Appeals for the Fifth Circuit
• Decided: April 12, 2006
• Docket: 03-20398
• Status: Unpublished

Opinion

United States Court of Appeals Fifth Circuit F I L E D IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT April 12, 2006 ________________________________________________ No. 03-20398 Charles R. Fulbruge III Clerk Consolidated With

Case Nos. 03-20817 and 03-21021

________________________________________________ UNDERWRITERS AT LLOYD’S LONDON, ETC., ET AL.

Plaintiffs-Appellees,

WILLIAMS FIELD SERVICES COMPANY; TRANSCONTINENTAL GAS PIPELINE CORPORATION

Intervenor Plaintiffs-Appellees,

versus

OSCA, INC., ET AL.

Defendants

OSCA, INC.

Defendant-Appellant,

-----------------------------------------------------------

UNDERWRITERS AT LLOYD’S LONDON, Etc; ET AL.

Plaintiffs,

OSCA INC.; ET AL.

Defendants,

OSCA INC.

Third Party Plaintiff-Appellant

1 versus

UNDERWRITERS AT LLOYD’S AND/OR LONDON MARKET INSURANCE, Etc.; ET AL.

Third Party Defendants,

AMERICAN HOME ASSURANCE COMPANY; AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY

Third Party Defendants-Appellees,

WILLIAMS FIELD SERVICES COMPANY; TRANSCONTINENTAL GAS PIPELINE CORPORATION

Intervenor Plaintiffs-Appellees

Appeals from the United States District Court For the Southern District of Texas 4:01-CV-2214 ________________________________________________

Before SMITH, DENNIS, AND PRADO Circuit Judges.

PER CURIAM:*

This case arises from a September 9, 1999 oil and gas well

blowout on a fixed platform in the Gulf of Mexico approximately 100

miles off the Louisiana coast. The parties involved in this

controversy include: (1) Newfield Exploration and its joint

* Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

2 venturers (Newfield),1 the principal operator of the platform where

the blowout occurred; (2) Certain Underwriters at Lloyd’s London

Subscribing to Policy No. JHB-CJP-1177, et al (Underwriters), which

have already paid most of Newfield’s damages and are claimants in

subrogation; (3) Newfield's contractors, which were engaged in

repair work on the well, OSCA, Inc., (OSCA) and High Pressure

Integrity, Inc. (HPI); (4) Newfield’s ‘Company Man’, or “eyes and

ears” on the platform, Chalmers, Collins & Alwell, Inc. (CCA); (5)

Newfield's insurers, Certain Underwriters at Lloyd’s London

Subscribing to Policy No JC8250-201417 (EED Underwriters), American

Home Assurance Company (American Home) and American International

Specialty Lines Insurance Company (AISLIC); (6) Williams Field

Services, Inc., (Williams) a pipeline company engaged in

transporting natural gas through a network of feeder lines from

over two hundred production platforms, including the Newfield

platform and Transcontinental Gas Pipeline Company

(Transcontinental), a subsidiary of Williams, referred to

hereinafter collectively with Williams; and (7) Chevron, owner of

a production platform linked directly to the Newfield platform by

1 Other joint venturer plaintiffs were Apache Oil Corporation, Continental Land and Fur, and Fidelity Oil. The interest owners will be collectively referred to as “Newfield.”

3 one of Williams' feeder lines.2

Newfield, Underwriters, Williams and Chevron brought suit in

federal district court against the well repair contractors, OSCA,

HPI, and ‘company man’ CCA for damages resulting from the blowout.

OSCA brought third party actions for coverage against American

Home, EED Underwriters, and AISLIC. Following a jury trial, a

verdict was returned holding all three of the contractors liable.

The district court, accordingly, rendered a liability trial final

judgment on March 3, 2003. The insurance coverage issues were

tried separately by the district court, which rendered a final

judgment on March 3, 2003, holding that (1) the policies issued by

EED Underwriters and American Home did not cover OSCA for the

accident and (2) the AISLIC policy did not “drop down” and

therefore did not provide any protection until covered losses

exceeded $10 million. As OSCA’s liability in the underlying suit

was $13,306,600.26, the court entered judgment against AISLIC for

$3,306,600.26. OSCA then moved for a new trial or to amend the

judgment, but the district court denied the motion. AISLIC filed

a “motion for clarification,” which the district court granted in

an “Amended Declaratory Action Final Judgment” on September 9,

2 Other interest owners in the Chevron platform were Petrofina Deleware, Inc., and AtoFina Pertrochemicals Inc. They are referred to collectively as Chevron.

4 2003. Relying on Exclusion D(4), the amended final judgment held

that OSCA’s “covered” losses never exceeded $10 million, meaning

that the AISLIC policy was not triggered and AISLIC owed nothing.3

OSCA appealed both the original and amended final judgments.

OSCA is the only defendant with an appeal pending before this

court.

The blowout:

The blowout occurred while OSCA was attempting to set a bridge

plug provided by HPI using coiled tubing to run the plug and

necessary tools into the well. A bridge plug is “a down hole tool

designed to isolate a lower zone while testing an upper section.”4

The appellant OSCA was hired to perform the necessary coiled tubing

operations. Coiled tubing is small diameter flexible steel pipe

wrapped around a spool. Tools and machinery, referred to as the

“bottom hole assembly” or the “tool string” are attached to the end

of the tubing and placed into the well. The coiled tubing unit

operator then forces, or “snubs” the tubing into the well, conducts

3 Exclusion D(4) of the AISLIC policy provides that the policy does not cover property damage to “that particular part of real property or fixtures on which any Insured or any contractors or subcontractors working directly or indirectly on behalf of any Insured are performing operations, if such Property Damage arises out of such operations.” 4 HOWARD R. WILLIAMS AND CHARLES J. MEYERS ET AL., WILLIAMS AND MEYERS OIL AND GAS LAW, Vol. 8 at 111 (2004).

5 the required procedure, in this case setting the bridge plug, and

then pulls the tubing and remaining tools out of the well.

The contract between OSCA and Newfield required OSCA to

perform work in a good and workmanlike manner and it was stipulated

in the joint pretrial order that Newfield required back pressure

valves to be included in the coiled tubing assembly. A back

pressure valve is designed to close in the event of a sudden

increase in pressure below the tool string. No back pressure valve

was included in the tool string present in the well when the

blowout occurred. The tool string itself was assembled by HPI and

the operations were overseen by CCA personnel in communication with

Newfield.

There was difficulty setting the bridge plug and the first two

attempts were unsuccessful. On the third attempt, the tool string

attached to the tubing suddenly stopped approximately nine hundred

fifteen feet down in the well as if it had struck something. There

was no known obstruction at that depth. The coiled tubing buckled

and parted and gasses and condensate began to flow up. An

uncontrolled blowout lasted for several days, and on the third day

the gasses ignited. The blowout, fire, and resulting control

operations caused significant damage. Fortunately there were no

injuries.

The blowout, fire, and subsequent well control activities

6 resulted in a damaged well, lost hydrocarbons, and a severely

damaged platform. In addition, the platform held a gas gathering

system owned by Williams. The gas gathering system on the Newfield

platform was connected to a feeder pipeline from a Chevron platform

father out in the Gulf. The gathering system included an automated

emergency shutdown system that was triggered by the blowout and

fire. The system was damaged in the blowout and the pipeline

remained shutdown for sixteen days. Pressure building up in the

shutdown pipeline caused a safety system on the Chevron platform to

flare off the pent up gas being produced by the Chevron wells. The

only other alternative would have been to shut-in the Chevron

wells, causing physical damage. OSCA does not appear to dispute

that flaring the gas was the more prudent option.

Facts relevant to the insurance coverage action:

OSCA carried several layers of insurance coverage at the time

of the blowout. Its primary coverage was provided by United

Capital, a marine general liability policy with limits of $1

million; above that, OSCA carried an American Home’s “Bumbershoot”

policy with limits of $9 million in excess of the United Capital

policy. Above American Home OSCA carried AISLIC’s Policy, with

limits of $75 million above the $10 million provided by the two

underlying policies. OSCA was also insured by EED Underwriters,

the EED standing for “Energy, Exploration, and Development,” with

7 $10 million in limits with an excess policy providing $40 million

above that $10 million. OSCA made claims on all of these policies

except that provided by United Capital because, as is undisputed,

United Capital is insolvent.

The trial court’s ruling on the EED Underwriters policy has

not been appealed. The district court held that the policy

provided coverage only in the event of OSCA’s gross or willful

negligence. There was no such finding against OSCA; its liability

was based on simple negligence.

On appeal AISLIC has conceded that its policy “drops down” to

provide coverage if OSCA’s losses thereunder exceed the amount

covered by the underlying insurance policies or the Per Occurrence

Retention of $2 million, which functions like a deductible.

AISLIC’s concession thus eliminates one of the issues on appeal.

AISLIC is, however, still contesting coverage.

Discussion- Liability Issues:

Applicable Law:

All of the parties agree that Louisiana’s substantive law

applies to the liability issues in this case by operation of the

Outer Continental Shelf Lands Act, 43 U.S.C. §1331 et seq. As this

court recognized in Fontenot v. Dual Drilling Co., Louisiana law,

not maritime law, applies on fixed platforms located on the Outer

8 Continental Shelf and this circuit has rejected attempts to have

‘federal common law’ override Louisiana tort law in such cases. 179

F.3d 969 (5th Cir. 1999).

Evidentiary Issues:

Standard of Review:

OSCA contends that the trial court’s rulings on the

admissibility of evidence are reviewed for abuse of discretion.

Johnson v. Ford Motor Co., 988 F.2d 573, 578 (5th Cir. 1993).

Chevron agrees. Newfield, however, argues for a plain error

standard of review claiming that OSCA failed to preserve the error

by appropriate objection.

OSCA filed several motions in limine to prevent the

introduction of the documents discussed below. The motions in

limine were denied by the trial court as moot. The circumstances

surrounding these rulings are rather odd. On March 13, 2002, the

court issued two written orders providing that the court would

dispense with its usual procedure of entertaining evidentiary

objections in advance of trial, instead decreeing that the court

would entertain objections at the time exhibits were offered.5 The

5 One order, dated March 13, 2002, reads: “[a]ccordingly, the Court will dispense with its normal procedure of admitting exhibits at the start of trial and require all parties to offer exhibits as they use them. Any non-frivolous objections can be

9 court reiterated this change in procedures in an order governing

proceedings at trial issued the next day.6 OSCA claims that on

March 14, 2002, the first day of jury selection, the judge reversed

her position and stated that she would not consider any evidentiary

objections not filed in advance of trial. The motions in limine

were denied as moot on March 15, 2002. The parties dispute the

reason that the motions in limine were moot. OSCA claims that the

motions were moot because of the three pre-trial orders providing

for contemporaneous objections. Newfield and the other appellees

argue that the motions were moot because the exhibits had already

been admitted. While it is not entirely clear, the record

indicates that evidence was admitted on March 15, 2002. OSCA’s

argument as to when evidence was admitted is confusing and self-

contradictory. Chevron points to dialogue between the district

court judge and a Newfield attorney during the direct examination

of the first witness as the time the evidence was admitted, 7 apparently “en mass.” The court’s docket entry for the 15th also

notes that exhibits were admitted as stated in the record and

made at the time each document is offered.” 6 “MS. BLANCHARD: That exhibit, that diagram has been previously marked as Newfield exhibit 12, Your Honor. THE COURT: All the exhibits that you all agreed to everything is in evidence except for the stuff you all indicated that you all were withdrawing. So you know what’s in, right. MS. BLANCHARD: Yes.” 7 Chevron brief at 20; 102 R.11; Chevron R. Ex.17 10 refers to exhibit lists without any qualifier. In its reply brief,

OSCA argues both that the evidence was never properly admitted and

that the dialogue in the record cited as the moment of admission by

Chevron was a reference to previously admitted exhibits.

Given the way the exhibits in this case were apparently

admitted, the confusing and seemingly contradictory orders about

the lodging of objections to evidence, and the motions in limine

ruled moot, common sense supports a finding that OSCA sufficiently

preserved its objection to warrant abuse of discretion review. On

the other hand, Newfield cites to several places in the record

where OSCA makes contemporaneous objections to evidence on

relevance or other grounds. In the end, however, the standard of

review does not have a pivotal effect on the resolution of the

evidence issues raised in this appeal. As discussed below, neither

assignment of error has merit even under the less deferential abuse

of discretion standard.

Introduction of October 1999 Corrective Action Report- subsequent remedial measure under FRE 407:

Following the blowout OSCA performed a “root cause

investigation” in compliance with its status as a member of ISO

9001.8 Following the investigation OSCA prepared a report entitled

8 See The International Organization for Standardization Website, http://www.iso.org (follow the “ISO 9000/ISO 14000" hyperlink, then follow the “introduction” hyperlink, and then 11 Nonconformance and Corrective Action Report and dated October 22,

1999. The report contained three sections: (1) the “incident”

section, which essentially identified the Newfield blowout; (2) the

“root cause” section, which set forth a determination of the causes

of the blowout; and (3) the “corrective/preventative action”

section which proposed new procedures, policies, and training as

well as the review of old procedures, policies, and training.

The issue is whether the report was admissible in light of

Federal Rule of Evidence 407. In an example of poor judgment, in

its brief OSCA failed to mention that the report was redacted to

omit the corrective/preventative actions section of the report. In

addition the version of the report included in OSCA’s record

excerpts is the full unredacted version, with no notation that this

version was never entered into evidence or shown to the jury.9

Newfield, Chevron, and Williams pointed to this discrepancy in

their respective briefs, but OSCA’s reply brief makes no reference

to the problem. OSCA’s opening brief argument on the admissibility

of the report does, however, note cases in which entire documents

were held inadmissible so it seems likely that the distinction was

not completely lost on counsel.

follow the “ISO 9000-2000 - Selection and Use” hyperlink)(last visited Mar. 31, 2006). 9 Compare OSCA’s R. Ex. 19 with Newfield’s R. Ex. 2 and Newfield Exhibit 36. 12 OSCA argues that the trial court abused its discretion when it

admitted the report into evidence in violation of Federal Rule of

Evidence 407 (Inadmissible Subsequent Remedial Measures). Newfield

responds that the report is admissible as a party admission and, as

redacted, contains no material inadmissible under Rule 407. Federal

Rule of Evidence 407 provides, in pertinent part “[w]hen, after an

injury or harm allegedly caused by an event, measures are taken

that, if taken previously, would have made the injury or harm less

likely to occur, evidence of the subsequent measures is not

admissible to prove negligence, culpable conduct,....” The rule

“rests on a social policy of encouraging people to take, or at

least not discouraging them from taking, steps in furtherance of

added safety.” FED. F. EVID. 407 advisory committee’s note. This

principle has been applied by the courts “...to exclude evidence of

subsequent repairs, installation of safety devices, changes in

company rules, and discharge of employees, and the language of the

present Rule is broad enough to encompass all of them.” FED. F.

EVID. 407 advisory committee’s note. OSCA points out that Rule 407

covers more than physical repairs, it includes changes in policy

and procedures. See, e.g., In Re Air Crash Disaster, 86 F.3d 498,

531-32 (6th Cir. 1996); Hall v. Am. Steamship Co., 688 F.2d 1062,

1066 (6th Cir. 1982). The report did include changes in policy and

procedures, but those sections of the report were redacted before

13 the report went to the jury.

OSCA cites Complaint of Consolidation Coal Co., a Third

Circuit case involving an admiralty claim in which the court held

that even the portion of a redacted memo discussing the

investigation of the incident was excludable under Rule 407. 123

F.3d 126, 136 (3rd Cir. 1997). The memo in this case was described

as a safety memo sent to all employees, which discussed the

investigation of the accident, saying that an employee fell after

a rope line broke, that the rope line had prior damage that should

have been discovered by close inspection and cautioning all

employees to inspect ropes carefully before using them. The

majority in Consolidation Coal court, and OSCA, cite Specht v.

Jensen, a civil rights case for the Tenth Circuit in which the

court finds that it was not an abuse of discretion for the district

court to exclude a press release describing both the defendant’s

investigation of the incident giving rise to the suit and the

disciplinary measures taken against the police officers involved.

863 F.2d 700,701-02 (10th Cir. 1988).10 The Specht opinion is

10 OSCA also cites two Fifth Circuit cases to support its argument. Both cases involved true remedial measures and not investigation results or redacted post accident reports and so are inapposite. Mills v. Beech Aircraft Co., Inc., 886 F.2d 758 (5th Cir. 1989) (Excluding a shop manual rewritten by an aircraft manufacturer following the crash of a similar model.); Grenada Steel Industries, Inc. v. Alabama Oxygen Co. Inc., 695 F.2d 883 (5th Cir. 1983) (Excluding subsequent alternative designs of a gas storage cylinder valve). 14 silent about whether a redacted version of the press release was

offered as an option, but does cite Rocky Mountain Helicopter, a

case from the same circuit, discussed below, as indirect but

analogous support, perhaps recognizing that a redacted release may

have been admissible. Id. at 702.

In response to OSCA’s argument, Newfield and Chevron cite

contrary case law and argue that the distinction between accident

investigation results and remedial measures is relevant to the

application of Rule 407. Rocky Mountain Helicopter v. Bell

Helicopters Textron involved a helicopter crash allegedly resulting

either from a defective trunnion, a part connecting the mast with

the rotator blades, or from pilot error, including a decision to

exceed the cargo capacity of the helicopter. 805 F.2d 907, 910

(10th Cir. 1986). The Rocky Mountain Helicopter trial court admitted

evidence from a “Photoelastic Study of Stress in 214 Trunnions” that

Bell conducted after the accident. Bell appealed on the ground that

the study should have been excluded under Rule 407. Id. at 918.

Bell argued both that the report communicated to the jury the fact

that the trunnion had been redesigned and thus constituted evidence

of a subsequent remedial measure and that the study itself was a

subsequent remedial measure because, if conducted before the

accident, it would have made the accident less likely to occur. Id.

The court rejected both arguments. Id. It rejected the first

15 on the grounds that the study had been redacted to exclude any

mention of the trunnion redesign and that no reference had been made

to one by any attorney or witness. Id. The court rejected the

argument that the study itself was a remedial measure saying:

It would strain the spirit of the remedial measure prohibition in Rule 407 to extend its shield to evidence contained in post event tests or reports. It might be possible in rare situations to characterize such reports as measures which, if conducted previously, would reduce the likelihood of the occurrence. Yet it is usually sounder to recognize that such tests are conducted for the purpose of investigating the occurrence to discover what might have gone wrong or right. Remedial measures are those actions taken to remedy any flaws or failures indicated by the test. In this case, the remedial measure was not the Photoelastic Study of the trunnion but rather the subsequent redesign of the trunnion.

Id. The court goes on to say that any policy considerations that

underlie Rule 407 are both “not as vigorously implicated where

investigative tests and reports are concerned” and that they are

outweighed by “the danger of depriving injured claimants of tone of

the best and most accurate sources of evidence and information.”

Id. (citing Westmoreland v. CBS, Inc. 601 F.Supp. 66 (S.D.N.Y.

1984)). A well-argued dissent filed in Consolidation Coal also

cites and would seek to follow Rocky Mountain Helicopter and

recognizes the distinction between remedial measures and

investigation results. Consolidation Coal, 123 F.3d at 139. (McKee,

J., dissenting).

Newfield and Chevron also cite Prentiss & Carlisle Co., Inc.

16 v. Koehring-Waterous Division of Timberjack, Inc., for its holding

that the findings of an investigation into the cause of an accident

are admissible where any discussion of remedial measures is

redacted. 972 F.2d 6, 9-10 (1st Cir. 1992). In Prentiss & Carlisle

Co., the trial court held that the analysis of the problem was not

a measure within the meaning of Rule 407 and the First Circuit

agreed. Id.

Bolstering their argument, Newfield and Chevron note that the

NCAR prepared by OSCA was part of its obligations in compliance with

its membership in ISO 9001, a membership used by OSCA as a sales

tool. OSCA points out that as the report of the investigation was

prepared, and the investigation itself was conducted “not out of a

sense of social responsibility” but in order to gain the sales

benefits of membership in a trade organization. Thus, they argue,

the social policy behind Rule 407 does not apply here. This argument

comes primarily from a Fifth Circuit case, Rozier v. Ford Motor Co.,

in which the court found that a “Trend Cost Estimate” studying

alternate fuel storage placement in a model similar to the car that

had exploded, triggering the lawsuit, was admissible both because

it had been prepared before the accident and because it would have

been “required in any event by a superior authority, the National

Highway Traffic Safety Administration.” 573 F.2d 1332, 1343 (5th

Cir. 1978). While compliance with ISO 9001 was not strictly

17 mandatory in the same sense that a directive from the NHTSA would

be, the reasoning with regard to the social policy behind Rule 407

does have some applicability.

Although there is some inconsistency in the case law, the

stronger argument and the weight of that case law convince us to

affirm the trial court’s admission of the redacted Newfield NCAR

over any objection founded on Federal Rule of Evidence 407. OSCA

also makes a brief argument that the Newfield NCAR should have been

excluded under Federal Rule of Evidence 403 because any probative

value was substantially outweighed by the danger of unfair

prejudice, confusion of the issues, or misleading the jury. The

argument made by OSCA is essentially conclusory, and this is not

surprising as the company’s own evaluation of the causes of the

incident is certainly probative and, while the document was surely

prejudicial to OSCA’s case, it does not follow that the prejudice

was unfair.

Introduction of evidence relating to “Ocean Energy Incident”:

At trial Newfield introduced evidence of a similar, but

factually unrelated incident commonly referred to as “The Ocean

Energy Incident.” When the incident occurred OSCA was performing

coiled tubing services on another platform, for another operator,

on or about November 22, 1998 (approximately ten months before the

Newfield blowout). OSCA was the sole contractor working for, and 18 under the direction of, Ocean Energy when the coiled tubing buckled

and a blowout ensued.11 Following the incident, OSCA generated a

Noncompliance and Corrective Action Report (“Ocean Energy NCAR”) in

which OSCA listed both the root causes of the incident and proposed

internal policy changes with the goal of making its coiled tubing

operations safer. OSCA intended for these changes to go into effect

by the spring of 1999, before the Newfield blowout occurred. The

Ocean Energy NCAR was not redacted before being introduced into

evidence. In addition to the NCAR, a presentation made to the

Minerals Management Service and an accident report prepared by MMS

about the Ocean Energy incident were entered into evidence.

OSCA argues that the trial court abused its discretion when it

admitted evidence relating to the Ocean Energy Incident, and the

Ocean Energy NCAR in particular. Specifically OSCA argues that the

evidence is irrelevant and that any probative value the evidence

does have is substantially outweighed by the danger of unfair

prejudice, confusion of the issues, or misleading the jury and

should have been excluded under Federal Rule of Evidence 403.

Newfield counters that the incidents were substantially similar,

occurring while coiled tubing was used on offshore oil and gas wells

where it appeared that an obstruction may have been struck and the

11 The Ocean Energy blowout did not result in any claim, lawsuit, or other action against OSCA. 19 tubing split, causing a blowout. The items listed as the causes of

the Ocean Energy blowout were quite similar to those listed as the

causes of the Newfield blowout on the Newfield NCAR, including

excessive snub force, no back-pressure valve, and hydraulic limits

set above eighty percent of coiled tubing minimum yield. At trial

Newfield attempted to show that none of the new policies proposed

in the Ocean Energy NCAR had been implemented on the day of the

Newfield blowout and that had these policies been implemented the

blowout would have been prevented.

The district court agreed that the evidence was admissible

because Newfield made a showing that the Ocean Energy incident was

substantially similar to the Newfield blowout. Evidence of other

accidents may be used where it is shown that those prior accidents

are substantially similar to the instant accident. Ramos v. Liberty

Mutual Insurance Co., 615 F.2d 334 (5th Cir. 1980), decision

clarified, 620 F.2d 464. Further, “for purposes of proving other

accidents in order to show defendant’s awareness of a dangerous

condition, the rule requiring substantial similarity of those

accidents to the accident at issue should be relaxed ... any

differences in the circumstances surrounding these occurrences go

merely to the weight to be given the evidence.” Jackson v. Firestone

Tire & Rubber Co., 788 F.2d 1070, 1083 (5th Cir. 1986); See also

Johnson v. Ford Motor Co., 988 F.2d at 579-80 (“However, even when

20 it is offered solely to show notice, the proponent of such evidence

must establish reasonable similarity.”).

Here, given the readily apparent similarities between the two

incidents, and the similarity in the causes attributed to the two,

the trial court did not abuse its discretion in finding that the

incidents were substantially similar. In fact, Newfield’s argument

that had the recommendations made in the Ocean Energy NCAR been

implemented the Newfield blowout may have been prevented is closely

related to an argument that OSCA should have been aware of the

dangerous condition created by its policies and procedures, and

thus, even a finding of reasonable similarity would have sufficed.12

Evidentiary Sufficiency: Liability

12 In addition to an argument under Federal Rule of Evidence 403, OSCA argues that the Ocean Energy evidence should have been excluded under Rule 407. This argument is entirely without merit. The Ocean Energy incident occurred roughly ten months before the Newfield blowout that gave rise to the instant litigation. The Ocean Energy NCAR and the Ocean Energy related MMR documents were all prepared before the Newfield blowout occurred. That fact makes clear that Rule 407, entitled “Subsequent Remedial Measures,” does not apply. See Notes of Advisory Committee on Proposed Rules, Fed. R. Evid. 407 (“1997 Amendments...First, the words “an injury or harm allegedly caused by” were added to clarify that the rule applies only to changes made after the occurrence that produced the damages giving rise to the action. Evidence of measures taken by the defendant prior to the “event” causing “injury or harm” do not fall within the exclusionary scope of Rule 407 even if they occurred after the manufacture or design of the product.”); Rozier v. Ford Motor Co., 573 F.2d at 1343. 21 These assignments of error challenge the sufficiency of

evidence supporting the jury verdict. See FED. R. CIV. P. 50(b). We

review the denial of a motion for judgment as a matter of law de

novo applying the same standard of review as the trial court.

Industrias Magromer Cueros y Pieles S.A. v. Louisiana Bayou Furs,

Inc. 293 F.3d 912, 918 (5th Cir. 2002); Flowers v. S. Reg’l

Physician Servs., 247 f.3d 229, 235 (5th Cir. 2001). OSCA submits

that the ordinary standard of review for denial of motion for

judgment as a matter of law should apply. See Boeing Co. v.

Shipman, 411 F.2d 365, 373-74 (5th Cir. 1969). This court has held

that “it is the function of the jury to weigh evidence” and that

“its decision should be given deference if the record contains any

competent evidence to support its findings.” Louisiana Bayou Furs,

Inc., 293 F.3d at 918. “It is clear that evidence in the record can

support a jury verdict even if it is of such quality and weight that

reasonable and fairminded [individuals] in the exercise of impartial

judgment might reach different conclusions.” Id. (quoting Transoil

(Jersey) Ltd. v. Belcher Oil Co., 950 F.2d 1115, 1118 (5th Cir.

1992). Chevron concedes this standard of review. Newfield, on the

other hand, argues that OSCA failed to preserve these issues for

appellate review by failing to include them in its Rule 50 motions

and asserts that a plain error standard is appropriate, and thus,

the court should look only to find any evidence to support the

22 jury’s findings. Wellborn v. Sears, Roebuck & Co., 970 F.2d 1420,

1424 (5th Cir. 1992). In its reply brief OSCA argues that the issues

were preserved in paragraph one of its Rule 50 motion. The

paragraph reads:

Pursuant to Federal Rule of Civil Procedure 50, OSCA moves this court to set aside the verdict and Judgement entered on February 28, 2003 and enter instead a Judgment in favor of OSCA notwithstanding the verdict of the jury. Alternatively, OSCA moves this Court to set aside the jury’s apportionment of fault and assign the overwhelming percentages of fault to [Newfield, CCA and HPI]. The paragraph scarcely mentions the subject of a claimed

insufficiency of the evidence proving a breach of OSCA’s duty of

care. The paragraph does, however, mention a challenge to the

jury’s apportionment of fault. The brief attached to OCSA’s motion

also contains little or no mention of the evidentiary sufficiency

supporting the jury’s finding of a breach of the duty of care. The

brief does contain an argument regarding the sufficiency of the

evidence supporting the apportionment of fault. It seems both

parties may be partially correct in their assertions about the

preservation of the errors. In any case it is again not crucial to

the final outcome as even under the standard of review more

favorable to OSCA, OSCA’s arguments are unavailing.

Evidence failed to show that OSCA breached a duty of reasonable care or that OSCA should have been assigned 86% of the fault:

In attempting to establish that the jury’s verdict should be

reversed for insufficient evidence of liability, OSCA makes two 23 primary points. The first is that evidence of OSCA’s failure to live

up to its own stated goals as documented in the Ocean Energy

evidence is not evidence of a breach of its duty to act reasonably

under the circumstances. The implication is that evidence of

industry standards or practice is absolutely necessary to prove

negligence here. OSCA cites no caselaw supporting this proposition.

OSCA argues that its “aspirational goals” cannot be the standard of

care because a potential tortfessor’s duty under Louisiana Law does

not require that he choose the best or even a better method or

approach, just a reasonable one. See Mathieu v. Imperial Toy Corp.,

646 So. 2d 318 (5th Cir. 1995)(finding that police officers

approaching a subject are not restricted to employing the best of

several available alternatives, but must simply chose a reasonable

one). That only a reasonable, and not a best or perfect, method of

doing something is required is an accurate statement of Louisiana

Law. A requirement that industry standards must be used to prove

what is reasonable does not, however, follow from this premise. The

lessons a party should have learned from past experiences are

relevant to the reasonableness of its current behavior. Although

it is not clear that the Ocean Energy evidence was the only evidence

available to the jury in forming its findings on the appropriate

scope of OSCA’s duty, it would in this case be enough to support the

verdict.

24 The second of OSCA’s points relates to the jury’s assignment

of eighty-six percent (86%) of the fault for the incident to OSCA

while assigning no fault to Newfield and only six percent (6%) to

HPI and eight percent (8%) to CCA. OSCA asserts that there is

insufficient evidence to support this allocation of fault. OSCA’s

argument focuses on the omission of a back pressure valve from the

tool string being used when the blowout occurred. OSCA argues that

because HPI was responsible for assembling the tool string and CCA

was responsible for supervising the work on Newfield’s behalf, the

fault for the accident should have been more evenly split. Further,

OSCA points out that HPI, CCA, and, through CCA, Newfield, all had

knowledge of the absence of a back pressure valve, while OSCA claims

to have been told to stay clear of the area where the tool string

was assembled and that it was not told that a back pressure valve

had been omitted. This argument on its face may make the allocation

of fault sound unreasonable. As Newfield and Chevron point out,

however, the jury was presented with evidence of other alleged

mistakes made by OSCA that arguably caused the blowout, including

OSCA’s failure to set snub limits to 80% minimum yield and OSCA’s

failure to follow its own procedure and include a blind shear ram

in the blowout preventer (BOP) used in the coiled tubing operation.

These mistakes, in addition to OSCA’s failure to inquire about the

back pressure valve, are enough to support the jury’s allocation of

25 fault.

Evidentiary Sufficiency: Damages

Insufficiency of evidence to prove the amount of damages actually caused by the blowout: Entered only final amounts, not any bills or invoices:

OSCA asserts that the damages awarded by the jury were

insufficiently supported by the evidence. To prove its damages

Newfield called its own treasurer to testify to the invoices paid by

Newfield for the repairs compelled by the blowout. Present in the

courtroom were nineteen binders of invoices paid by Newfield to its

suppliers and contractors for repairs relating to the blowout. The

treasurer explained that each invoice was reviewed by an engineer

for reasonableness and then again by her office and that the

invoices were charged to one of four “Authorities for expenditure”

(AFEs), which she described as engineer prepared budget and

accounting records for individual Newfield projects. In this case

there was an AFE for each of four “projects”: well control, the

relief well, repair of the platform itself, and the replacement

well. In addition, the treasurer provided a summary of each AFE and

testified to the kinds of charges attributed to each. On cross-

examination OSCA brought out that the treasurer did not have

personal knowledge of the accident or the engineering related

calculations that went into the decisions to incur the costs paid

26 through the invoices. In addition to the testimony of its

treasurer, Newfield also introduced the testimony of its vice

president who personally witnessed the damage and also had

responsibility for approving the invoices.

On appeal OSCA appears to be claiming that in order to meet its

burden of proof Newfield had to enter evidence even more specific

than this, which it characterized as total amounts paid under the

insurance contract with the Underwriters.13 This characterization is

not particularly accurate, as the transcript of the testimony

reveals that the discussion of the claimed damages was at times

extremely specific. The treasurer identified and discussed in detail

some of the individual invoices contained in the binders and she

discussed in slightly more general terms the parts of the platform

that had been damaged and replaced.

OSCA cites Cleere Drilling Co. v. Dominion Exploration &

Production, Inc., in support of its position that the evidence of

damages was insufficient. 351 F.3d 642, 656 (5th Cir. 2003). In

Cleere Drilling, in addition to reversing the district court as to

several determinations of liability under various indemnity terms in

13 OSCA appears to indicate that the numbers provided were representative of money paid under the insurance contracts with Underwriters. A review of the record reveals that the numbers reflect amounts paid to Newfield’s creditors, by Newfield, for accident related supplies and services. The insurance coverage was never discussed in front of the jury, something OSCA actually complains about on appeal under a different assignment of error. 27 a contract, this court remanded for findings relating to the quantum

of damages to be awarded. Id. at 656. The party found liable for

some of the relevant damages asserted that the claimant of those

damages failed to prove that they were reasonable and necessary.

The court did not expressly disagree, but because of the fact

intensive nature of the issue, chose to remand the case without

discussion, or ruling on the inadequacies of the proof of damages.

Moreover, there is circuit precedent authorizing proof of damages

through introduction of summary evidence in lieu of voluminous

records. See New Amsterdam Casualty v. W.D. Felder & Co., 214 F.2d

825 (5th Cir. 1954). OSCA argues that while the evidence was

admissible, it nevertheless was insufficient proof of the damages

found by the jury. We disagree. All of the records were available

to the defendants for pretrial discovery and for use during the

trial. The defendants had ample opportunity to demonstrate any

inaccuracy or falsity in the records or the summaries based upon

them.

Failure to reduce damages claim by the value of “betterment” or improvement:

In addition to its argument that Newfield failed to adequately

prove its damages in general, OSCA also argues that Newfield failed

to reduce its damages claim by the value of “betterment” or

improvement it obtained by replacing old equipment with new

equipment and re-drilling a problem well. The well that suffered 28 the blowout had been giving Newfield significant trouble even before

this incident. The coiled tubing work that sparked the blowout was

being done to set a bridge plug and thereby shut off the deeper part

of the well, a part that was apparently re-drilled and included in

the requested damage amount. OSCA alleges that there was proof that

the well had a collapsed screen and would have had to have been re-

drilled anyway. OSCA would have the law provide that “[i]f the

plaintiff in the compensatory damages claim does not also prove the

amount of depreciation and reduction for betterment, the plaintiff

has failed to provide competent proof of his claim for damages and

is not entitled to recover.” Newfield responds that it argued both

before and at trial that betterment and depreciation were

inapplicable because if compensated in the amount requested,

Newfield would not have been placed in a better position than it was

in before the blowout. Newfield argued to the jury that the damaged

platform was only a year and a half old and would have outlived its

own usefulness and been abandoned when the reserves below it were

depleted. Thus, new components used in the repairs added no value.

Newfield also points out that betterment and depreciation were

discussed and argued at trial. Newfield’s treasurer testified about

how depreciation was calculated for tax purposes. She explained

that the depreciation schedule for the property was over the life of

the reserves and that all equipment was depreciated with respect to

29 all of the reserves held by the company, and not on a platform by

platform basis. The treasurer also testified that there is no

market for used platform components, so repairs had to be made new

for old. Further, Newfield argued that the re-drill of the well was

not an improvement as 13,000 feet of the original well were able to

be reused, and the well was re-completed in the same reservoir as

the original well with the same screens and methods that were used

in the first well. After hearing these arguments and evidence, the

jury awarded roughly $800,000 less than Newfield requested for costs

to repair the platform and roughly $5,000,000 less than Newfield

requested for the re-drill of the well. Thus, Newfield adds that to

the extent the jury found deduction for betterment or depreciation

appropriate, it made them, leaving little for OSCA to complain about

on appeal.

Louisiana tort law does provide, as a general rule, that

damages in a tort suit are to place the injured party in “as good a

position as before his property was damaged, but not a superior

position.” Mossy Motors, Inc. v. Sewerage and Water Board of New

Orleans, 753 So. 2d 269, 280 (La. Ct. App. 1999). The implications

of and exceptions to this rule are not particularly clear. For

example, the Louisiana Supreme Court has held, in a case involving

damage to a house, that appropriate damages were the estimate given

to repair the damage less depreciation. Reisz v. Kansas City S.

30 R.R. Co., 935, 88 So. 120, 122 (La. 1921). In Reisz, however, there

appeared to be no evidence, or conflicting evidence, in the record

on the value of the depreciation; the court declared that an

allowance of one-third for depreciation was fair and equitable and

apparently did not put the burden of proof on the plaintiff. Id.

Another Louisiana Supreme Court case, this time involving low income

housing owned by the Catholic Archdiocese that was damaged in a

fire, rejected a rigid cost of repair less depreciation rule and

allowed the Archdiocese to recover the full cost of restoration

reasonably incurred. Roman Catholic Church of the Archdiocese of New

Orleans v. Louisiana Gas Serv. Co., 618 So. 2d 874 (La. 1993)(“Some

of our own courts of appeal have approved such limitations,

including a rigid ‘cost of replacement, less depreciation,’ test,

evoking this court’s pointed admonitions that no mechanical rule can

be applied with exactitude in the assessment of property damage

under Article 231514 and that every case must rest on its own facts

and circumstances.”).

The Mossy Motors case, quoted above, slightly confuses the

issue. 753 So. 2d 269. In Mossy Motors the court allowed the

plaintiff car dealership to recover the full cost of replacing a

damaged showroom with several smaller buildings amounting to the

14 Article 2315 of the Louisiana Civil Code is the article from which almost all tort liability under Louisiana Law springs. 31 same square footage at a comparable price to restoring the single

building. Id. at 274. The new buildings were in compliance with

current building code and had to be designed under regulations

required by contract with General Motors because the dealership’s

new buildings were not grandfathered in, as the old one had been.

Id. The fact that the old showroom had depreciated and suffered some

damage before the defendant’s tortious actions was not used to

discount recovery. Id. at 277, 280. This analysis followed and

expanded on that in Roman Catholic.

Mossy Motors, however, also held that there was inadequate

information about damages claimed in reference to a service building

to show that a full reconstruction was necessary or to support the

estimates provided by the plaintiff’s expert for repairing the

structure. Id. at 280-81. It is in this part of the opinion that the

above quote from this case may be found. The repair work had not

yet begun, so firm cost amounts were not available. Id. It is this

uncertainty about the extent of the necessary repairs and their

actual costs that seemed troubling to the court. Id. The court

reduced the trial court’s award by the full amount allocated for the

service building and remanded for further findings. Id.

The case relied on by OSCA is a Fifth Circuit opinion decided

under federal maritime, not Louisiana, law and is also substantially

distinguishable. See Pizani v. M/V Cotton Blossom, 669 F.2d 1084

32 (5th Cir. 1982). The case involved a dock damaged in multiple

collisions with a steamboat. Id. at 1086. The plaintiff dock owner’s

only proof of damages was a report prepared by a construction firm

who made a lump sum bid to effect all of the repairs made. Id. at

1086. Repairs were made to all five pile clusters even though only

two were damaged by the steamboat collisions. Id. at 1086-87. Also,

while all but one of the original pile clusters were made up of only

three or four pilings, the repaired clusters each contained five

pilings. Id. The court found that these “repairs” clearly

constituted improvements and noted that because only a lump sum bid

had been submitted it was impossible to isolate the cost of the

damages actually attributable to the steamboat damage. Id. at 1087.

The district court in the case had acknowledged that “repairs”

rendered may have included improvements, but held that the defendant

was responsible for establishing the differential in cost. Id. at

1088. The district court awarded the entire lump sum bid as damages.

The Fifth Circuit disagreed saying:

We know of no rule shifting this burden to the defendant every time a plaintiff succeeds in introducing into evidence some figure denominated ‘the cost of repairs.’ Indeed, it has explicitly been held that when a defendant shows that the figure claimed by the plaintiff includes non-compensable improvements, the plaintiff must prove the amount of such improvements, i.e. the amount by which the original figure must be decreased. Id.

The defendant argued that the case should not only be reversed, it

33 should be dismissed as well and the court acknowledged that such a

rule exists in the common law but chose to exercise equity power to

remand the case for further findings instead. Id. at 1089.

As noted above, Pizani was decided under federal maritime law,

and the parties to this case have stipulated to the applicability of

Louisiana law. Further, Pizani may be distinguishable for reasons

other than choice of law rules as least as far as deductions for

depreciation are concerned. A requirement that a plaintiff take

care to exclude the costs of repair of things not damaged, like the

additional three clusters, and the use of not only new, but better

or more substantial materials, may be different from a requirement

that the plaintiff in every case calculate depreciation and prove it

at trial. This distinction applies to OSCA’s objection to new for

old repair of the platform, but would not apply to OSCA’s contention

that the need for a replacement well was not entirely attributable

to the blowout because it was already damaged. In addition, the

trial court in Pizani awarded the full amount requested. Here the

jury verdict awarded substantially less than the amount sought.

OSCA also cites another Maritime Law case, involving another

damaged dock. Freeport Sulphur Co. v. S/S HERMOSA, 526 F.2d 300

(5th Cir. 1976). In this case the repairs to the dock were found to

have increased its useful life by ten years. Id. The district court

deducted the value of this improvement from the award based on a

34 depreciation formula. Id. The major issue on appeal was the method

of calculating this deducted value. Id. The case is not directly

applicable, but does hold that any increase in the value of the

plaintiff’s property from its pre-tort level attributable to repairs

should offset the recovery of the cost of the repairs. Id. at 304.

The case also recognizes, however, that the only value of the

repairs to the dock were in the extension of its useful life, and in

discussing how to calculate the value of the extension, the court

cites a Ninth Circuit case where no value was awarded because the

repaired item, a bridge pier, had only the useful life of the thing

it served, the bridge, and any extension of its useful life beyond

that of the whole bridge was without value. See Oregon v. Rug Go-

Getter, 468 F.2d 1270 (9th Cir. 1972).15 The Freeport court agreed,

saying “where the repairs do not extend the useful life of the

property as it existed just before the collision, there should be no

deduction for deprecation.” Id. at 305-06.

Newfield argues that Louisiana puts the burden of proving

depreciation on the defendant, citing Louisiana Power & Light, Co.

v. Smith, 343 So. 2d 367, 372 (La. Ct. App. 1977). The case

involved a light pole damaged in an auto accident and the major

issue was the calculation of damages. Id. at 368. The court holds,

15 Other circuits have also recognized this principle. Petition of M/V Elaine Jones, 480 F.2d 11, 27 (5th Cir. 1973); United States v. Ebinger, 386 F.2d 557 (2nd Cir. 1967). 35 inter alia, that “any effort to effect an offset as a method of

reducing damages is the burden of the party seeking the offset.

Thus if the record clearly supports a plaintiff’s contention that

the cost of a new pole (required to be installed because the pole

has been destroyed), is a particular amount, then it is the

defendant’s burden to show that such amount should be reduced by

applying some depreciation factor.” Id. at 372.

The LP&L case also supports Newfield’s position that where

repairs have “no discernable life expectancy beyond a period for

accounting purposes,” depreciation should not be taken into account

in determining the proper measure of damages. With respect to the

new for old repairs done to the platform, Newfield’s argument that

new materials do not increase the useful life expectancy of the

platform, which without the accident would have “outlived” the

reserves beneath it, is convincing. New repairs to a year and half

old platform that would have outlasted its usefulness appear to have

essentially no economic value.16 This is what Newfield argued, and

in an adversarial system it makes sense to require OSCA to prove

otherwise. In fact at trial OSCA did attempt to argue for

depreciation and, to the extent that the deficit between what

16 The LP&L discussion of accounting or tax depreciation for the light poles sounds very similar to the one Newfield’s treasurer testified that Newfield used for platform equipment. Louisiana Power & Light, Co. v. Smith, 343 So. 2d at 370-71. 36 Newfield asserted as damages and what the jury awarded, OSCA was

likely successful. Under Louisiana law, Newfield’s damage award

must be affirmed.

Abuse of discretion in refusing mention of the Underwriters and prevention of OSCA from confronting Underwriter witnesses about Newfield’s damages claim:

OSCA complains about the trial court’s ruling that Newfield,

Newfield’s joint venturers, and its insurers subrogees,

Underwriters, must be referred to only as “Newfield” during the jury

trial. OSCA argues that this was reversible error. Newfield

counters that OSCA failed to object at trial, an assertion OSCA does

not contest in its reply brief. As no objection was made, the plain

error standard of review applies. Dixon v. International Harvester

Co., 754 F.2d 573 (5th Cir. 1985); Johnson v. Helmerich, 892 F.2d

422, 425 (5th Cir. 1990). Under the plain error standard of review

the appellant must show that there was error, that it was plain or

obvious, and that his substantial rights were affected and that,

uncorrected, the error seriously affects the fairness, integrity, or

public reputation of judicial proceedings. Price v. City of San

Antonio, 431 F.3d 890, 894 (5th Cir. 2005). Given that there is

ample authority for the proposition that a district court judge is

governor of the trial, and a good reason for the order, namely

simplification of an already overpopulated jury trial, there is no

37 plain error.17 See Helmerich, 892 F.2d at 425.

Chevron and Williams: damages foreseeable and recoverable under Louisiana Law- scope of duty:

To prevail on a negligence claim under Louisiana Law a

plaintiff must prove five elements: “(1) the defendant had a duty to

conform his conduct to a specific standard (the duty element); (2)

the defendant failed to conform his conduct to the appropriate

standard (the breach of the duty element); (3) the defendant’s

substandard conduct was a cause-in-fact of the plaintiff’s injuries

(the cause-in-fact element); (4) the defendant’s substandard conduct

was a legal cause of the plaintiff’s injuries (the scope of

liability or scope of protection element); and, (5) actual damages

(the damages element).” Roberts v. Benoit, 605 So. 2d 1032, 1051

(La. 1992)(on reh’g)(citing Fowler v, Roberts, 556 So. 2d 1, 4 (La.

1989).

With respect to Williams’ and Chevron’s claims the first two

elements are tied together with OSCA’s liability for the blowout in

general, and as such have been discussed above or are not at issue

on appeal. The third element, cause-in-fact, appears to be

uncontested with respect to both Williams’ and Chevron’s claims. As

does the fifth element because the amount of damage was either

17 Newfield also points out that as it had over $3,000,000 in unreimbursed damage claims, it was a real party in interest. 38 stipulated to by the parties or entered in a judgment as a matter of

law uncontested on appeal.

It is thus the fourth element, legal cause or scope of

liability, that OSCA contests on appeal. The analysis of legal

cause depends on the facts in each case. See PPG Indus. Inc. v.

Bean Dredging, 447 So. 2d 1058, 1061 (La. 1984). Under Louisiana’s

duty risk analysis, this element is satisfied where “the harm which

befell the plaintiff [was] easily associated with the type of

conduct engaged in by the defendant.” Roberts v. Benoit, 605 So. 2d

at 1054. Foreseeability is one part, but not all, of the legal

cause analysis. Hill v. Lundin & Assoc., Inc., 256 So. 2d 620, 622

(La. 1972)(“Foreseeability is not always a reliable guide, and

certainly is not the only criterion for determining whether there is

a duty risk relationship. Just because a risk may foreseeably arise

by reason of conduct, it is not necessarily within the scope of the

duty owed because of that conduct. Neither are all risks excluded

from the scope of duty because they are unforeseeable. The ease of

association of the injury with the rule relied upon, however, is

always a proper inquiry.”). Several cases also note that, at its

heart, the element describes a policy choice. Roberts v. Benoit, 605

So. 2d at 1052.

Williams:

Williams argues that, assuming underlying negligence liability

39 for the blowout was proved, OSCA stipulated to liability for damages

to Williams’ property. Williams directs the court’s attention to

the transcript of the trial court’s consideration of several Rule 50

motions, including one Williams recorded before the case went to the

jury. The record reads as follows:

THE COURT: Do we really have any disputed issue with respect to causation for either Chevron or Williams? MR. BREAUD [counsel for OSCA]: Your Honor, we do as to Chevron. THE COURT: Because? MR. BREAUD: Not to Williams... 117 R. 26 . Williams asserts that OSCA waived any causation

argument and cannot raise it on appeal. OSCA denies that this

argument was waived. A brief review of the context of the above

quoted dialogue does indicate that OSCA admitted that if it were to

be found liable to Newfield, it would also be liable to Williams and

that on that basis the court removed a jury interrogatory about the

cause of Williams’s damages.

Even if we were to find that the issue was not waived, the

evidence at trial overwhelmingly proves that the blowout was the

legal cause of the damage to Williams’ equipment. Williams’ damaged

equipment was located on the platform at the time of the blowout, as

usual, and was damaged by the fire and well-control efforts. OSCA

argues that it is not liable to Williams because “OSCA could not

have been aware of a risk to Williams’ automated natural gas

metering equipment,” and that the risk to the equipment was not a

40 foreseeable risk associated with the coiled tubing operations.”

Williams responds that the gas gathering system was in plain sight

and visible to anyone. It also argues that the cases cited by OSCA

actually support the verdict in favor of Williams’ and against OSCA.

See Consol. Aluminum Corp. v. CF Bean Corp. 833 F.2d 65 (5th Cir

1987); and PPG Industries v. Bean Dredging, 447 So. 2d 1058 (La.

1984). Both cases will be discussed in greater detail below, but

both involve dredging vessels striking submerged pipelines. In both

cases the owner of the damaged pipeline was awarded damages even

when parties with more remote claims were barred from recovery.

Williams argues that its situation is closer to the owners of the

damaged pipelines than the chemical plants claiming damage for

physical damage due to loss of electric power resulting from the

shut off of the flow of gas or the economic loss incurred in

purchasing replacement gas at a higher price. This argument is

convincing and OSCA does not offer much in the way of counter-

argument. Williams damages were physical and directly caused by the

blowout, fire and well control activities. There appears to be a

strong ease of association; one at least as strong as for damage to

any other equipment on the platform. OSCA’s claim that it lacked

knowledge of the equipment’s presence is undermined by the fact that

the equipment was in plain view and that as a sophisticated actor in

the oil and gas industry OSCA obviously knew that Newfield was

41 producing gas from the wells serviced by the platform and would need

to move the gas off the platform to be sold.18

Chevron:

Chevron was also awarded damages and OSCA’s case for reversal

on appeal is stronger with respect to these damages. Again the main

issue is whether the element of legal cause or scope of liability

has been established. OSCA argues that liability for damages for

lost gas production on a platform twenty miles away from the

Newfield platform was unforeseeable and thus is outside the scope of

its duty. Chevron disputes both the unforseeability of the damages

and OSCA’s characterization of Louisiana law as equating

foreseeability with the legal cause inquiry.

As noted above Louisiana law holds that the legal cause/scope

of liability inquiry depends on the facts of each case. Both

parties, however, cite cases with fact patterns they deem

instructive. OSCA cites Consolidated Aluminum Corp v. C. F. Bean

Corp., 833 F.2d 65 (5th Cir. 1987), decided under federal maritime

law, in which a dredge struck and ruptured a gas pipeline causing

the release of a large amount of natural gas. To stop the flow, the

18 It is basically impossible to store gas on a platform, and natural gas cannot be shipped unless it is liquified, which is something done in specialized facilities and not on site on a platform. Thus, the existence of a pipeline attached to the platform, and equipment to use the pipeline on the platform, was essentially certain. 42 pipeline owner closed the nearest valve, causing an interruption in

service to the Consolidated Aluminum Manufacturing Plant.

Consolidated’s equipment was physically damaged due to the

interruption. Id. Consolidated was the only aluminum manufacturing

plant in the United States designed with only one source of

electricity readily available. Id. Natural gas provided by the

pipeline in question fueled on-site generators which in turn powered

the plant. Id. The plant did not keep a store of fuel oil even

though the generators would also have run on it. Id. When the flow

of natural gas was interrupted by the dredge collision, the

generators stopped producing electricity and the plant equipment was

physically damaged by the shut down. Id. The Fifth Circuit denied

recovery to Consolidated. Id. OSCA argues that Chevron and

Consolidated’s situations are analogous. Chevron responds that

Consolidated was decided under federal maritime, and not Louisiana,

law and that, in addition, the policy behind the two situations is

distinguishable. In Consolidated, the plant was unique in its

industry in its reliance on one source of power. Chevron’s platform

in the Gulf is not at all out of the ordinary in its dependence on

one pipeline, routed though another platform, to gets its natural

gas to shore. On the other hand, there is an obvious similarity

where a damaged pipeline leads to physical damage for a pipeline

customer, and in Consolidated there was no recovery.

43 OSCA also cites a Louisiana Supreme Court case involving a

pipeline damaged by a dredge. PPG Indus. V. Bean Dredging, 447 So.

2d 1058 (La. 1984). This case, however, involves a customer of the

pipeline company suing the dredging company, not for physical damage

to its equipment, but for the economic cost of purchasing

replacement fuel at a higher price. The Louisiana Supreme Court

applied a duty-risk analysis and denied recovery for the economic

loss. OSCA characterizes this as a holding against the award of

damages to a downline customer caused by a damaged pipeline.

Chevron argues that the case merely makes a distinction between

economic and physical damages, holding that the economic damages of

a physically damaged party’s customers are not within the scope of

a tortfeasor’s duty. Chevron points out that this case is then

distinguishable because it, Chevron, suffered physical damage when

its gas was flared.19

In support of its trial court victory, Chevron cites another

Louisiana Supreme Court case, Cleco Corp. v. Johnson, 795 So. 2d

302 (La. 2001). Chevron argues that this case continues and

clarifies a distinction between unrecoverable “indirect economic

19 Although decided under federal maritime law, the Fifth Circuit has held that the flaring of natural gas to avoid damage to an oil company’s wells qualifies as physical damage. See Corpus Christi Oil & Gas Co. v. Zapata Gulf Marine Corp., 71 F.3d 198, 201-02 (5th Cir. 1995); Pennzoil Prod’g Co. v. Offshore Express Corp., 943 F.2d 1465, 1473 (5th Cir. 1991). 44 damages” and recoverable “direct physical damages.” In Cleco, a

truck struck a utility pole owned by Cleco, an electric utility

company. The collision caused a voltage surge on the electrical

lines supported by the pole. The voltage surge damaged electrical

equipment and appliances owned by Cleco’s customers. Cleco settled

its customers claims and sued in subrogation. The Louisiana Supreme

Court found that there was an ease of association between the truck

driver’s actions and the damages to the customer’s property.

Chevron argues that the Cleco holding supports a finding that

Chevron’s damages were foreseeable. In its view, poor driving

leading to a car accident, leading to liability for damaged

household appliances, is not more foreseeable than negligent

operations on an offshore oil rig leading to a fire, leading to

liability for damaged petroleum products. Also, Cleco cites with

approval Istre v. Fidelity Fire & Casualty Inc. Co., 628 So. 2d 1229

(La. Ct. App. 1993), a case in which a backhoe operator who

negligently damaged a buried power cable was held liable for

personal injuries sustained in an automobile accident at an

intersection four miles and an hour away. The backhoe’s injury to

the powerline cut power to a stoplight at the intersection.

Chevron’s argument is that if liability in Cleco and Istre was

foreseeable and/or easily associated, surely a sophisticated oil

industry services provider could foresee that negligent operations

45 could cause a blowout of petroleum products, and that where this

occured in the Gulf, a network of pipelines would quite likely be

involved. We agree. The factual situations in the Louisiana cases

Cleco and Istre are more closely analogous to the situation at hand

than that in PPG Industries. We affirm the jury verdict as to

OSCA’s liability to Chevron.

Discussion- Insurance Coverage Issues:

AISLIC

The D(4) Exclusion:

The district court interpreted Exclusion D(4) to bar coverage

for platform repair expenses, relief well costs, well re-drill

costs, and lost hydrocarbons. Exclusion D(4) excludes coverage for

property damage to “that particular part of real property or

fixtures on which any Insured or any contractors or subcontractors

working directly or indirectly on behalf of any Insured are

performing operations, if such Property Damage arises out of such

operations.” OSCA emphasizes the words “particular part” and argues

that this exclusion can apply only to the specific part of the

property or fixture on which OSCA was working. OSCA submits that

this particular part was the casing at the top of the well and that

portion of the production deck of the platform immediately

surrounding the casing. Under this interpretation of the provision

AISLIC’s policy would still cover most of the platform and re-drill 46 damages as well as the relief well and lost hydrocarbons. AISLIC

argues that the exclusion is broader and that the property on which

OSCA was working includes the entire well and platform. AISLIC

argues that the well and platform are connected and constitute one

piece of property, that OSCA was working on the well from the

platform, and that OSCA was hired to lower a tool string thousands

of feet into the well.

OSCA centers its argument on this point around a Missouri

Supreme Court case involving a fire in a newly constructed home

started by a painting contractor. Columbia Mutual Ins. Co. v.

Schauf, 967 S.W.2d 74 (Mo. 1998). The painting contractor, who was

hired to paint all of the home’s interior and exterior surfaces, had

finished spraying laquer on the kitchen cabinets and was cleaning

his spray equipment in the kitchen when his pump generator started

a fire. Id. at 76. The fire caused extensive damage throughout the

house. Id. When the fire started some of the contractor’s employees

were painting in a bedroom. Id. The contractor held a business

owner’s liability policy that contained an exclusion essentially

identical to D(4). Id. In applying the exclusion, the Schauf court

found that only damages to the kitchen cabinets themselves were

excluded. Id. at 81. The insurer had argued that damage to the

entire house was to be excluded because the contractor was scheduled

to work on all of the property. Id. at 80. The Schauf court opined

47 that “[b]y using the words particular part, the provision evidences

the intent to narrow the scope of the exclusion as much as possible.

In other words, the subject of the insured’s work is defined with

great specificity.” Id. at 80 (emphasis in original). The court

noted that both the contractor and the insurance company’s

interpretations of the phrase “particular part of real property” and

that the existence of two reasonable interpretations made the

exclusion ambiguous. As the Schauf court recognized, insurance law

dictates that where an exclusion is ambiguous the narrowest

reasonable construction must be applied. Id. at 80-81. In Schauf

that narrow and reasonable interpretation was that the exclusion

applied to the “‘property on which [the insured] is performing

operations,’ not to the area in which the insured is performing

operations.” Id. at 81. OSCA argues that when applied to the facts

of the instant case the exclusion applies only to 915 feet of casing

and a portion of the top platform deck, and not the entire well and

entire platform.

AISLIC argues that Schauf is an outlier, not followed by other

courts and in particular is not a statement of Louisiana law. The

parties have agreed that Louisiana law is applicable. AISLIC also

points out an internal inconsistency. The contractor in Schauf

initially argued that the exclusion did not apply because he was

cleaning his equipment when the fire started, and as such he was not

48 performing operations on real property. The court disagreed,

finding that the cleaning of the equipment was performing operations

because it was performing part of the contract to paint the house

and if the equipment was not cleaned it could not later be used to

complete the painting. This is odd because the court found that

damage to the area where the contractor was cleaning was covered

under the policy, only the damage to the kitchen cabinets was

excluded.

For its part, AISLIC cites Louisiana jurisprudence. AISLIC

relies primarily on a case from Louisiana’s Second Circuit involving

damage to an oil well. Goldsberry Operating Co., Inc. v. Cassity,

Inc., 367 So. 2d 133 (La. Ct. App. 1979). In Goldsberry the

defendant was hired to perforate ten feet of the well with an

explosive gun at a depth of about 8,000 feet. Id. at 134. The gun

exploded prematurely, at roughly 6,900 feet, causing significant

damage to the well. Id. The defendant’s insurance policy had an

exclusion essentially identical to the one at issue. Id. After

restating the general rule that exclusions are to be construed

narrowly the court found that the operations conducted by the

defendant were not merely on the ten feet of well it intended to

perforate, but instead on the entire length of well that the gun,

and the electricity used to detonate it, would have traversed had it

reached the intended depth. Id. at 134-35. This fact pattern is

49 remarkably similar to the one at issue, and if parallels are drawn,

damage to the entire depth of the well intended to be accessed by

the coiled tubing and to the parts of the platform actually used by

OSCA would be excluded.

The court in Goldsberry, and AISLIC, cite as persuasive a case

decided by the Supreme Court of Tennessee in which a contractor was

hired to install two circuit breakers in an existing electrical

switchboard. Vinsant Elec. Contractors v. Aetna Casualty & Surety

Co., 530 S.W.2d 76 (Tenn. 1975). While installing the circuit

breakers the contractor dropped a wrench and shorted the entire

board, which caught fire. Id. at 76. Again the relevant insurance

policy contained a similar exclusion. Id. The court in Vinsant made

clear that the switchboard was made up of many parts constituting a

unit of property within itself. Id. at 77. The court held that the

exclusion applied to the whole switchboard, not the small area where

the circuit breakers were to be installed and commented that to hold

otherwise could lead to absurd results. Id. This exclusion presents

a close call. It appears that both interpretations of the

exclusion’s language may be reasonable. Louisiana law clearly

dictates that where two reasonable interpretations of an exclusion

exist the court should choose the one which favors coverage. McAvey

v. Lee, 260 F.3d 359, 365 (5th Cir. 2001); See Cochran v. B.J.

Services Co. USA, 302 F.3d 499, 503 (5th Cir. 2002). We, therefore,

50 hold that the D(4) exclusion in the AISLIC policy excludes coverage

only to the parts of the platform on which OSCA was actually

working. We therefore reverse the district court’s finding that

there was no coverage under the D(4) exclusion.

The E(2) Exclusion:

Although not discussed by the court below, AISLIC raised in its

brief below and raises again here, a second exclusion that it claims

applies to preclude recovery. AISLIC notes that this Court can

affirm the district court on alternate grounds.20 Commonly referred

to as a “work product exclusion” the section reads:

E. EFFICACY, LOSS OF USE, ETC. Liability of the insured:

(1) arising out of the failure of any Insured’s Products or of work, including architectural or engineering services, by or on behalf of any Insured to meet any warranty or representation by any Insured as to the level of performance, quality, fitness or durability or extent that such liability is for the diminished value or utility of Insured’s Products or work by or on behalf of any Insured; (2) without limiting paragraph (1) of the Exclusion E. in respect of Property Damage to

20 See Chriceol v. Phillips, 169 F.3d 313, 315 (5th Cir. 1999)(stating that the Court is not bound by the reasons articulated by the district court for granting summary judgment); Missouri Pacific R.R. Co. v. Harbison-Fischer Mfg. Co., 26 F.3d 531, 538 (5th Cir. 1994)(affirming the district court on grounds raised, but not addressed, below); Harbor Ins. Co. v. Urban Constr. Co., 990 F.2d 195, 199 (5th Cir. 1993)(holding that grant of summary judgment may be affirmed on a legal basis not ruled upon below). 51 any Insured’s Products or of work, including, without limitation, architectural or engineering services, performed by or on behalf of any Insured, if such Property Damage arises out of any portion of such ... work, or out of materials, parts or equipment furnished in connection therewith.

AISLIC argues that portions of the damages the jury awarded

fall within this exclusion, including damages to OSCA’s own work and

products, as well as consequential damages resulting from its faulty

work that are not damages to property of third parties.21

Specifically, AISLIC argues that the exclusion applies to preclude

coverage for OSCA’s failure to perform its contractual obligations

in a good and workmanlike manner and to consequential damages of the

blowout, which it alleges include the control of well and pollution

control ($4,771,599.51), relief well expenses ($2,390,783.14), and

expenses for restoration and re-drilling of the well

($1,919,520.00).

In support of its contention that the exclusion applies to

consequential damages like those listed above, AISLIC cites several

Louisiana cases involving building contractors. In the first a

contractor was sued for defects in a soybean-storage facility. Old

River Terminal Co-Op v. Davco Corp., 431 So. 2d 1068 (La. Ct. App.

21 It seems that OSCA admits that the exclusion applies to damages to its own property, and AISLIC admits that the exclusion does not apply to damages to Newfield’s platform as that is property of a third party. 52 1983). The court held that an exclusion nearly identical to E(2)

barred coverage for damage to the cracked silos and for

consequential damages like fees for consulting engineers and

transportation expenses for relocating the soybeans. Id. at 1071.

In the second case the owners of an office building sought

indemnity from the insurer of a contractor hired to install a window

wall system, which among other things leaked. Rivnor Props. v.

Herbert O’Donnell, Inc., 633 So. 2d 735 (La. Ct. App. 1994). Again

the insurance policy contained language similar to the E(2)

exclusion. Id. at 751. The court characterized the claim against the

contractor as one “based solely on the contractor’s defective

workmanship, i.e., improper installation of the window wall system.”

Id. The court went on to say, “Louisiana Courts have found no

coverage where the liability of a contractor is based solely on

improper construction or defective workmanship. This is based on

the well-settled principle that liability policies are not intended

to serve as performance bonds.” Id. (citations omitted). The court

found that the policy excluded coverage for repairing or replacing

the window wall system and further held that the policy also

excluded coverage for economic losses, like fees for architects,

attorneys and experts and loss of rental income, caused by the

insured’s defective work. Id. at 752.

AISLIC also cites several other cases involving similar

53 outcomes. In Hallar Enterprises, Inc. v. Hartman, the court held

that an insurer did not have a duty to defend its insured in a suit

for damages, including loss of use, resulting from the failure of a

road constructed by the insured. 583 So. 2d 883, 890 (La. Ct. App.

1991). In Allen v. Lawton & Moore Builders, Inc., the court denied

coverage for damages, including loss of appreciation, engineering

fees, loss of enjoyment, and fees for attorneys and experts, alleged

to have resulted from the insured’s faulty construction of a house.

535 So. 2d 779 (La. Ct. App. 1988).

OSCA effectively distinguishes these cases by pointing out that

in all of them the physical damages excluded were to the work

product of the insured and the consequential damages arose from the

physical damages to the work product. Stated again, the insured

were all contractors hired to construct something essentially from

scratch and the thing they constructed (silo, wall, road, house) was

the thing physically damaged. Further the consequential damages

also excluded by the courts were the direct result of the failed

constructions and not the result of damage to some other damaged

property. OSCA argues that in this case it was hired to set a

bridge plug inside an already constructed well and that its faulty

workmanship damaged not only the setting of the bridge plug, its

work product, but the property of its employer, the already

constructed well and platform. It argues that the consequential

54 damages AISLIC lists were the result of damage to the well and

platform, not damage to the bridge plug.

In support of its position OSCA cites a case involving an

insured hired to install exterior lighting and outlets for garages

on Barksdale Air Force Base. Hendrix Elec. Co., Inc. v. Cas.

Reciprocal Exch., 297 So. 2d 470 (La. Ct. App. 1974). The job

involved running an underground electrical cable to an existing

power distribution panel and installing a new circuit breaker in the

panel. Id. at 472. An employee accidentally dropped a metal strip

and thereby caused a short which started a fire and destroyed the

entire panel. Id. The court held that the “damage was not to any

‘work performed on or on behalf of the named insured.’ The damage

was to existing property of the Government, that is the panel and

attached circuit breakers.” Id. Thus, the court found that the

exclusion clearly did not apply. Id.

OSCA also cites Gardner v. Lackvold, a case involving the

stripping of paint from the exterior of a home. 521 So. 2d 818 (La.

Ct. App. 1988). The insured was hired to remove paint from the house

in preparation for a new paint job, but neglected to properly clean

or neutralize the caustic chemicals used to strip the paint from the

house. Id. at 819. When a second contractor applied the new paint

job, the remaining chemicals ate through it, ruining the finish. Id.

Again the relevant insurance policy contained similar language to

55 that at issue. Here the plaintiffs conceded that the insurance

would not cover the cost of completing the paint removal the insured

was hired to effect. Id. at 819-20. The plaintiffs did, however,

seek coverage for the destruction of the new paint job, including

the cost of stripping the new paint and the cost of painting the

house a second time. Id. at 820. The court found for the plaintiffs,

agreeing that the exclusion was for damages to “work performed by

the named insured” and that here the damage was to other property of

the plaintiffs, i.e., the new paint job. Id. The court noted that

cases cited by the insurance company, and by AISLIC as discussed

above, were distinguishable because they concerned “damages to the

actual item constructed or worked on by the contractor rather than

damages to other property belonging to the plaintiffs.” Id.

These cases also appear to coexist peacefully with this

Circuit’s precedent, based on Louisiana insurance law, in Todd

Shipyards Corp. v. Turbine Service, Inc., a case involving the

repair of a turbine engine. 674 F.2d 401 (5th Cir. 1982). The court

answered the question “what is the work product?” where the options

were the entire turbine engine or just the specific components being

worked on and decided that only the specific components being worked

on were the work product. Id. at 421. The court held that the

exclusion “carves out of the policy damage to the particular work

performed by the insured, but not the overall damage that the

56 incorporation of the defective work product causes to the entire

entity.” Id. In addition the Todd Shipyards court recognized that

while consequential damages arising from damage to work product

itself may be excluded, those arising from damage to other property,

in this case loss of use of the ship powered by the turbine engine,

were not disallowed by the exclusion. Id. at 423. AISLIC asserts

that Todd Shipyards has been supplanted by subsequent Louisiana

jurisprudence. We disagree. The cases AISLIC cites, Allen, Haller

Enterprises, Rivnor Properties, and Old River Terminal Co-op are

discussed and distinguished above. See also Gaylord Chemical Corp.,

753 So. 2d 349, 355-56 (La. Ct. App. 2000); Lauren Plaza Assocs.,

Inc. v. Gordon H. Kolb Development, Inc., 1993 WL 165697 (E.D.

La.)(unpublished). We find that the exclusion does not apply to the

consequential damages awarded and decline to use this alternate

rationale to affirm the district court.

American Home

Absolute Exclusion II(b):

The American Home bumbershoot policy was obtained to provide

nine million dollars in excess coverage over OSCA’s primary general

maritime policy from a now insolvent insurer. The district court

held that the American Home policy did not cover OSCA for damages

arising from the blowout. The district court applied Absolute

Exclusion II(b) which excludes liability arising from:

57 ownership, use, or operation of drilling rigs, drilling barges, drilling tenders, platforms, flow lines, gathering stations, and or pipelines, but this exclusion shall not apply to craft serving the foregoing such a crew, supply, or utility boats, tenders or tugs.

The district court found that OSCA’s liability arose from its use or

operation of Newfield’s platform.

American Home centers its legal argument on a case from

Louisiana’s Fourth Circuit interpreting an identical exclusion.

Janex Oil Co. Inc. v. Hanover Compressor Co., 694 So. 2d 415 (La.

Ct. App. 1997). The court found that the exclusion operated to deny

coverage for a negligence claim against St. Bernard Well Service

Inc., a company hired to operate a platform located in Lake

Catherine, Louisiana. Id. at 416. The court held that the language

of the exclusion, “arising...from...operation of... drilling

rigs...” was unambiguously broader than “operator” which it noted

“arguably refers to one individual or entity in overall charge of

operations.” Id. The court noted that the insurance company’s

argument that the purpose of the exclusion was to limit coverage to

vessels while excluding drilling platforms made sense in view of

circuit precedent. Id. OSCA’s attempt to distinguish this case is a

little difficult to follow, but it appears that OSCA is arguing that

while St. Bernard was hired to operate the entire platform and then

accused of doing so negligently, OSCA was only on a platform

58 incident to working on the well and so the Janex analysis is

inapplicable and the correct question is not whether the liability

arose from operation of the platform, but from use of the platform,

something not addressed in Janex.

OSCA argues that under Louisiana law the use of the excluded

object must not only be an essential fact of the accident to trigger

the application of an “arising from the use” exclusion, but it must

also be an essential element of the plaintiff’s theory of liability.

In support of this theory OSCA cites a case involving automobile

insurance and a kind of drive by shooting. Edwards v. Horstman, 687

So. 2d 1007 (La. 1997). In Edwards a passenger in one car was shot

by a passenger in another car. Id. The injured girl sued, among

others, the driver of the car in which she was riding and the issuer

of his homeowner’s insurance. Id. at 1010. The insurer argued that

coverage was excluded under an “arising out of the use” of a motor

vehicle exclusion. The court declared that the provision was

“designed to exclude coverage for liability resulting from conduct

of an insured that constitutes both a legal cause of injury and a

“use” of the vehicle.” Id. at 1011; See also Carter v. City Parish

Gov’t of East Baton Rouge, 423 So. 2d 1080 (La. 1982)(establishing

two-part ‘legal cause’ and ‘use’ test and holding that negligent

operation of a vehicle by driving into flood waters was both the

legal cause of the drowning death of a passenger and use of an

59 automobile). The court further determined that “in order for

conduct to constitute “use” of an automobile, that conduct must be

essential to the defendant’s liability and the specific duty

breached by the insured must flow from the use of the automobile.”

Id. at 1012. In Edwards the court held that the insured’s duty did

flow from the use of the automobile, having used it to put his

passenger in danger instead of avoiding the known gunman in the

vehicle ahead. In another case in which a person was shot while in

a motor vehicle, this time by an unknown uninsured motorist, the

court found that the injury did not arise from the use of a motor

vehicle. Kessler v. Amica Mutual Ins. Co., 573 So. 2d 476 (La.

1991). In Kessler, a Tulane law student was driving through an

intersection in Uptown New Orleans when an unidentified driver ran

a stop sign. Id. at 477. The student swerved to avoid the car and

sounded his horn. Id. The driver of the other car, probably in

response to the horn, fired a shot though the back window of the

student’s car and into the back of the student’s head. Id. The

court applied the same analysis used in Kessler, but reached a

different result, as the conduct of the insured which caused the

damage in Edwards was reckless driving, where in Kessler the conduct

relevant for UM coverage was the shooting “while using” a car. The

court drew a distinction between “use” and “while using,” found that

the car was incidental to the breach of the driver’s duty not to

60 shoot at people, and denied coverage.

OSCA likens its conduct to that of the unidentified shooter,

arguing that its use of the platform while working on the oil well

was incidental. It argues that had the well been on land it would

have had no use for the platform and its negligence could just as

easily have caused a blowout. In OSCA’s view the platform was simply

a location. American Home disagrees, arguing that the well and

platform are connected, the sole purpose of the platform being to

service and operate the attached wells. Under this theory, the

workover operations engaged in by OSCA are within the meaning of the

words “use or operation” of a platform. American Home makes the

point that while a gun in a car may be there by happenstance, a

platform attached to a well in the middle of the ocean is not. We

agree with American Home, a platform is not a location on which an

oil well happens to be, it is there for use in connection with the

oil well. We affirm the district court’s finding that American Home

is not liable pursuant to this exclusion. As we find that this

absolute exclusion applies and bars recovery, we need not reach the

issue of the BUMB-3 pollution endorsement.

Conclusion:

In sum, we affirm the district court judgment as to the

liability issues. We reverse in part the district court’s finding

on the insurance issues. Specifically, we find that the D(4)

61 exclusion to the AISLIC policy is not as broad as it was held to be

by the district court. We find that it excludes coverage only for

damage to the specific part of the platform and well on which OSCA

was working. We remand to the district court for application of

this narrower interpretation of the exclusion to the specific

coverage afforded by the AISLIC policy. We affirm the district

court’s judgment as to all of the other insurance issues, with the

exception that we did not find it necessary to reach the pollution

endorsement issue. AFFIRMED IN PART, REVERSED IN PART, REMANDED IN

PART.