A Texas Unbrella Policy

Most businesses in Grand Prairie, Arlington, Fort Worth, Dallas, or Weatherford, are going to have insurance policies to cover losses. In addition to the regular liability policy they will also have an “umbrella” policy. An umbrella policy is an insurance policy that covers amounts above those covered under one or more other primary policies, and which does not pay until the losses exceed a certain sum. It is sometimes also called an excess insurance policy.
The United States Court of Appeals for the Fifth Circuit, ruled on a case on March 25, 2010, that dealt with an umbrella policy. The style of the case is, Delta Seaboard Well Serv’s Inc. v. American Int’l Specialty Lines Ins. Co.
Delta Seaboard Well Serv’s, Inc. (Delta) is an oil and gas well serving company that plugs non-productive wells for operating companies. In 2003, Delta contracted with Fort Apache Energy, Inc. to plug a well. Sometime after plugging the well Fort Apache discovered that the gas pressure at the wellhead had not “bled off”, a fact finding that would have required Delta to cease its plugging operation. Fort Apache sued Delta for negligently plugging the hole when there was still recoverable reserves in the hole.
During this time, Delta was insured by Gemini Insurance Company (Gemini). After this time, Delta had purchased an umbrella policy from American Int’l Specialty Lines Ins. Co. (American). Delta informed Gemini of the lawsuit and Gemini denied coverage. In the lawsuit against Delta, Delta was found liable for more than $2 million in damages to Fort Apache.
Delta then brought suit against American for a portion of the claim that Delta claimed was due under the umbrella policy. The facts of this case are not complicated but are extensive. The importance of the case is the reading of the Gemini policy and the reading of the American policy together to see whether or not the American policy becomes liable for any portion of the claim. The court ultimately ruled that there was no coverage under the umbrella policy.
This case demonstrates again how courts read the policies to see if there is coverage. For the company purchasing insurance it is important that they understand what it is they are buying and that they make clear to the agent they buy the insurance from, that they get the coverage they want.