A federal appeals court on Friday upheld a lower court ruling in favor of a unit of Great American Insurance Group in a case in which a policyholder alleged it had been misled about whether it had coverage for a natural gas well blowout.
Castroville, Texas-based Finger Oil & Gas Inc. was insured under a policy issued by major U.S. unit Mid-Continent Casualty Co., according to Friday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Finger Oil & Gas Inc. vs. Mid-Continent Casualty Co.
In July 2019, the company was drilling at its own natural gas well when a valve broke and the well blew out. As an answer, the asked their commercial lines account manager at Marsh USA Inc. to ask if it was covered for the blowout.
The agent contacted a Mid-Continent insurer about the matter, who confirmed that the insured had blowout and crater coverage, and this information was forwarded to Finger Oil.
Later, Mid-Continent advised Finger Oil that it would review the policy regarding coverage. Relying on the Marsh agent̵7;s email as confirmation that it was covered for the incident, the company hired several contractors to work on the well and incurred bills totaling $641,590.
However, Mid-Continent later denied Finger Oil’s claim, based on an ownership exclusion in its policy and an “oil and gas endorsement.”
Finger Oil sued Mid-Continent and Marsh, alleging misrepresentation, breach of contract and failure to timely investigate a claim.
The U.S. District Court in San Antonio ruled in favor of the insurer and Marsh. The oil company appealed the verdict. Marsh was not a party to the appeal.
A three-judge panel of the Court of Appeal ruled in favor of the insurer. “We agree with the judge’s conclusion that Mid-Continent’s statement does not constitute an actionable misrepresentation under the circumstances presented here,” it said.
“Finger Oil’s agent asked Mid-Continent if it had blowout and crater coverage, to which Mid-Continent correctly responded that it did.
“Mid-Continent’s statement was more like a general statement that the policy included such coverage, rather than a misrepresentation of specific policy terms,” the panel said, affirming the lower court ruling.
Attorneys in the case did not respond to requests for comment.