A Tarrant County judge on Tuesday ordered Great American Insurance Company of New York to pay Fort Worth-based Compass Well Services $5.3 million for breach of an oil and gas property insurance policy for claims Compass submitted tied to a 2013 well-site property damage incident in the Eagle Ford Shale.
The ruling, entered by Fort Worth District Judge Don Cosby, follows a March 5 jury verdict that found GAIC failed to conduct a reasonable investigation of the claim, affirm or deny coverage within a reasonable time, and promptly pay the claim in accordance with the Texas Insurance Code.
“We are gratified by the jury’s verdict,” Baker Botts partner Louie Layrisson, the lead lawyer for Compass, told The Texas Lawbook in a statement. “After years of delay by GAIC, this judgment validates our client’s policy rights.”
Attempts to reach GAIC’s lead counsel, David Andis of Spring, Texas firm Gauntt Koen Binney & Kidd, for comment have been unsuccessful.
The legal dispute dates back to May 2013, when Compass was working as one of several contractors that provided services to an oil and gas operator, Cinco Resources in Atascosa County, a region of the Eagle Ford Shale located south of San Antonio. According to court documents, an employee for one of the other contractors mistakenly shut the wellhead valve while Compass was actively fracking the well.
The closure led an iron connection on the wellhead to separate, which caused a 72-hour emergency shutdown. Three companies onsite replaced and discarded hydraulic fracturing equipment due to pressures exceeding equipment design.
Compass made a $1.5 million insurance claim with GAIC five months after the incident to recover its costs from the equipment damage. GAIC denied the claim, arguing there was insufficient evidence of over-pressure or damaged equipment. Later, GAIC declined to alter its coverage decision in light of new information confirming property damage, Compass’ lawyers said.
In a court filing, GAIC argued Compass’ delay in reporting the loss and its destruction/disposal of the equipment at issue “prejudiced GAIC’s investigation of [Compass’] claims.”
“Further, such destruction and/or disposal prevented GAIC from determining whether the property at issue suffered physical loss which is a prequisite to plaintiff’s recovery under the policy,” the filing says.
After a six-day trial this spring, the jury ruled 10-2 in favor of Compass.
Of the $5.3 million Judge Cosby awarded Compass on Tuesday, $2.3 million accounted for compensatory damages and statutory penalty interest, $2 million accounted for treble damages under the Texas Insurance Code and nearly $1 million accounted for attorneys’ fees incurred to date in the dispute.