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Appeals court says third-party companies are liable for compensation in offshore Shell drilling unit collision

Appeals court says third-party companies are liable for compensation in offshore Shell drilling unit collision

by Todd Barnett | Jul. 15, 2017, 8:00am

NEW ORLEANS — A federal appeals court recently ruled that two third-party companies involved in conducting an archaeological sonar survey near an offshore drilling unit in the Gulf of Mexico are not responsible for compensating the two companies found liable for the accident.

On June 21, the U.S. Court of Appeals for the Fifth Circuit affirmed a district court’s ruling that Integrity Fishers Inc. and Sea Eagle Fisheries Inc. are not responsible for compensating Tesla Offshore LLC and International Marine LLC, the parties found at fault in a collision that damaged a submerged mooring line attached to Shell Offshore’s Nautilus offshore drilling unit.

Although Integrity and Sea Eagle operated the Lady Joanna, a vessel involved in the sonar survey in which the collision occurred, the court agreed with the district court, finding that “Shell’s claims for damages based on the [Nautilus] incident did not arise out of, and are not related to, the operation of the [Lady Joanna].” The court also vacated the district court’s dismissal of insurance claims by Tesla and International and remanded the case back to the district court to review the insurance policies involved.

During its sonar survey, Tesla contracted with International Marine to provide a tow vessel named International Thunder, which towed a “towfish,” a submerged sonar scanning instrument, along a grid pattern.

Tesla contracted with Integrity to provide a smaller vessel following the towfish, called a “chase vessel.” After the first vessel provided by Integrity suffered mechanical errors, Integrity brought in the Lady Joanna, which was owned and operated by Sea Eagle, to serve as the chase vessel.

The Thunder and the Joanna temporarily left the grid to perform repairs on the towfish. After the vessels re-entered the grid, despite warnings from the captain of the Joanna that the Thunder was getting too close to the Nautilus drilling unit, the tow cable connecting the Thunder to the towfish collided with one of the Nautilus’s submerged moorings, causing extensive damage, according to the court filing.

During a negligence suit brought by Shell, Tesla and International were found 75 percent and 25 percent at fault, respectively, for the accident. Tesla and International responded by launching a suit against Integrity and Sea Eagle, claiming indemnity entitlement and insurance coverage under Integrity’s and Sea Eagle’s insurance policies.

Although the master service agreements signed between Tesla, Integrity and Sea Eagle contained a section stating that the latter two companies would be responsible for third-party damages “arising out of or related in any way to the operation of the vessel owned… by [Integrity or Sea Eagle],” the district court found that the operation of the Joanna was in no way related to the accident.

The district court then dismissed Tesla’s and International’s indemnity and insurance claims, which led to the current appeal.

The appeals court affirmed the district court’s dismissal of indemnity claims but vacated its dismissal of insurance claims.

“Summary judgment cannot be granted on the insurance claims without first reviewing the insurance policies and determining their scope,” the appeals court said in its decision.

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