P&I insurer waives goodbye to Subrogation Claims

Offshore Rig

Kristin Poling, Claims Executive, looks at the Eastern District of Louisiana’s decision concerning an insurer’s right to recoup maintenance and cure payments.

In June of this year, the Eastern District of Louisiana handed down a decision concerning an insurer’s right to recoup maintenance and cure payments against a negligent party. More importantly, the opinion also addresses common waiver of subrogation language contained in charterparty agreements and insurance contracts. See Jones v. Select Oilfield Services, LLC, 2022 U.S. Dist. LEXIS 108114 (E.D. La. June 17, 2022).

Select Oilfield Services entered into a time charter agreement with Cox Operating LLC in connection with Cox’s oil and gas exploration business. Pursuant to the terms of the agreement, Select provided Cox with a liftboat named L/B SELECT 102. Select further provided a captain and crew to operate the vessel and assist with Cox’s operations in the Eloi Bay Field.

Several years into the arrangement, the liftboat captain was injured while the vessel was servicing Cox’s oil and gas platform. The captain was a Jones Act seaman and sought maintenance and cure payments from Select, which was paid out via Select’s Protection and Indemnity insurer, Certain Underwriters at Lloyd’s. Thereafter, the captain initiated a Jones Act negligence suit against Select and Cox in the Eastern District of Louisiana.

Select’s P&I insurer intervened in the lawsuit, seeking to recover its maintenance and cure payments from Cox on the basis of Cox’s alleged negligence.

As a general rule, an innocent employer is entitled to indemnification from a negligent third party for maintenance and cure payments made as a result of the third party’s negligence. Cox moved for summary judgment on the claim, however, arguing that the insurer had waived its right to subrogation in accordance with the charterparty and P&I policy terms.

Under the terms of the charterparty, Select is required to name Cox as an additional insured and provide a waiver of subrogation in favour of Cox. This requirement dovetails with Select’s P&I policy, which gives Select the right to name those for whom work is performed as additional insureds and to waive subrogation claims against them. These insurance provisions apply so long as the vessel is actually engaged or involved in the parties’ intended operations at the time of the loss.

In its opposition, Lloyd’s argued that the captain was injured on Cox’s platform, not aboard the liftboat, and therefore the incident was excepted from the insurance waiver of subrogation clause.

Ultimately, the court determined that all work carried out on the oil and gas platform – and in the Eloi Bay Field generally – fell within the scope of the subrogation waiver provision. Thus, Lloyd’s could not recover its maintenance and cure payments from Cox, regardless of whether Cox’s negligence caused the captain’s injury.

Lloyd’s has filed an appeal, which remains pending as of this writing.

Kristin E. Poling

Claims Executive