Fifth Circuit Finds No Difference Between Drillships and Drill Rigs

Fifth Circuit Finds No Difference Between Drillships and Drill Rigs

By: Penny Kissinger

Richard v. Dolphin Drilling Ltd., No. 16-30003, 2016 LEXIS 13961 (5th Cir. Aug. 1, 2016).Offshore Energy Services (“Offshore”) filed a claim with its two insurers when its employee sued due to an injury that occurred on a drillship owned by Offshore. The excess insurer, Valiant Insurance Company (“Valiant”), refused to pay the claim based on an exclusion in the policy for any “loss, damage, injury or expense” incurred, that involved a drilling rig.The United States District Court for the Western District of Louisiana found that the drillship was included under the exclusion clause and granted summary judgment to Valiant. Offshore appealed claiming three assignments of error.First, Offshore argued that the district court failed to distinguish a drillship from a drill rig. The Fifth Circuit noted that Offshore failed to offer any significant evidence or compelling argument that would distinguish the two. Lacking any evidence to the contrary, the court stated that the plain meaning of a word should be used without resorting to any other interpretation. When applied to the wording of Valiant’s exclusionary clause, the court determined that the term “drilling rig” also includes a drillship. In addition, the court cited Cash v. Liberty Ins. Underwriters, Inc., 624 F. Appx 854, 858-59 (5th Cir. 2015), finding that the parties’ intent should be used in determining the coverage.Although Cash was not binding on the court, it found the argument compelling and determined the parties’ intent in the present contract was to exclude any liability resulting from the use of anything associated with a drilling rig.Next, Offshore argued that the insurance policy would be useless under the district court’s summary judgment and would lead to absurd results, because it would not provide any real coverage. The Fifth Circuit found this argument to be meritless because Offshore claimed that ninety-nine percent of its business involved servicing the oil industry and failed to claim that a majority of their business involved “the ownership, use or operation of drilling rigs.” Because Offshore failed to show how much of their work revolved around the areas found in the exclusion, there was no way to determine that absurd results would occur.Lastly, Offshore argued that Valiant waived its right to defense by waiting three years to assert its use of the exclusion clause. However, Valiant became a party to the lawsuit in 2014. They were not included in the original suit filed in 2011, and thus the court found their defense to be timely.Having found no merit in any of Offshore’s arguments, the Fifth Circuit Court of Appeals affirmed the district court’s summary judgment.