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ENERGY & POWER NEWSLETTER

Legal Review Q1 2021

An overview of recent insurance related court rulings of interest to energy and power organizations.

04/28/2021 · 4 minute read

United Kingdom

The UK Supreme Court has found substantially in favor of the Financial Conduct Authority (FCA) in the appeal of the business interruption test case, and dismissed appeals made by insurers.

The judgement (January 2021) included the following key points:

  • Notifiable disease: cover will be available under all of the notifiable disease extensions considered by the Supreme Court for losses caused by the wider COVID-19 pandemic. This outcome extends to the QBE wordings under consideration which had been given a narrower application by the High Court.
  • Non-damage denial of access: these extensions were construed more widely than they had been by the High Court, in particular:
  • The public authority action necessary to trigger the cover need not necessarily have the force of law (such as government guidance or announcements); and
  • The prevention of access to or inability to use premises need not be absolute, meaning that closure of a discrete part of a business could be sufficient to trigger cover.
  • Causation and trends: consistent with the outcome of the High Court judgment, the Supreme Court did not find favor with the narrow arguments around causation and trends clauses advanced by insurers. In practical terms, on the wordings in issue, the findings of the Supreme Court will make it difficult for insurers to limit recovery on the basis that losses would have been caused in any event by the wider COVID-19 pandemic.
  • Orient Express: the Supreme Court determined that the case of Orient Express Hotels v Generali was wrongly decided and that it should be overruled.

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United States

US Appeal Court concludes a seaman may be contributorily negligent when he is complying with an order from his superior.

The case involved a seaman who was injured while following an order to replace a chafed line during bad weather, and the court found equal fault to both the seaman and tugboat owner. The judge noted the tugboat owner was negligent because “there were safer times to issue the order to change the line”. The seaman was negligent because he failed to “watch his footing while replacing the chafed stern line” and did not “move the chafed stern line to a location on the boat where he would not have stepped on it”.

In appealing the decision, the seaman cited a similar case where the Appeal Court had found that “a seaman may not be contributorily negligent for carrying out orders that result in his own injury, even if he recognizes possible danger”. However, the Appeal Court found that the cited dictum (a remark, statement, or observation by a judge that is not a binding legal precedent) could not be applied in this case as the seaman was not following a ‘specific’ order. The court defined a ‘specific’ order as one that includes a manner and method, and does not make allowances for alternative action. The court upheld the finding of contributory or comparative fault by the seaman.

US Customs and Border Protection (CBP) ruling in relation to offshore wind energy projects on the Outer Continental Shelf.

In the US, the Jones Act is a section of the Merchant Marine Act (1920) which specifies that US flag ships must be used to transport cargo and passengers (coastwise trade) between US ports. For offshore wind energy projects, one of the first requirements is for scour protection material (typically rocks). In January, CBP ruled that the Jones Act applies to vessels discharging scour material to a ‘pristine seabed’ for projects on the Outer Continental Shelf. The CBP cited 2021 amendments to federal law (Outer Continental Shelf Lands Act 1953) which now expressly includes reference to “installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing, or producing resources, including non-mineral energy resources”. Going forward, the CBP may have to consider how the Jones Act will apply to offshore wind projects compared to oil and gas projects.

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