Georgia Home Ins. Co. v. Means, 186 F.2d 783 (5th Cir. 1951)

Brought under the "blowout" provision¹  of an insurance policy, TR-2293, the suit was for loss and damage to an oil rig and equipment.

The claim was that while plaintiff was engaged in drilling an oil well with the insured rig, a "blowout", as that term is defined in the policy, occurred, causing loss and damage to the equipment insured under the policy to the extent of $40,483.38.

The defenses, in addition to a denial, were affirmative pleas: (1) of no blowout, as that term is defined²  in the policy; (2) breach of clause 11 of the policy, "Impairment of Liability"; and (3) breach of clause 7, "Benefit of Insurance".

Tried fully to the court without a jury, there were findings of fact³  and conclusions of law⁴  in plaintiff's favor, and defendant has appealed.

Here, placing its main reliance upon its first ground, the failure of the proof to show a blowout with resulting loss, appellant argues also that plaintiff's drilling contract and his dealings with respect to it with the Sun Company constituted a violation of clauses 7 and 11, and, finally, that of the damage recovery against it, $7,345.66 for expenses incurred at defendant's request in salvaging the pipe and tool joints was not properly recoverable.

On its first point, it plants itself squarely on "the warranties by the assured as to oil drilling safety measures", including (a) master gate drilling valve, and (b) blowout preventor. So planting, it argues not that these warranties were breached but that, taking the provisions as to them in connection with the definition of blowout, the policy makes it clear that unless the force "of the pressure of oil, gas or water entering the hole" is sufficient to unseat or break violently through the blowout preventor, there is no blowout.

In amplification, it argues that the controlling provision in the "blowout" definition is this, "followed by an uncontrolled flow of oil, gas, or water", and that it cannot be said that this has occurred in any well where the blowout preventors are working and the oil, gas or water has not broken through, or erupted violently from, them.

So arguing, it insists that, since it is undisputed that the preventors did hold and that there was no wild eruption breaking through them, but the damage occurred from a bridging over in the hole and the mere inability to continue to make hole, the facts found by the district judge did not constitute a blowout.

An additional argument made by it is that if there was a blowout within the policy definition, it was of such a small and minor nature that the loss sustained did not flow from it but from the bridging over of the hole, not because of the blowout but merely because of the inability to continue to make hole, a risk not insured against in the policy. It insists, therefore, that the findings of the district judge, that a blowout occurred and that this caused plaintiff's loss, are clearly erroneous. We cannot agree.

We think it plain, on the contrary, that defendant's position is the clearly erroneous one. If sustained, it would put a premium on careless operation and the use of minimum measures of security, and would be in direct contradiction of the undisputed facts and the policy definition.

Here plaintiff not only complied with the minimum safety measures required under the warranties, but far exceeded them by using, instead of one, three blowout preventors. Appellant's contention, in effect that because plaintiff did so, and thereby prevented a much heavier loss from a more excessive blowout and a possible cratering, he defeated his recovery, will not stand up. As found by the court upon the undisputed evidence, there was a sudden expulsion of drilling fluid followed by an uncontrolled flow of oil, gas and water, in that the pressure of the gas entering the hole was, and, despite all efforts to prevent it, continued to be, greater than the pressures exerted by the heavy column of drilling fluid forced down into the well. It was this differential in the gas pressure which, causing the blowout, in turn caused the bridging over of the well and the loss to plaintiff.

It is quite true that if the preventors had not worked, there would have been a more spectacular blowout with oil, mud, and water shooting high into the air, and perhaps destroying the derrick and causing the well to crater. But this is immaterial. The pressure from the gas entering the hole and causing the sudden expulsion of fluid was, and continued to be, so great that it defeated all efforts to overcome the pressure and continue to make hole notwithstanding the pumping in of a great weight of drilling fluid, 200,000 pounds. This pressure and the uncontrolled flow of fluid which it caused finally resulted in the bridging over of the hole and the loss for which plaintiff sues.

The district judge was right in concluding that there was a blowout and that it caused the loss for which he gave plaintiff judgment.

Appellant's other points, the claimed breach of the clauses 7 and 11 of the policy, are no better taken. It is quite clear that the record furnishes no basis whatever for these claims and that the district judge was right in concluding that nothing in the drilling contract or in the conduct of plaintiff and the Sun Company with reference thereto in any manner breached any of the obligations of the policy or diminished or affected any of defendant's rights thereunder.

Finally, as to the item of recovery for costs and expenses incurred in salvaging the pipe, the district judge was right in concluding that these costs were incurred in strict accordance with the provisions of the policy and at defendant's request, and were properly allowed as part of plaintiff's recovery.

The judgment was right. It is

Affirmed.