News

Insurance fight over cost of 37-acre sinkhole

by Patrick Flanagan

The operator of a brine mine that collapsed and apparently caused a 37-acre sinkhole in south Louisiana has asked the state insurance commissioner to make an insurance company pay out on a $50 million policy.

NEW ORLEANS (AP) - The operator of a brine mine that collapsed and apparently caused a 37-acre sinkhole in south Louisiana has asked the state insurance commissioner to make an insurance company pay out on a $50 million policy.

New York-based Liberty Insurance Underwriters Inc.'s policy was to kick in after other insurers paid more than $75 million in claims against Texas Brine LLC. That limit has been reached.

The insurance company asked the federal court in Houston last Oct. 22 to rule that it owes nothing to Texas Brine because Texas Brine knew it was mining dangerously near an Ascension Parish salt dome's edge.

The claims are reasonable, Texas Brine said in a letter released Thursday, a day after it was sent to Insurance Commissioner Jim Donelon. It also alleges that Liberty breached confidentiality by basing its allegations on privileged material provided by Texas Brine to all of its insurers, and making that material public in the process.

Neither Liberty nor its federal court attorneys immediately responded to requests for comment.

The insurance company has 30 days to respond to the Insurance Department. Its response will not be public unless the company decides to make it so, said Ileana Ledet, a Donelon spokeswoman.

According to Texas Brine, Liberty claims those companies "inexplicably have paid $76 million in claims that were not owed under their five separate policies," so the $75 million limit hasn't been reached.

A lawsuit filed by Liberty claims leaseholder Vulcan Materials Co. suggested the well be held to 5,000 feet deep but Texas Brine got a state Department of Natural Resources a permit to mine to 6,040 feet.

The suit also alleged that a 1998 internal memo warned against raising the height of the cavern roof and widening the diameter, saying "if we get greedy ... we could cause a disaster."

The lawsuit was filed two weeks after Liberty asked a state judge not to rule quickly on matters it then brought up in the federal lawsuit, said Jim Garner, an attorney representing Texas Brine in Louisiana state courts.

More recently, a second state district judge, Alvin Turner, held Liberty in contempt of his order to drop the Texas suit. Texas Brine can recover damages and attorney fees involved in the Texas suit, and Liberty "owes fiduciary duties to its insured, Texas Brine," Turner wrote.

The case belongs in Louisiana because the sinkhole and plaintiffs - including the state - are in Louisiana, Garner said.