October 22, 2014
Oklahoma

Insurer accused of ducking Shell wind farm’s repair costs

By David Siegel, Law360, New York (October 22, 2014, 2:15 PM ET) -- law360.com

Wind energy company UpWind Solutions Inc. on Monday accused Companion Property & Casualty Insurance Co. in Oklahoma federal court of acting in bad faith by denying coverage for damaged gearboxes in turbines at a wind farm co-owned by Shell Oil Co. and Goldman Sachs Group Inc.

The complaint alleges Companion used a pre-existing damage exclusion in the policy it provided UpWind to deny coverage for gearboxes without adequately investigating the nature of the damage to turbines at the Whitewater Hill Project.

“Companion breached its duty of good faith and fair dealing, through conduct that was unreasonable under the circumstances, by denying coverage to UpWind without conducting an investigation, by misinterpreting the terms and conditions of the policy without a basis in law or fact, and by withholding the payment of the policy’s benefits that are due and owing,” the complaint said.

UpWind obtained $3.45 million in extended warranty contractual liability coverage from Companion for a period from 2011 to 2016, according to the complaint. The policy covered any “expenses” UpWind was contractually obligated to pay resulting from damage to the covered wind turbine equipment.

Companion’s denied coverage for claims submitted in 2013 and 2014 for repairs to two gearboxes, invoking the policy’s pre-existing damage exclusion clause, but UpWind claims the insurer failed to perform an adequate investigation to reach that determination.

“To mask its deficient claims handling, Companion complained that UpWind did not provide information regarding the gearbox claims, even though Companion stated that it had sufficient information to determine that the ‘pre-existing damage exclusion’ applied to bar coverage,” the complaint said.

UpWind claims Companion intentionally misread the scope of the pre-existing damage exclusion in an effort to justify its refusal to provide coverage for the gearbox claims.

“Companion undertook no meaningful investigation of the gearbox claims, and instead denied coverage to UpWind based on conflicting excuses and knowing misinterpretations of the language of the policy,” the complaint said.

The complaint asks for compensatory damages, citing the fact UpWind had to pay for the repairs to the gearboxes, in addition to punitive damages for Companion’s alleged breach of faith by intentionally misreading the exclusion clause.

Andrew N. Bourne of Bourne & Zakheim LLP, who represents UpWind, says the company made the prudent business decision to purchase insurance against damage to its equipment.

“It is unfortunate that UpWind must file suit in order to vindicate its contractual rights and secure the coverage it purchased, but our client looks forward to its day in court,” Bourne said.

A representative for Companion did not immediately respond to a request for comment Wednesday.

UpWind is represented by Andrew N. Bourne of Bourne & Zakheim LLP and Robert A. Nance of Riggs Abney Neal Turpen Orbison & Lewis PC.

The case is UpWind Solutions Inc. v. Companion Property & Casualty Insurance Co., case number 5:14-cv-01148, in the U.S. District Court for the Western District of Oklahoma.