Severson & Werson Victorious in Defense of Significant Bad Faith Claim

(Last updated July 2, 2008)

Successful assertion of the war risk exclusion in excess liability policies barred a reimbursement/bad faith insurance claim by Unocal related to the construction of the Yadana gas pipeline in Myanmar/Burma. The Court granted summary judgment in favor of the firm's insurer clients, on October 16, 2007, in Los Angeles Superior Court (Lexington Insurance Co. v. Union Oil Company of California, Case No. BC360774).

In the late 1980's, refugees from the Tenasserim region of Burma (Myanmar) sued Unocal and others for human rights abuses arising out of the Yadana gas pipeline venture. The Myanmar military provided security during the construction of the pipeline. The Myanmar plaintiffs argued that an agency relationship existed between Unocal and the other participants in the pipeline venture and sought to hold Unocal financially liable for the multiple atrocities committed by members of the military. Unocal settled and immediately filed suit against 4 excess insurers seeking $80 million in reimbursement for defense fees and settlement. Unocal also contended that the insurers' initial "scratches" on the files constituted a denial of coverage.

The policies excluded, under a “war risk exclusion,” liability for damages arising out of military terrorism. Based upon new evidence of past and continuing atrocities at the hands of the Myanmar military in the pipeline region uncovered by Severson's litigation team, as well as the testimony of the original Myanmar plaintiffs, the S&W trial team lead by Forrest Booth and Susan Keeney, established the application of the exclusion and defeated the claim.

For a copy of the order, please visit the Los Angeles Superior Court website, www.lasuperiorcourt.org.