ACE AMERICAN INSURANCE COMPANY v. M-I, L.L.C. Answer and CounterClaim

Case 4:10-cv-02931 Document 5 Filed in TXSD on 08/20/10 Page 1 of 20
UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
ACE AMERICAN INSURANCE §

COMPANY §
§ Civil Action No. 4:10-cv-02931
Plaintiff, §
v. § Jury
§
M-I, L.L.C. § JUDGE KEITH P. ELLISON
§
Defendant, Counter-Plaintiff. §
M-I, L.L.C.’S ANSWER AND COUNTERCLAIM

AGAINST ACE AMERICAN INSURANCE COMPANY
M-I, L.L.C. (“M-I”) files this answer to the Complaint for Declaratory Judgment filed by
ACE American Insurance Company (“ACE”) (Dkt #1). M-I also files its counter-claims against
ACE for its violations of the Texas Insurance Code and failure to comply with its contractual
obligations.
I. STATEMENT OF THE CASE

1. ACE broadly insures M-I against claims for bodily injury and property damage.
When faced with the largest disaster in the history of oil and gas exploration in the Gulf of
Mexico, M-I turned to its primary insurer, ACE.
2. Rather than honor its contractual obligations, ACE ignored M-I with a willful
disregard for the harm inflicted upon its insured or ACE’s own responsibilities under its policies
of insurance and the Texas Insurance Code. ACE failed to properly acknowledge M-I’s notices
of the Deepwater Horizon catastrophic event and resultant claims, refused to respond to M-I’s
requests for information and did not ask for documents or other materials from M-I to investigate
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the claims. Instead, ACE filed a peremptory coverage lawsuit against M-I before ACE ever
informed M-I of its coverage decision.
3. For all of these improper actions and more, M-I files the following counter-claims
against ACE. M-I further seeks a determination of coverage for specific Deepwater Horizon
claims under the applicable policies. M-I asks that the Court place this case on a fast-track for
resolution. Whether or not ACE owes M-I a duty to defend can be resolved via summary
judgment, albeit on a case-by-case basis, by comparing the underlying complaints to the policies’
terms. M-I needs guidance from the Court so that it can effectively defend against and resolve
the maze of Deepwater Horizon claims.
II. ANSWER TO THE COMPLAINT FOR DECLARATORY JUDGMENT

4. M-I denies the allegations in ACE’s paragraph 1.1. M-I’s denial of ACE’s
definition of the “Deepwater Horizon Incident” applies to all paragraphs in this pleading. This
dispute arises out of ACE’s wrongful handling and denial of claims resulting from the Deepwater
Horizon events.
5. M-I admits that it was providing goods and performing attendant services
pursuant to a written contract between itself and BP Exploration and Production, Inc. (“BP”) at
the time that the Deepwater Horizon exploded and sank. Otherwise, M-I denies the allegations
in ACE’s paragraph 1.2.
6. M-I admits the allegations in ACE’s paragraph 1.3.
7. M-I admits the allegations in ACE’s paragraph 1.4 but because the policy
numbered HDO G 24940354 is but one of many policies issued by ACE to M-I, this particular
policy shall be referred to herein as the ACE CGL policy.
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10. M-I admits the allegations in ACE’s paragraph 2.2, but would add for
completeness that M-I’s member companies are Smith International Acquisition Corporation
(“Smith Acquisition”) and Schlumberger Technology Corporation (“STC”). Smith Acquisition
is a Delaware corporation with its principal place of business in Texas. STC is a Texas
corporation with its principal place of business in Texas.
13. M-I admits that it was providing goods and performing attendant services
pursuant to a written contract between itself and BP that is entitled “Contract for Gulf of Mexico
Strategic Performance Unit Offshore Well Services” (the “BP/M-I Agreement”). Otherwise, M-I
denies the statements in ACE’s paragraph 4.1.
14. M-I denies the allegations in ACE’s paragraph 4.2 because they are incomplete
descriptions and gross over-simplifications of the BP/M-I Agreement used by ACE as an ill-
conceived theory to avoid coverage instead of accurately representing the BP/M-I Agreement.
15. M-I is unable to admit or deny the allegations in ACE’s paragraph 4.3 at this time.
18. M-I admits that numerous lawsuits with unique and varying allegations have been
filed against M-I as a result of the Deepwater Horizon events. Otherwise, M-I denies the
allegations in ACE’s paragraph 4.6.
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20. M-I admits that the ACE CGL policy contains an Aircraft, Auto Or Watercraft
Exclusion. Otherwise, M-I denies the allegations in ACE’s paragraph 5.2.
21. M-I denies the allegations in ACE’s paragraph 5.3.
23. M-I admits that ACE correctly quoted the language from the BP/M-I Agreement,
but otherwise denies the allegations in ACE’s paragraph 5.5.
24. M-I admits that the ACE CGL policy provides Commercial General Liability
Insurance and that it contains Endorsement #18. Otherwise, M-I denies the allegations in ACE’s
paragraph 5.6.
25. M-I denies the allegations in ACE’s paragraph 5.7. M-I states further that ACE
failed to fully quote the policy language and that exceptions to the Watercraft Exclusion exist,
which eliminate any potential application of this exclusionary language.
28. M-I is unable to admit or deny the allegations in ACE’s paragraph 5.10 at this
time.
time.
time.
32. M-I admits that the ACE CGL policy contains Endorsements #15 and #27.
Otherwise, M-I denies the allegations in ACE’s paragraph 5.14.
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33. M-I admits that ACE correctly quoted an excerpt from the ACE CGL policy but
otherwise denies the allegations in ACE’s paragraph 5.15.
34. M-I admits that ACE correctly quoted the language from the ACE CGL policy
descriptions and gross over-simplifications of the BP/M-I Agreement used by ACE as an ill-
conceived theory to avoid coverage instead of accurately representing the BP/M-I Agreement.
37. M-I admits that the ACE CGL policy contains a condition entitled “Duties in the
Event of Occurrence, Offense, Claim or Suit.” Otherwise, M-I denies the allegations in ACE’s
paragraph 5.19.
descriptions of the Deepwater Horizon events.
40. M-I admits that ACE correctly quoted the language from the BP/M-I Agreement
43. M-I admits that the ACE CGL policy contains a condition entitled “Duties in the
Event of Occurrence, Offense, Claim or Suit.” Otherwise, M-I denies the allegations in ACE’s
paragraph 5.25.
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45. M-I admits that the ACE CGL policy contains Endorsement #14. Otherwise, M-I
denies the allegations in ACE’s paragraph 5.27.
56. M-I admits that the ACE CGL policy contains Endorsement #26. Otherwise, M-I
denies the allegations in ACE’s paragraph 5.38.
57. M-I incorporates its answers to ACE’s paragraphs 1.1 – 5.38.
58. M-I admits that it presented ACE with correspondence dated June 8, 2010
regarding claims or suits against M-I. M-I otherwise denies the allegations in ACE’s paragraph
6.2.
59. M-I admits that ACE seeks a declaration of its rights and duties to M-I, but
otherwise denies the allegations in ACE’s paragraph 6.3.
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60. M-I admits that ACE seeks a declaration of its rights and duties to M-I, but
otherwise denies the allegations in ACE’s paragraph 6.4, including all of its sub-parts.
61. M-I denies the allegations in ACE’s paragraph 6.5. ACE possesses the burden to
plead and prove all policy language upon which it relies to contest M-I’s coverage claims.
III. FACTUAL BACKGROUND

The Underlying Claims
64. At the time of the Deepwater Horizon events in April 2010, M-I was providing
drilling fluids and attendant services pursuant to the confidential BP/M-I Agreement.
65. Lawsuits were filed against M-I within days of the fire upon and subsequent
sinking of the Deepwater Horizon. As of today, over 70 lawsuits have been filed against M-I
and this number is expected to rise.
66. The allegations in the underlying lawsuits vary widely. Some focus upon
sustained injuries, sickness and actual damage to personal and real property. Others allege a
more general loss of use of property or the inability of plaintiffs’ businesses to succeed.
Claimants seek a wide diverse of damages based on varying theories of liability, from specific
statutory rights concerning pollution to the more wide-ranging such as negligent hiring and
policy deficiencies.
67. M-I is actively investigating and defending itself against these claims. In contrast
to ACE’s attempt to escape its liabilities by globally grouping them all together, there simply is
no way to group the multitude of separate lawsuits into generic categories sufficient to determine
coverage for each one. Of course, if ACE had analyzed the claims separately as a reasonable
7
insurer acting in accordance with the Texas Insurance Code, it would not and could not have
issued a wholesale denial of coverage.
The Policies
68. ACE issued several primary insurance policies to M-I in an effort to help manage
the risks that M-I faces in its business as an oil and gas service contractor.
69. Two of the ACE policies apply to the claims made against M-I arising out of the
Deepwater Horizon events. The primary Commercial General Liability policy is numbered
HDO G 24940354 (the “ACE CGL policy”). The primary Workers’ Compensation and
Employers’ Liability policy is numbered WLR C4 6132403 (“the ACE WC/EL policy”).
70. The ACE CGL policy provides M-I with $2 million in policy limits for each
occurrence and $25 million on a general aggregate basis. In addition, ACE owes M-I an
unlimited defense that does not erode the policy limits. ACE’s defense obligation ends only
when ACE has “used up the applicable limit of insurance in payment of judgments or
settlements.” See Section I.1.a.(2) (Insuring Agreement).
71. Under the ACE CGL policy, ACE agreed that: “We will pay those sums that the
insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property
damage’ to which this insurance applies. We will have the right and duty to defend the insured
against any ‘suit’ seeking those damages.” See Section I.1.a. (Insuring Agreement) (emphasis
added). ACE now wrongfully seeks to avoid its obligation to both defend and indemnify M-I for
claims under the ACE CGL policy.
72. The ACE WC/EL policy provides M-I with varying policy limits depending on
the nature of the asserted claim. For claims made based upon workers’ compensation regimes,
ACE must defend M-I and satisfy all associated workers’ compensation obligations. For certain
8
non-workers’ compensation claims, the policy limits are $1 million each accident. Like the ACE
CGL policy, ACE owes M-I an unlimited defense that does not erode the policy limits.
73. Under the ACE WC/EL policy, ACE agreed to “pay promptly when due the
benefits required of you by the workers compensation law” and that it has “the right and duty to
defend at our expense any claim, proceeding or suit against you…” See Part One, B & C
(emphasis added). For non-workers’ compensation claims, ACE agreed to “pay all sums you
legally must pay as damages because of bodily injury to your employees” and that it has “the
right and duty to defend, at our expense, any claim, proceeding or suit against you…” See Part
Two, B & D (emphasis added). ACE now wrongfully seeks to avoid its obligation to both
defend and indemnify M-I for claims under the ACE WC/EL policy.
ACE’s failure to acknowledge M-I’s notice of potential claims.
74. On April 26, 2010, M-I provided notice of potential claims to all of its insurance
carriers, including ACE, through M-I’s insurance broker Marsh USA Inc. (“Marsh”). M-I also
separately notified ACE of potential claims through the third-party administrator. M-I’s notices
specifically informed the carriers that M-I had provided drilling fluids and attendant services on
the Deepwater Horizon and that five M-I employees were located on the rig as of Tuesday, April
20, 2010.
75. ACE did not acknowledge this notice. M-I received no written communication
from ACE concerning the Deepwater Horizon events, M-I’s involvement on the rig or the tragic
fact that two of M-I’s employees perished on the Deepwater Horizon.
76. The only written communication M-I received from ACE after its notices of
potential claims were a handful of emails from Alison Walz, Claims Director with ACE,
containing generic statements such as “I am the ACE representative assigned to the recent
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explosion. Please include me on the distribution list going forward....” At no point, however,
did ACE provide M-I with information on its coverage analysis, request items reasonably
necessary, or offer M-I its assistance in evaluating the potential scope of this disaster.
77. ACE’s silence on any substantive issue left M-I to handle the onslaught of claims
on its own with no direction from ACE. M-I was forced to engage counsel, investigate
underlying claims, interview witnesses, handle administrative hearings, retain consultants,
preserve documents and analyze voluminous amounts of material without any assistance from
ACE.
ACE’s failure to acknowledge M-I’s notices of actual claims.
78. On June 10, 2010, M-I provided notice of specific claims to ACE. This notice
tendered over thirty claims to ACE for handling and informed ACE in detail of the work M-I
was performing to protect its own interests.
79. M-I received nothing in response from ACE. ACE did not acknowledge the
notice of claims. ACE did not request information from M-I to investigate the claims. ACE did
not accept or deny coverage for the claims. ACE’s silence again left M-I to defend these claims
without any understanding of ACE’s intentions.
80. On July 2, 2010, M-I provided notice of additional claims to ACE, including a
written request for indemnity from BP to M-I.
81. On July 6, 2010, ACE responded with an email from Ms. Walz stating only
“Thank you for the tender letter and complaint. We are carefully evaluating the tender and will
get back to you later this week or early next week.”
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82. On July 27, 2010, M-I received a second email from Ms. Walz that stated in its
entirety:
Thank you for your e-mail containing the tender from BP of the
admiralty claim captioned Jones v. Transocean Ltd., Civil Action
No. 02:10-CV1196, United States District Court for the Eastern
District of Louisiana. ACE American Insurance Company
(“ACE”) acknowledges receipt of this matter and notes that other
actions are also referenced in a spreadsheet attached to your e-mail
and in a spreadsheet attached to Mr. Peter Scaff’s prior letter.
Please be advised that ACE is currently in the process of
conducting a coverage investigation of these matters under a full
reservation of rights. ACE requests your continued cooperation
and assistance during this process and we anticipate providing M-I
L.L.C. with the results of our coverage investigation shortly. ACE
thanks you for your patience while we complete our investigation.
83. M-I received no further communications from ACE, despite ACE’s promise that
it would provide M-I with the results of its coverage investigation “shortly.” At no point did
ACE appropriately acknowledge M-I’s notice of claims. Nor did ACE request information from
M-I to investigate the claims. And ACE certainly did not accept or deny coverage for the claims.
ACE’s failure to acknowledge M-I’s requests for information.
84. On at least three separate occasions, M-I prompted ACE for assistance. On April
29, 2010, M-I asked for ACE’s opinions on the BP/M-I Agreement. ACE never responded.
85. On July 27, 2010, M-I’s excess carrier requested that M-I and ACE attend a
meeting to discuss coverage issues. M-I attended as did representatives from the excess carriers.
Only ACE refused to attend offering no explanation for its decision.
86. On August 11, 2010, M-I sent a letter to Ms. Walz requesting that ACE provide
M-I with its coverage decisions. This letter specifically urged ACE to notify M-I of ACE’s
acceptance of the Deepwater Horizon claims. M-I also asked for ACE’s assistance in
negotiating with other defendants for the Deepwater Horizon claims and requested ACE’s
11
coverage decision in order to respond to BP’s demands for defense and indemnity under the
BP/M-I Agreement. ACE failed to respond to this letter.
87. ACE instead filed its Complaint for Declaratory Judgment on August 16, 2010.
Then only on the following day, August 17, did ACE provide M-I with its coverage analysis
under both the ACE CGL and the ACE WC/EL policies. ACE included in its email
correspondence to M-I a copy of its Complaint for Declaratory Judgment.
IV. BREACH OF CONTRACT

88. Insurance policies are contracts between the policyholder and the insurance
company.
89. Under the terms of the ACE CGL and ACE WC/EL policies, ACE contractually
agreed to defend M-I against claims for workers’ compensation benefits, damages pursuant to
the Jones Act, bodily injury and property damage. The ACE CGL policy specifically covers
claims of “bodily injury” and “property damage” so long as they are caused by an “occurrence”
that takes place in the “coverage territory” during the policy period. Bodily injury includes
“bodily injury, sickness or diseased sustained by a person, including death resulting from any of
these at any time.” Property damage includes “physical injury to tangible property, including all
resulting loss of use of that property” and “loss of use of tangible property that is not physically
injured.” The ACE WC/EL policy similarly applies to “bodily injury by accident or bodily
injury by disease.” The claims asserted against M-I fall within these broad grants of coverage.
90. ACE wrongfully refused to defend M-I against any and all claims arising out of
the Deepwater Horizon events. The ACE CGL and WC/EL policies obligate ACE to defend M-I
and nothing within the policies excuses ACE from its contractual obligations. ACE also
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wrongfully seeks a premature ruling on its duty to indemnify, which as a matter of law, cannot
be determined until the conclusion of each underlying claim.
91. ACE asserts three reasons why it should be excused from performing its
contractual obligations: (1) the mobile offshore drilling unit, the Deepwater Horizon, constitutes
an excluded watercraft, an undefined term in the ACE CGL policy; (2) M-I’s everyday business
practices as insured under the ACE CGL policy constitute uninsured professional services; and
(3) the broad use of the term “pollution” eliminates all of ACE’s duties of defense and
indemnity.
92. As set forth herein and as shall be established as a matter of law, ACE is wrong.
93. To begin with, the Deepwater Horizon is not a watercraft. It is an immense
structure primarily designed for drilling operations, not water transportation. At the time of the
disaster, it was rigidly affixed to the seafloor by a nearly 5,000 foot riser through which drilling
and completion operations were performed and had restricted maneuverability. While it may, or
may not, constitute a vessel under the unique nature of general maritime law, that fact alone does
not transform a mobile offshore drilling unit into a “watercraft.” The ACE CGL policy provides
no definition of the term “watercraft” leaving this Court with the opportunity to interpret the
policy as such terms are commonly understood in the context of the overall policy issued to an
offshore oil and gas contractor. To the extent M-I and ACE present differing interpretations of
this term, then M-I specifically pleads that the term “watercraft” is ambiguous.
94. ACE’s attempt to apply the “watercraft” exclusion on the basis that BP is “an
insured” under the policy fails for two key reasons: BP has neither requested nor received
additional insured status under the policy and the conduct solely attributable to one insured – BP,
assuming BP so qualifies – does not preclude coverage for other insureds. The Separation of
13
Insureds provision of the policy requires ACE to apply the insurance “separately to each insured
against whom claim is made or ‘suit’ is brought.’” ACE’s interpretation of the watercraft
exclusion runs afoul of its obligation to evaluate claims separately as to each insured.
95. ACE’s interpretation also ignores the method by which BP may qualify for
coverage under the policy. Reading the particular endorsement relied upon by ACE against the
watercraft exclusion makes it clear that BP, if anything, is expressly an “additional insured” and
not “an insured” for purposes of the watercraft exclusion. Any other reading would render this
entire coverage illusory. To the extent M-I and ACE present differing interpretations, then M-I
specifically pleads that the watercraft exclusion and additional insured endorsement are
ambiguous.
96. ACE further fails to quote the entirety of the watercraft exclusion, which confirms
the inapplicability of the exclusion to all of the claims made against M-I. The full language
provides:
“This exclusion does not apply to: …
(5) “Bodily injury” or “property damage” arising out of: …
(b) the operation of any of the machinery or equipment listed in

Paragraph f.(2) or f.(3) of the definition of “mobile
equipment.”
97. The operative paragraph of “mobile equipment” states:
f.(3) Air compressors, pumps and generators, including

spraying, welding, building cleaning, geophysical exploration,
lighting and well servicing equipment.
98. The lawsuits against M-I include claims of bodily injury and property damage
arising out of the use of pumps, generators, equipment for geophysical exploration and other well
servicing equipment. Regardless of all of ACE’s rhetoric concerning the Deepwater Horizon’s
14
dimensions and BP’s alleged status, the policy language itself confirms that the watercraft
exclusion does not apply.
99. ACE’s reliance upon the professional services exclusion to deny coverage
similarly constitutes a breach of contract. Words in a policy cannot be read in isolation; rather,
they take their meaning from the overall policy. Here, the professional services exclusions do
not use the term engineering in isolation as the interpretation proffered by ACE suggests.
Endorsement #15 surrounds the term “engineering service” with medical and other health service
treatments, legal advise, optometrical service, the furnishing of drugs and the handling of dead
bodies. Endorsement #27 includes the preparing of maps, opinions and drawings as wells as
supervisory and architectural services. The services are specialized, often credentialed or
licensed, and are routinely covered by different forms of insurance. The claims against M-I do
not support an interpretation that M-I’s services fall within these specialized exclusions nor does
the policy language allow ACE to deny every claim asserted against M-I simply because ACE
wants to characterize M-I’s activities as “engineering.” Any other interpretation means that ACE
took substantial premiums from M-I for years in return for illusory coverage.
100. This is also a prime example of why ACE’s global attempt to avoid its
responsibilities without conducting a case-by-case review should be rejected. The professional
services exclusion must be evaluated against the actual allegations alleged, and may only be
applied in the duty to defend context in suits alleging – as the sole basis for recovery – that the
insured breached a standard of care in rendering professional services. In instances where the
plaintiff makes claims of professional and non-professional negligence, general liability insurers
owe a duty to defend the claims.
15
101. ACE further wrongfully relies upon Endorsement #14 as an escape hatch for all
claims arising out of the Deepwater Horizon events. The exclusionary language relied upon by
ACE expressly applies only to property damage claims and not to all bodily injury claims.
Regardless of whether ACE may or may not avoid liability as to property damage claims, that
decision cannot be made on a global basis. Texas law requires ACE to compare the allegations
of each lawsuit against the language of the policy and then evaluate the actual damages awarded
to each plaintiff. ACE’s global assertion that every claim asserted or that could be asserted by
every plaintiff necessarily falls within the exclusionary language of Endorsement #14 ignores
these basic tenets of insurance law. Further, the language relied upon by ACE to disclaim its
duty to defend pollution claims does not impact ACE’s potential duty to indemnify M-I. ACE’s
duty to indemnify, even as to pollution related claims, cannot be determined until those claims
are finally resolved by adjudication or settlement.
102. ACE’s wrongful refusal to defend M-I is a breach of the referenced policies for
which M-I has suffered actual damages.
V. VIOLATIONS OF CHAPTER 541

103. ACE violated the Texas Insurance Code Chapter 541 through its practices of
stalling, misrepresenting coverage, improperly investigating the facts and delaying payment of
claims. ACE committed these statutory violations in the following particulars, among others:
(A) By misrepresenting to M-I material facts or policy provisions relating to

the coverage at issue;
(B) By failing to attempt in good faith to effectuate a prompt, fair and

equitable settlement of M-I’s claims as soon as liability had become
reasonably clear;
(C) In failing to respond to M-I after a covered loss was presented to ACE;
16
(D) By failing to promptly provide M-I with a reasonable explanation of the

basis in the policy, in relation to the facts or applicable law, for ACE’s
denial of coverage;
(E) In failing within a reasonable time to affirm or deny coverage of the

claims;
(F) In failing within a reasonable time to submit a reservation of rights letter

to M-I;
(G) By failing to conduct a reasonable investigation with respect to the claim;
(H) By making an untrue statement of material fact or failing to state a

material fact necessary to make other statements made not misleading;
(I) By making statements in a manner that would mislead a reasonably

prudent person to a false conclusion of a material fact;
(J) By making a material misstatement of law; and
(K) Any and all other acts or omissions which may be uncovered during the
discovery phase and/or trial of this lawsuit.
104. M-I’s damages are a result of the wrongful acts and/or omissions of ACE.
VI. VIOLATIONS OF CHAPTER 542

105. ACE violated the Texas Insurance Code Chapter 542 through its failure to
promptly acknowledge, investigate and pay M-I’s claims. Specifically, ACE committed these
statutory violations in the following particulars, among others:
(A) By failing within 15 days after receipt of M-I’s notice of claims to acknowledge
receipt of the claims, commence any investigation of the claims and request from
M-I all items, statements, and forms that ACE reasonably believed would be
required.
(B) By failing to notify M-I in writing of the acceptance or rejection of any claims not
later than the 15th business day after receiving all items, statements, and forms
required to secure final proof of loss.
(C) By delaying payment for more than 60 days after receiving all items, statements,
and forms reasonably requested from M-I.
17
106. ACE’s conduct and delay obligates it to pay, in addition to the amount of the
claims, 18 percent per year of the amount of the claims as additional damages, together with
reasonable attorneys’ fees.
VII. DAMAGES
107. Because of ACE’s actionable conduct, M-I has suffered actual damages in an
amount within the jurisdictional limits of this Court.
108. In refusing to defend M-I, ACE knew that M-I would incur and continue to incur
substantial expenses despite the fact that it had insurance coverage under its policies.
109. On information and belief, ACE’s unlawful acts and practices under the Texas
Insurance Code were committed knowingly as defined in § 541.002, entitling M-I to multiple
damages.
VIII. ATTORNEYS’ FEES

110. M-I was forced to retain the undersigned attorneys to pursue these claims. Under
Chapters 541 and 542 of the Texas Insurance Code, Chapters 37 and 38 of the Texas Civil
Practice & Remedies Code, and 28 U.S.C. §2202 all of M-I’s reasonable and necessary
attorneys’ fees may be recovered through trial and any appeals. M-I has satisfied all conditions
precedent to the recovery of legal fees, expenses, and interest.
IX. JURY DEMAND

111. M-I makes this demand for a jury trial in this litigation.
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X. PRAYER
THEREFORE, Defendant and Counter-Plaintiff M-I, L.L.C. requests that:
(1) ACE American Insurance Company be cited to appear and answer these claims;
(2) Judgment be entered against ACE American Insurance Company in favor of M-I,
L.L.C. for:
(A) actual damages;

(B) multiple damages;
(C) pre-judgment and post-judgment interest at the maximum allowable rate;
(D) penalty interest at the rate of eighteen percent;
(E) reasonable attorneys’ fees and expenses;
(F) all costs in prosecuting this litigation; and
(G) any additional relief, legal and equitable, general or special, to which
Plaintiff may be justly or equitably entitled.
Respectfully submitted,
/s/ Samantha Trahan

Samantha Trahan
Texas State Bar No. 24028073
J. James Cooper
Gardere Wynne Sewell LLP
1000 Louisiana, Suite 3400
Houston, TX 77002-5011
713-276-5500 (phone)
713-276-5555 (facsimile)
ATTORNEY-IN-CHARGE FOR DEFENDANT

and COUNTER-PLAINTIFF M-I, L.L.C.
OF COUNSEL:
Geoffrey H. Bracken
Stephen L. Moll
GARDERE WYNNE SEWELL LLP
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CERTIFICATE OF SERVICE
This is to certify that a true and correct copy of the foregoing document has been
forwarded to the following counsel using the DCECF system on this 20th day of August, 2010.
Kenneth G. Engerrand
Charles Clayton Conrad
Michael A. Varner
Brown Sims, PC
1177 West Loop South, Tenth Floor
Houston, Texas 77027-9007
Tel: 713.629.1580
Fax: 713.629.5027
/s/ Samantha Trahan

Samantha Trahan
20
HOUSTON 1084975v.1

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Case 4:10-cv-02931 Document 5 Filed in TXSD on 08/20/10 Page 1 of 20

UNITED STATES DISTRICT COURT

ACE AMERICAN INSURANCE §

M-I, L.L.C.’S ANSWER AND COUNTERCLAIM

I. STATEMENT OF THE CASE

Mexico, M-I turned to its primary insurer, ACE.

informed M-I of its coverage decision.

the maze of Deepwater Horizon claims.

II. ANSWER TO THE COMPLAINT FOR DECLARATORY JUDGMENT

in ACE’s paragraph 1.2.

6. M-I admits the allegations in ACE’s paragraph 1.3.

policy shall be referred to herein as the ACE CGL policy.

8. M-I admits the allegations in ACE’s paragraph 1.5.

9. M-I admits the allegations in ACE’s paragraph 2.1.

(“Smith Acquisition”) and Schlumberger Technology Corporation (“STC”). Smith Acquisition

corporation with its principal place of business in Texas.

11. M-I admits the allegations in ACE’s paragraph 3.1.

12. M-I admits the allegations in ACE’s paragraph 3.2.

denies the statements in ACE’s paragraph 4.1.

allegations in ACE’s paragraph 4.6.

19. M-I admits the allegations in ACE’s paragraph 5.1.

Exclusion. Otherwise, M-I denies the allegations in ACE’s paragraph 5.2.

21. M-I denies the allegations in ACE’s paragraph 5.3.

but otherwise denies the allegations in ACE’s paragraph 5.5.

which eliminate any potential application of this exclusionary language.

26. M-I denies the allegations in ACE’s paragraph 5.8.

27. M-I denies the allegations in ACE’s paragraph 5.9.

31. M-I denies the allegations in ACE’s paragraph 5.13.

Otherwise, M-I denies the allegations in ACE’s paragraph 5.14.

otherwise denies the allegations in ACE’s paragraph 5.15.

but otherwise denies the allegations in ACE’s paragraph 5.16.

36. M-I denies the allegations in ACE’s paragraph 5.18.

descriptions of the Deepwater Horizon events.

39. M-I admits the allegations in ACE’s paragraph 5.21.

but otherwise denies the allegations in ACE’s paragraph 5.22.

41. M-I admits the allegations in ACE’s paragraph 5.23.

42. M-I denies the allegations in ACE’s paragraph 5.24.

44. M-I denies the allegations in ACE’s paragraph 5.26.

denies the allegations in ACE’s paragraph 5.27.

46. M-I denies the allegations in ACE’s paragraph 5.28.

but otherwise denies the allegations in ACE’s paragraph 5.29.

48. M-I denies the allegations in ACE’s paragraph 5.30.

49. M-I denies the allegations in ACE’s paragraph 5.31.

50. M-I denies the allegations in ACE’s paragraph 5.32.

51. M-I denies the allegations in ACE’s paragraph 5.33.

but otherwise denies the allegations in ACE’s paragraph 5.34.

53. M-I denies the allegations in ACE’s paragraph 5.35.

54. M-I denies the allegations in ACE’s paragraph 5.36.

55. M-I denies the allegations in ACE’s paragraph 5.37.

denies the allegations in ACE’s paragraph 5.38.

57. M-I incorporates its answers to ACE’s paragraphs 1.1 – 5.38.

otherwise denies the allegations in ACE’s paragraph 6.3.

62. M-I denies the allegations in ACE’s paragraph 7.1.

63. M-I denies the allegations in ACE’s paragraph 8.1.

III. FACTUAL BACKGROUND

and this number is expected to rise.

issued a wholesale denial of coverage.

settlements.” See Section I.1.a.(2) (Insuring Agreement).

claims under the ACE CGL policy.

ACE’s failure to acknowledge M-I’s notice of potential claims.

fact that two of M-I’s employees perished on the Deepwater Horizon.

underlying claims, interview witnesses, handle administrative hearings, retain consultants,

ACE’s failure to acknowledge M-I’s notices of actual claims.