Thursday, June 03, 2010

Loyd's Rejects BP's Insurance Claim

BP has attempted to recover some of it's losses due to the recent and ongoing oil spill in the Gulf of Mexico through the insurers of Transocean (the company that owns the Deep Water Horizon rig that BP has leased). BP is seeking in the neighborhood of $700m and the syndicate representatives for Loyd's of London are claiming that they hold no responsibility. Details here.

There are a few things that I find interesting about this and none of them are the facts presented on the surface. Of course BP would seek coverage in this manner, there is a reasonable likelihood that either Loyd's is on the hook for part of this bill and the legal fees are negligible vs the potential loss. Pursuing this is a no-brainer for BP. Equally and for the same reasons it's no surprise that Loyd's is denying the claim, they have significant reason to believe that since the leak is not actually on the rig that they may be able to avoid liability. What's more is that in situations like this it may come down to very tiny details as to who bears the legal and financial responsibilities. The whole thing may be the result of a design flaw or and operational flaw, or simply a terrible combination of mistakes. This will, no doubt take years to settle.

What I find most interesting is; $700m really? That;'s honestly what BP thinks this is going to cost? These people must be dreaming. I mean seriously dreaming. Valdez cost in the neighborhood of $5B, who thinks this is going to skate for $700m. I took a shit this morning that was $700m compared to what these guys are going to eat. My guess and lets be clear that I'm just some average DB, is that BP will be on the hook for $7.5B and that doesn't count lost revenue at the pumps and drop in stock value. $700m is a joke they told one time at a party. Seriously these guys are screwed. We had all better hope they have the money to clean up and go broke here. remember that corporations can't spend any more money than they actually end up with. So buy BP gas cause it's the only way this cleanup is getting funding.

Secondly; Dear BP self insured? Really? Are you retarded? you suck money out of the ocean, it's not that expensive when you think about the profit margin, which, by the way, has been pretty good lately. Maybe you should think about, oh, I don't know, a liability policy? I have liability on my rental house how do you not hedge a 5000ft deep oil well bet in dolphin land? Morons.

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