NU Online News Service, May 5, 4:07 p.m.EDT

Companies facing claims from the Gulf of Mexico oil rig disasterare insured for losses totaling about $1.4 billion, the InsuranceInformation Institute reported.

The coverage amount for the platform explosion and sinking andresulting spillage from of the Deepwater Horizon well is based oninitial reports from the companies involved in the incident as wellas early insurance and reinsurance industry estimates, I.I.I.said.

Meanwhile, complaints that out-of-state attorneys are convergingon Gulf Coast states improperly soliciting persons to becomeplaintiffs in cases related to the oil rig sinking are beinginvestigated by the Mississippi Attorney General's Office, aspokesperson said.

I.I.I. President Robert Hartwig, who holds a doctorate ineconomics, said insurance losses from the rig's sinking will besignificant and "one of the largest losses ever for global offshoreenergy insurance and reinsurance markets."

Energy platform risks, he said, "are well-syndicated, with theinsured loss spread across a broad spectrum of insurers andreinsurers on a global scale."

"It is also important to note that major oil concerns such asBritish Petroleum (BP) make extensive use of self-insurance," addedMr. Hartwig.

The self-insurance factor, and the possibility some partiescould eventually exhaust the limits of their insurance coverage aslosses mount, "means a substantial share if not the majority oflosses could be financed by the Deepwater Horizon projectparticipants themselves, through their existing in-houseresources," he explained.

I.I.I. cited a National Public Radio broad interview earlierthis week that heard from BP Chief Executive Tony Hayward that BP"has made it clear that where legitimate claims are made, we willbe good for them."

The fire, explosion and deaths of 11 persons aboard the rigbefore it sank April 22 are believed to have been caused by abuildup of explosive gas as the well was being shut down.

Regarding the giant spill that has developed, I.I.I. said that"blowout preventers are designed to shut down an operational welland prevent oil from leaking into open waterways. The device'sapparent failure to do so in this instance set the stage for therelease of hundreds of thousands of gallons of oil into the Gulf ofMexico."

"Offshore energy facilities are among the most difficult andcomplex commercial risks to insure, especially in the Gulf ofMexico, where hurricanes often damage platforms and underseapipelines. Yet significant spillage of oil is rare," said Mr.Hartwig.

He mentioned that offshore facilities in the Gulf of Mexicosustained several billion dollars in damage during the intense 2004and 2005 U.S. hurricane seasons without any major oil spillsoccurring.

The most expensive oil spill to date came from the Exxon Valdeztanker incident in 1989, which released 37,000 tons of crude oilinto Alaskan waters.

I.I.I., citing figures from the International Tank OwnersPollution Federation, said cleanup costs alone from Exxon Valdeztotaled $2.5 billion, with fines and penalties adding at leastanother $1 billion.

"While insurers paid hundreds of millions of dollars inconnection with the Exxon Valdez disaster, the majority of thelosses were paid by Exxon. Likewise, the larger the loss from theDeepwater Horizon incident, the greater the share that will be paidby BP," said Mr. Hartwig.

Initial I.I.I. estimates indicate that property damage andliability policies will generate the largest dollar-amountclaims.

The organization listed the main types of insurance coveragesthat might apply (in alphabetical order) as:

o Business Interruption/Loss of Production: Provides coveragefor energy businesses against loss due to temporary interruption inoil/gas supply from an offshore facility.

o Comprehensive General Liability: Provides coverage for claimsan energy business is legally obligated to pay as a result ofbodily injury or property damage to a third party.

o Environmental/Pollution Liability: Provides coverage forbodily injury, property damage and cleanup costs as a result of apollution incident from a designated site.

o Operators' Extra Expense (Control of Well): Provides coveragefor costs incurred by energy businesses when regaining control of awell after a 'blowout.' Coverage may include re-drilling expensesincurred in the restoration of a well after a blowout as well asthe legal expenses emanating from an incident such as the sinkingof a rig, or an oil spill.

o Property Damage: Provides coverage for physical damage or lossto a company's offshore property and equipment, including offshorefixed platforms, pipelines, and production and accommodationfacilities.

o Workers Compensation/Employers' liability: Provides coveragefor claims arising out of employee injuries or deaths incurredwhile the employee is in the line of duty.

In Mississippi, Jan Schaefer, a spokesperson for MississippiState Attorney General Jim Hood, said that "we do haveinvestigators working the complaints" by the MississippiAssociation for Justice based in Jackson, Miss.

Stephen Mullins, the president of the organization, wrote Mr.Hood seeking an inquiry into aggressive, "unethical andunauthorized" tactics he said are being used by firms with nolicense to practice in Mississippi.

He asked for a probe of "investigators, a.k.a. runners, that aresetting up illegal meetings with potential plaintiffs throughimproper solicitation even though no members of their firms have alicense to practice in Mississippi."

In addition to pursuing Gulf Coast businesses, he said they hadapproached families of those who perished on the oil rig while theywere still in mourning.

Mr. Mullin wrote that lawyer association representatives inLouisiana, Alabama and Texas supported his request for aninvestigation.