Canadian Underwriter

Insurers face potential $850 million lawsuit from oil company

September 3, 2003   by Canadian Underwriter

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Western Oil Sands, one of the partners in the Athabasca Oil Sands Project (AOSP), says it has filed a “statement of claim” against its insurers with which it will proceed if previously filed claims are not paid.
The suit would seek to collect more than $200 million damages, plus $650 million in aggravated and punitive damages.
Western has been in dispute with its insurers over claims resulting from its involvement with the AOSP, and a fire at the Muskeg River Mine in January, 2003.
Claims for about $200 million were filed for cost over-runs and project delays relative to ASOP. And two interim claims for $90 million, of which only $18 million constitutes Western’s 20% share, have been filed over the Muskeg mine fire. The company says repair costs and subsequent freezing from the fire have cost Western and its partners $166 million ($33.2 million is Western’s share) as of the end of June 2003. As well, loss of profits due to the delay from the fire are the basis for another claim for $500 million total (Western’s share being $100 million). And more claims may follow for the full extent of damages from the fire.
Despite filing the lawsuit, Western says, “the statement of claim will only be served on the defendants and pursued in the courts in the event that resolution procedures cannot be agreed to on a timely basis”.

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