Bermuda energy industry mutual insurer OIL Insurance Limited is co-suing the US government over multi-million dollar losses resulting from the levee breaches and failures that inundated New Orleans when Hurricane Katrina struck in 2005.

One of the properties flooded was the Murphy Oil refinery in the city’s St. Bernard Parish, which it is claimed caused $269 million of property damage and a further $507 million loss of business.

OIL paid for some of the insured losses suffered by the refinery owner and operator Delaware-incorporated Murphy Oil. Now the refinery owners and Bermuda’s OIL have jointly filed a suit against the US government and a number of authorities operating in the New Orleans area, seeking payment for the combined total losses of $776 million.

The lawsuit was filed one day before an extended cut-off date for such legal action to be taken in relation to the hurricane, which struck the US Gulf Coast on August 29, 2005.

OIL, of Woodbourne Avenue, Pembroke, suffered massive claims as a result of the hurricane and, at the time, made supplemental premium calls on its members to the tune of $1.7 billion.

Together with Murphy Oil it is seeking to recoup its losses by proving that the US government, the US Army Corp of Engineers (which constructed the levee systems around New Orleans) and the Southeast Louisiana Flood Protection Authority are responsible through fault and negligence for the breaching of the levees and subsequent flooding that inundated the oil refinery.

The lawsuit has now been consolidated with a class action litigation containing more than 100 plaintiffs seeking damages from the US government and various agencies.

OIL and Murphy Oil specifically claim the US government is liable for the damage caused because:

l The Mississippi River Gulf Outlet contained design faults including lower than authorised structures and contained sections made of erodible materials.

l The construction of the levees and subsequent environmental effects “devastated” the natural storm surge protection that had existed before through the areas wetlands and forests.

l A lack of dredging of the canals created a build up of silt that added to the impact and strength of funnelled water, as well as the overall height of the storm surge waters.

The lawsuit, which was initially reported in the Miami-based Inside Bermuda newsletter, also claims the river gulf outlets were built before an environmental assessment was completed and have never been improved and updated to take into account the accepted wisdom of increasing strength hurricanes - as shown by the US Weather Bureau’s re-stating of the Standard Project Hurricane (one-in-100 year occurrence) from a 107 miles-per-hour wind speed storm in 1959 to 129 mph in 1972 and then 140 mph in 1979.

The construction of a further industrial and navigational canal then created what the lawsuit calls the first part of a “hurricane highway” susceptible to enhanced storm surge.

When Hurricane Katrina hit the Greater New Orleans area its winds had weakened to barely 100 mph, but a storm surge rushed through the Mississippi River Gulf Outlet and collided at the nexus of the Gulf Intracoastal Waterway with another storm surge coming from Lake Borgne which combined to flood St. Bernard parish including the Murphy Oil refinery, states the lawsuit.

The suit was filed with the US District Court for the Eastern District of Louisiana.