EXXON, LLOYD'S MAY BATTLE IN TEXAS JUSTICES RETURN VALDEZ CASE TO APPEALS COURT

EXXON, LLOYD'S MAY BATTLE IN TEXAS JUSTICES RETURN VALDEZ CASE TO APPEALS COURT

A billion-dollar fight between Exxon Corp. and underwriters at Lloyd's of London over insurance payments stemming from the Exxon Valdez oil spill appears heading back to a Texas state court - returning the case to the oil company's home turf.

The U.S. Supreme Court told the U.S. 2nd Circuit Court of Appeals in New York to review its 1994 decision allowing Lloyd's to countersue Exxon in a New York federal district court and not the Texas state court favored by the oil company. New York courts have a better record of deciding cases in favor of insurers.The directions that the Supreme Court gave the 2nd Circuit provides little leeway to the court and makes dismissal of the federal case likely, some attorneys said Tuesday.

If the New York appeals court, as expected, dismisses the federal case, action then would resume in Exxon's home state of Texas, where the lawsuit began.

Exxon sued Lloyd's and more than 100 insurers in 1993 in the Texas state court after the insurers refused to pay any claims relating to the 1989 Exxon Valdez wreck in Prince William Sound, Alaska.

Lloyd's filed a so-called mirror image lawsuit against Exxon in a federal district court in New York. Lawyers for Lloyd's argued they were not liable for damages because Exxon was at fault in the accident and because the Exxon policy did not cover pollution cleanup costs.

The insurers' suit was initially dismissed by the district court, which ruled that jurisdiction belonged in the Texas state court, where it was first filed. That decision was reversed by the 2nd Circuit, which agreed with Lloyd's and other underwriters that the question of "fortuity" - or whether the wreck resulted from conditions within Exxon's control - was one that should be considered under federal law.

But the Supreme Court told the appeals court to look at a related case it decided in June. In Wilton vs. Seven Falls Co., the justices narrowed the circumstances under which virtually identical insurance cases are allowed to proceed on separate tracks. In Wilton, the court said there was no compelling reason for the second, or retaliatory, lawsuit to take precedence over one first filed.

Some attorneys said the Supreme Court ruling could be interpreted as a directive for the Circuit Court in New York to dismiss Lloyd's federal case.

A spokesman for Exxon Tuesday refused comment on how much it was seeking

from Lloyd's underwriters and other insurers involved. News reports, however,

put the companies' Valdez losses at between $1.2 billion and $2.5 billion - before a jury in Alaska ordered Exxon to pay billions more in punitive damages.

"The reason we want the case to be heard in Texas boils right down to the fact that we live here," Ed Burwell, an Exxon spokesman, said Tuesday. "Both companies that are directly involved - the cargo owner and the owner of the ship - are based in Houston."

The insurers had fought to have the case heard in New York because it would be "less hospitable for Exxon," one attorney told The Journal of Commerce in 1993.

Involved in the murky aftermath of the oil spill are 110 insurance concerns in 33 countries, including the United States, Britain, Canada, Germany, France and Japan.

Exxon is seeking billions in insurance coverage under its Global Corporate Excess Policy for cleanup and other costs resulting from the 1989 spill.

The insurers said after the spill that Exxon's expensive cleanup effort was a public relations ploy, so they were not required to pay the pollution- related claims.

"There is no (insurance) coverage for losses incurred as a result of public relations incidents," the companies said, contending that the spill resulted from "willful, wanton, reckless and/or intentional misconduct."

The 2nd Circuit is expected to dismiss the New York suit, allowing the Texas case to go to trial as scheduled Jan. 16.

The Supreme Court also rejected 10 other maritime law cases that were presented for possible review.

The 10 maritime and admiralty law cases turned down for review included questions on worker injuries, insurance liens, union representation and bills of lading.