A Texas federal judge ruled that the insurer did not have to defend a design and construction consultant against the employer’s liability claim for a defective oil well because cover was excluded for property damage to ‘that particular part of real property on which any contractor working directly or indirectly on your behalf are performing operations, if the property damage arises out of those operations’.

After finding that the defective well had caused property damage, the court examined the question whether it arose out of ‘performing operations’.

The consultants alleged they were merely consultants and the actual sinking of the well was not part of their operations. The court found that the consultant designed the well, engaged the drilling contractor, consulted with and advised the owner and the drilling contractor, decided the total depth of the hole, decided on how deep to set the casing, and was in control of the drilling operation. Therefore the alleged damage to physical property occurred during the performance of the consultant’s operations. The consultant had agreed to provide the property owner with a functioning well and had failed to do so. The origin of the damages arose out of the consultant’s operations.

The case is Kinsale Insurance Co v Etopsi Oil & Gas LLC no 6:19-cv-00413.