Texas Appellate Court Rules for Former Energy CFO in Insurance Dispute

Precedent set for energy sector amid tough financial times

Sep 17, 2015, 15:14 ET from Johns Marrs Ellis & Hodge LLP

HOUSTON, Sept. 17, 2015 /PRNewswire/ -- The Texas 14th Court of Appeals this week issued a ruling that may have major implications for energy-company executives and their insurers as they navigate rough financial waters.

The appellate court ruled in favor of former Superior Offshore International Inc. Chief Financial Officer Roger D. Burks and sent his case back to the trial court in Harris County. The legal fight is over whether Superior's director-and-officer insurer, XL Specialty Insurance Co., should have paid to defend or indemnify Mr. Burks as part of Superior's bankruptcy litigation.

This recent ruling covers the same issues that bankruptcy courts, energy company executives, and insurers increasingly will face as energy companies hit hard financial times and bankruptcies mount due to the fall in oil prices, according to Mr. Burks' lawyers.

"This case will matter to C-suite executives of beleaguered companies and the lawyers who defend them. The court's opinion makes it much harder for insurance companies in Texas to just deny coverage for defense costs when a bankruptcy trustee tries to force directors and officers to forfeit compensation, severance packages, and stock," says Chris Johns, counsel for Mr. Burks and an Austin-based partner in the Texas firm Johns Marrs Ellis & Hodge LLP.

As will likely happen when any energy company seeks bankruptcy protection in the coming months, Superior faced both bankruptcy and shareholder lawsuits. Here, the insurer refused to cover Mr. Burks' defense costs when the company's bankruptcy estate came after his compensation.

"It's a reminder that when management faces allegations of breach of fiduciary duty, his insurance company can't just wash its hands of the matter based on the mere accusation. These policies are intended to allow the director to defend his innocence," says Joseph Marrs, a firm partner in Houston who also represents Mr. Burks.

The trial court now has been told to take another look at the breach-of-contract claims filed by Mr. Burks, who is seeking around $2 million in damages for the compensation he lost when he settled with the bankruptcy estate, plus legal fees. The case is Roger D. Burks v. XL Specialty Insurance Co., No. 14-12-00740-CV.

For more information about the win for Johns Marrs Ellis & Hodge LLP, contact Mary Flood at 800-559-4534 or mary@androvett.com.


SOURCE Johns Marrs Ellis & Hodge LLP