Sandefer Oil & Gas v. AIG Oil Rig of Texas

Sandefer Oil & Gas, Inc. (Sandefer) (plaintiff) was a Texas-based oil company that purchased insurance against certain oil-field risks from insurers (defendants) based in New Hampshire, New York, and abroad. In July 1985, Sandefer submitted six insurance claims regarding underground or subsurface loss events. Three of the claims arose in Louisiana; the other three arose in Texas and Oklahoma. The insurers denied Sandefer’s claims because Sandefer did not submit reasonably prompt notices of loss after learning about the incidents. Sandefer sued the insurers and AIG Oil Rig of Texas, Inc. (AIG-Texas) (defendant), which served as an agent for three of the insurers, in separate actions in Louisiana and Texas state court. The Texas action was stayed in favor of the Louisiana suit, which the insurers removed to federal court in Louisiana on diversity-of-citizenship grounds. The insurers then moved for summary judgment on the ground that Texas law applied, and Texas law provided that an insurer did not have to pay a claim if the insured failed to notify the insurer of a loss as soon as practicable, even if the insurer was not prejudiced. Sandefer responded that Louisiana law applied and that Louisiana law prohibited an insurer from denying a claim due to the lack of prompt notice of loss unless the insurer demonstrated prejudice. The magistrate judge recommended that the district court grant summary judgment to the insurers, which the district court did. Sandefer appealed.