By Thomas Papa and José Umbert, Zelle LLP
Synopsis
This article explores the critical differences in how corrosion exclusions are interpreted under insurance policies in the U.K. and the U.S., a distinction with far-reaching consequences for the oil and gas industry and other sectors facing significant corrosion risks.
A version of this article was originally published in the Zelle Lonestar Lowdown monthly newsletter on October 31, 2025.
Corrosion is a significant challenge for the oil and gas industry with corrosion losses regularly making headlines for the sheer scale of the losses. While the Alaskan oil spills of 2002 resulted in the state of Alaska suing BP is the most commonly cited example of a billion-dollar claim involving oil and gas and corrosion, there are numerous other examples. When a catastrophic loss occurs, the availability of insurance coverage becomes critical. Property insurance policies in the energy sector generally exclude corrosion and, as we now discuss, there are differences in interpretation of corrosion exclusions in insurance policies depending on where you are located.
Corrosion exclusions are not interpreted in the same manner on both sides of the Atlantic Ocean. Generally speaking, in the U.K., corrosion exclusions only apply to exclude the claim where the corrosion event was a gradual process, often naturally occurring over a period of time. Sudden events involving corrosion often fall outside the exclusion and are covered.
In the U.S., in general terms, any corrosion present in the events giving rise to the loss would be sufficient to trigger the exclusion with only the ensuing damage caused by the corrosion falling for coverage subject to the terms and conditions of the policy.
What follows is a brief review of both legal systems and how the caselaw reveals how the courts from both jurisdictions have generally nuanced these exclusions and shaped coverage outcomes, in ways that may be unexpected depending on where you are located.
English Law:
English courts take a temporal approach, viewing corrosion in two possible ways. One sees corrosion as a gradual, ongoing deterioration process, akin to wear and tear, typically excluded from coverage. The other interpretation occurs when the corrosion itself (not the damage caused by corrosion) occurs suddenly, and often results in corrosion damage being covered, that is the corrosion exclusion does not apply.
Another way to visualize this is that one interpretation requires the corrosion to be truly fortuitous and unexpected and therefore covered. Whereas, for the other, the exclusion is triggered because corrosion is to be expected as part of gradual deterioration. The latter would arise in the ordinary course of use and would be considered general wear and tear. The former occurs from a fortuitous event, and one that is not expected. Caselaw helps visualize this.
Take for example Burts & Harvey Ltd v Vulcan Boiler and General Insurance Co Ltd (No.1).
[i] In Burts, the negligent installation of steel tubes to transmit steam, was such that steam was able to escape and mix with other acids resulting in corrosion of the steel pipes themselves.
[i] [1966] 1 Lloyd’s Rep. 161.
The judge in Burts determined that a corrosion exclusion only applied to that corrosion which would have been inevitable and therefore not fortuitous. Whereas in that case, the corrosion was a sudden or accidental event and thus fell outside of the exclusion and was covered. This is consistent with the English law approach to gradual deterioration exclusions where inevitable damage is often excluded.[i]
Conversely, corrosion to the walls of a reactor (where natural corrosion would occur) would fall within a corrosion exclusion and would not be covered because the corrosion occurred naturally over a period of time.[ii] Albeit, cover may exist for the resulting physical damage caused by corrosion as such damage would be fortuitous and would not fall under the exclusion subject to the terms and condition of the policy. The approach taken by English courts differs from that generally taken in the U.S.
[i] See e.g. Leeds Beckett University (formerly Leeds Metropolitan University) v Travelers Insurance Co Ltd [2017] EWHC 558 (TCC).
[ii] MDS Inc v Factory Mutual Insurance Co 2021 ONCA 594. While this case comes from Canda it applied English law.
U.S. Law:
Generally speaking, and subject to the laws of each state, U.S. jurisprudence adopts a sequential event approach, analyzing corrosion as an initially excluded peril albeit one that may trigger covered ensuing perils. Whether the corrosion was naturally occurring or a sudden event is of less importance, rather U.S. courts often differentiate between the excluded corrosion damage and consequent loss from an insured peril, allowing coverage of the latter under “ensuing loss” or “resulting damage” clauses.
This approach has been generally adopted because U.S. courts take a literal approach to the language used in the policy itself, absent a finding of ambiguity. Essentially, if corrosion is excluded, and corrosion occurs, whether naturally or fortuitously, the exclusion is triggered and there is no coverage.
As above, the laws of each state should be checked to ensure consistency, but generally speaking, the existence of corrosion triggers the exclusion regardless of how the corrosion occurred. In such an event, whether the loss was sudden or natural is not important, all that matters was that the loss was caused by corrosion.[i] Texas law follows this approach.[ii]
In Resorts International, Inc. v. American Home Assurance Co.,[iii] the Florida District Court of Appeal found that damage to an insured air conditioning unit that resulted from corrosion was not covered under an all risks boiler and machinery policy which insured any “sudden and accidental breakdown” of the insured equipment. The court found that as it was undisputed that corrosion caused the air conditioning unit to fail, the exclusion of corrosion or erosion of material applied to exclude the claim. An analysis of how the corrosion occurred was not necessary, given the exclusion.
[i] See e.g. Wilfredo Nunez et al. v. Merrimack Mutual Fire Insurance Co., No. 2013-129-Appeal, Supreme Court of Rhode Island, (April 17, 2014).
[ii] Saint Paul Surplus Lines Ins. Co. v. Geo Pipe Co., 25 S.W.3d 900 (Tex. App. 2000)
[iii] 311 So. 2d 806 (Fla. Dist. Ct. App. 1975).
Another example is Central Louisiana Electric Co. v. Westinghouse Electric Corp.[i] There the appellate court found the corrosion exclusion was unambiguous and reflected the parties’ clear intent to exclude all coverages relating to damages caused by corrosion. When expert evidence established that corrosion caused the damage (cracks in the turbines) the court held that the damage was not the result of an accident as defined by the policy, and thus the damage was not covered.
The differences between this approach and the English law approach are significant. In the U.S. for the most part, there is no need to consider whether the loss was inevitable or sudden, the exclusion is triggered regardless.
[i] 569 So. 2d 120 (La. Ct. App. 1990), aff’d, 579 So. 2d 981 (La. 1991).
A good example of this comes from Arkwright–Boston Manufacturers Mutual Insurance Co. v. Wausau Paper Mills Co,[i]where the plaintiff asserted that the damage to a reactor was caused by a sudden acid attack rather than a gradual wearing away, an argument that would be sufficient for the exclusion to not apply were the case being heard under English law. However, in Arkwright, the court found the corrosion exclusion applied and the speed at which the corrosion took place was not relevant. With the court finding, under Wisconsin law in that example, that it was not a reasonable interpretation of an all-risk policy to limit the corrosion exclusion to inevitable corrosion. In essence, the court rejected the approach taken by English courts. Other states have come to the same conclusion, e.g. under Colorado law, corrosion in an all-risk policy “unambiguously refers to all corrosion, however brought about.”[ii]
[i] 818 F.2d 591, 594–95 (7th Cir.1987).
[ii] Adams—Arapahoe Joint School District No. 28–J v. Continental Insurance Co., 891 F.2d 772, 777 (10th Cir.1989).
Moreover, U.S. courts include other types of corrosion or cracking, e.g. stress corrosion cracking, to all fall within the corrosion exclusion, “we conclude that stress corrosion cracking is a form of corrosion and falls under the policy’s exclusion for corrosion as a matter of law.”[i]
Conclusion:
Under English law, corrosion is only excluded under the corrosion exclusion if the corrosion was gradual, naturally occurring or part of gradual deterioration. Where the corrosion is sudden and unexpected, and therefore fortuitous, the loss falls outside the exclusion and would be covered.
In the U.S., the sequential event framework means that, generally speaking, any loss involving corrosion will fall within the exclusion, whether the corrosion event was sudden or not.
[i] City Brewing Co., LLC v. Liberty Mut. Fire Ins. Co., 2013 IL App (1st) 111996-U, ¶ 51.
It should be noted that, depending on the policy wording, both jurisdictions sometimes allow coverage for certain types of ensuing damage caused by corrosion, even if the corrosion itself is excluded.
In summary, while those approaching a corrosion exclusion from an English law standpoint may expect that the corrosion exclusion will not apply if the event was sudden, those across the Atlantic will not be accustomed to such an approach. Careful consideration is needed when approaching corrosion exclusions to ensure that the needs and expectations of the policyholder fit with the type of cover being offered depending on which jurisdiction you are based. As it is likely that those working in the oil and gas sector will continue to experience issues involving corrosion, it is important that all involved – risk managers, brokers, carriers, and their counsel are familiar with the differences in interpretation of corrosion exclusions.
About The Authors
Tom is a Texas licensed attorney and English solicitor. Tom represents global insurance companies in insurance coverage and defense matters in connection with property, energy, construction and professional negligence claims. Tom often acts on behalf of reinsurers/ the London market and advises on reinsurance coverage.
José represents insurance companies in complex first- and third-party claims. He advises on coverage in property, business interruption, and liability claims, with a focus on energy losses, and handles disputes in the U.S., many countries in Latin America, and Spain. José also acts as coverage and monitoring counsel for U.S. casualty claims, mainly in the oil and gas sector. He is an English solicitor and a licensed attorney in California and Spain and has written and presented on many insurance coverage issues.
