Litigation and Regulatory Compliance



In Re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico on April 20, 2010

December 8, 2011 Published Work
Insurance Litigation Reporter, Vol. 33, No. 20

We previously reported on the action commenced by Transocean's insurers against BP, filed in May 2010, in which Transocean's insurers challenged BP's claims as an additional insured under Transocean's insurance policies. (Insurance Litigation Reporter, Vol. 32, No. 9; Vol. 32, No. 14; Vol. 33, No.1) On November 15, 2011, the U.S. District Court for the Eastern District of Louisiana denied BP's motion for judgment on the pleadings, holding that BP is not an additional insured and is not entitled to coverage under Transocean's insurance policies for the claims in question (i.e., relating to oil pollution risks). 2011 WL 5547259 (E.D.La., Nov. 15, 2011).

The court stated the issue as follows:

"Simply stated, the issue is the extent of "additional insured" coverage, if any, to which BP is entitled by virtue of the insurance contracts procured by Transocean as the named insured. Ranger, the Excess [*7] Insurers, and Transocean argue for a limited scope of coverage for BP: only to the extent that Transocean is obligated in the Drilling Contract to indemnify BP. BP argues for broad coverage: coverage is not limited by the Drilling Contract and is interpreted solely in reference to the terms of the Insurance Policies."

Id. at *6-7.

Thus, while the parties agreed that while BP was named as an additional insured under Transocean's policies, the scope of that coverage was in dispute. BP argued that the court need look no further than the insurance policy to determine the scope of coverage, citing the holding in Evanston Insurance Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008). However, the court distinguished ATOFINA and held that the proper inquiry in this case required the court to review the terms of the contract between Transocean and BP in order to determine the scope of coverage afforded to BP as an additional insured under Transocean's policies. Part of the court's rationale for looking at the drilling contract between Transocean and BP was the fact that Transocean's policies only allowed Transocean to name additional insureds to the extent required under contract. Id. at *20

The court therefore held that:

"Because Transocean did not assume the oil pollution risks pertaining to the Deepwater Horizon Incident—BP did—Transocean was not required to name BP as an additional insured as to those risks. Because there is no insurance obligation as to those risks, BP is not an "Insured" (or "additional insured") for those risks."

Id. at *75.

We will continue to follow the litigation and endeavor to report on further developments, including any appeal from this decision.