BP can tap Transocean insurers to cover pollution liabilities: Court
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BP P.L.C. can tap Deepwater Horizon owner Transocean Ltd.'s primary and excess insurance policies for pollution-related liabilities deriving from the 2010 oil spill in the Gulf of Mexico, a federal appeals court said last week, reversing a lower court's judgment.
The case was appealed to the 5th U.S. Circuit Court of Appeals in New Orleans after a lower court determined that Transocean's insurers had no additional insured obligation to London-based BP in connection to pollution claims after the Deepwater Horizon drilling rig exploded, spilling oil in to the Gulf of Mexico.
Zug, Switzerland-based Transocean held insurance policies with primary liability insurer Ranger Insurance Ltd. and several excess liability insurers led by Lloyd's of London syndicates that together provided $750 million of general liability coverage, according to court documents.
The insurers argued that the additional insured provision in the drilling contract between BP and Transocean, which required Transocean to maintain certain minimum insurance coverages for the benefit of BP, specifically limits BP's status as an additional insured, according to court documents.
But a three-judge panel unanimously reversed the lower court's decision and said BP is entitled to coverage under each of Transocean's policies as an additional insured because the policies do not impose such limitations “as a matter of law.”
“We hold that there is no relevant limitation to BP's coverage under the policy as an additional insured, that is, so long as the insurance provision and the indemnities clauses in the drilling contract are separate and independent,” according to the opinion.
“Accordingly, we hold, under Texas case law, it is unmistakable that the provision in the drilling contract extending direct insured status to BP is separate and independent from BP's agreement to forego contractual indemnity in various other circumstances,” the judges wrote.
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