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Lloyd's seeks to be released of obligation to cover costs of oil spill cleanup

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HOUSTON—Lloyd's of London, seeking to distance itself from the Gulf of Mexico oil spill, has filed a lawsuit asking a federal judge to declare that Transocean Ltd.'s excess insurance carriers have no obligation to cover BP P.L.C. for cleanup costs or damage claims resulting from the spill.

Lloyd's filed the suit against BP in Houston after BP asked Lloyd's for coverage under insurance policies take out by Zug, Switzerland-based Transocean, owner of the Deepwater Horizon drilling rig that was under contract to BP when it exploded April 20.

Government scientists late last week declared the Gulf of Mexico spill the worst in U.S. history, surpassing the 1989 Exxon Valdez spill in Alaska.

According to court documents, Lloyd's argues that in its contract with Transocean, BP agreed to hold the rig owner harmless for excess pollution coverage “from and against any loss, damages, expense, claims, fine, penalty, demand or liability for pollution or contamination including control and removal thereof.”

Further, Transocean's excess insurers—identified only as “various insurance companies”—asked the court to declare that they have “no additional insured obligation to BP,” according to court documents.

London-based BP is self-insured against losses arising from incidents such as the one that occurred in the Gulf.

According to court filing, Transocean's lowest layer of coverage attaches in excess of $50 million under a policy issued by Winnipeg, Manitoba-based Ranger Insurance Co.

The aggregate liability limits under the policies is $700 million.

“Because liabilities BP faces for pollution emanating from BP's well are from below the surface and from BP's well, those liabilities are not within the scope of the additional insured protection,” Lloyd's said in its complaint.

Transocean's excess insurers are seeking a declaratory judgment that they have no additional insured obligation to BP with respect to pollution claims against it for oil leaking from the well.

Lawsuits are mounting against BP, filed by thousands of commercial fishermen, property owners and tourism businesses affected by the spilled oil.