Houston Casualty Company v. Anadarko Petroleum Corporation and Anadarko E & P Company, L.P.
552 S.W.3d 268
| Tex. App. | 2016Background
- Anadarko owned a 25% working interest in the Macondo Well; the Deepwater Horizon blowout led to extensive litigation and an MDL proceeding. Anadarko settled certain claims with BP and paid BP $4 billion; BP agreed to indemnify Anadarko for most future liability.
- Underwriters issued an Energy Package Policy to Anadarko (June 30, 2009–June 30, 2010). Section III provided excess liability coverage with a $150 million per-occurrence limit and defined “Ultimate Net Loss” to include judgments/settlements and all defence expenses.
- Section III includes a Joint Venture Provision that scales Underwriters’ liability by the insured’s percentage interest in any joint venture, but contains two exceptions: (1) when the joint-venture agreement places the whole liability on the insured; (2) when the insured becomes legally liable for an amount greater than its ownership percentage, in which case Underwriters’ liability increases by the additional percentage.
- The MDL court entered a declaratory judgment finding Anadarko jointly and severally liable under the OPA for removal costs and damages, but did not fix a specific dollar amount Anadarko must pay; later developments included BP accepting responsibility for Anadarko’s OPA liability and a consent decree with the United States.
- Anadarko sued Underwriters seeking reimbursement of defence, investigation, and adjustment expenses under Section III. The trial court held the policy unambiguous, found defence expenses subject to scaling, but ruled the MDL court’s joint-and-several adjudication triggered the second exception so Anadarko was entitled to 100% of its Ultimate Net Loss. Underwriters appealed; the Court of Appeals reversed and rendered judgment for Underwriters.
Issues
| Issue | Anadarko's Argument | Underwriters' Argument | Held |
|---|---|---|---|
| Whether the Joint Venture Provision applies to defence expenses | Defence expenses are first-party–like and not within the JV scaling; Section III’s scaling applies only to third-party damage liability | “Any liability insured under Section III” includes defence expenses because “Ultimate Net Loss” expressly includes defence expenses | Defence expenses are covered by Section III and are subject to scaling under the JV Provision |
| Whether the first exception (JV agreement places whole liability on Anadarko) applies | The Offshore Lease (incorporating OPA) makes Anadarko wholly liable for OPA removal costs, triggering the exception | The Operating Agreement and other sources create multiple potential liabilities; the Offshore Lease/OPA does not place the whole of all JV liability on Anadarko | The first exception does not apply: the JV agreement did not place the whole of the JV’s liability (all liability from the Occurrence) on Anadarko |
| Whether the MDL declaratory judgment (joint-and-several liability under OPA) triggers the second exception so Underwriters must cover 100% | The MDL order finding joint-and-several liability means Anadarko became legally liable for an amount greater than its 25% interest, triggering the exception | The MDL declaratory judgment declared liability but did not fix an amount or create an obligation to pay a specific sum; the exception requires Anadarko to be legally liable for a particular amount (judgment or settlement) exceeding its percentage | The second exception was not triggered: the MDL declaratory judgment did not fix a monetary obligation for Anadarko, so scaling remains applicable |
Key Cases Cited
- RSUI Indem. Co. v. Lynd Co., 466 S.W.3d 113 (Tex. 2015) (rules for construing insurance policies)
- Gilbert Texas Construction, L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010) (contract terms enforced as written; courts will not rewrite policy language)
- In re Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015) (policy construed as whole; context controls)
- Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211 (Tex. 2003) (defined policy terms govern meaning)
- Am. Cyanamid Co. v. Capuano, 381 F.3d 6 (1st Cir. 2004) (declaratory liability judgment does not itself award monetary recovery)
- Intercontinental Group Partnership v. KB Home Lone Star L.P., 295 S.W.3d 650 (Tex. 2009) (declaratory actions differ from actions for monetary damages)