in Re Deepwater Horizon
470 S.W.3d 452
| Tex. | 2015Background
- The Deepwater Horizon exploded and sank in April 2010, causing deaths and extensive subsurface oil pollution; BP and Transocean faced massive related claims.
- Transocean (rig owner) had primary and excess liability policies (a $50M primary plus layers of excess insurance) that by their terms extend insured status to "any person or entity to whom the ‘Insured’ is obliged by oral or written ‘Insured Contract’ ... to provide insurance such as afforded by [the] Policy."
- Under the December 1998 Drilling Contract, Transocean and BP agreed to a "knock-for-knock" allocation: Transocean indemnified BP for above-surface pollution; BP indemnified Transocean for pollution not assumed by Transocean (i.e., subsurface pollution).
- Exhibit C to the Drilling Contract required Transocean to name BP as an additional insured "in each of [Transocean’s] policies, except Workers’ Compensation for liabilities assumed by [Transocean] under the terms of this contract."
- Insurers and Transocean denied BP coverage for subsurface pollution claims, arguing the policies incorporate the Drilling Contract limitation; the district court agreed, the Fifth Circuit certified questions to the Texas Supreme Court.
Issues
| Issue | Plaintiff's Argument (BP) | Defendant's Argument (Transocean / Insurers) | Held |
|---|---|---|---|
| Whether ATOFINA/four-corners principle requires coverage to be determined solely from policy language | ATOFINA means the four corners of the insurance policies control; here those policies contain no express limitation, so BP is covered for liabilities "imposed by law," including subsurface pollution | Policies link additional-insured status to an "Insured Contract" and to being "obliged" or "where required" by contract, so the Drilling Contract is incorporated and its limits apply | No — policy language required consulting the Drilling Contract; incorporation by reference is permissible and applicable here |
| Whether the Drilling Contract’s additional‑insured clause limits BP’s coverage to liabilities Transocean assumed | BP: the clause is a narrow exception (only excluding workers’ compensation) and does not limit coverage for liabilities imposed by law | Transocean/Insurers: clause reasonably limits additional-insured status to liabilities Transocean agreed to assume (i.e., above-surface pollution) | Clause reasonably construed to limit BP’s additional‑insured status to liabilities Transocean assumed; BP not insured for subsurface pollution |
| Whether indemnity and insurance provisions are separate so indemnity allocation cannot limit insurance coverage | BP: the insurance duty is independent; Article 20.1 preserves insurer obligations and does not import the indemnity limit into policy coverage | Transocean/Insurers: although duties are separate, the contract ties Transocean’s duty to insure BP to the liabilities Transocean assumed, so scope can be congruent | Duties may be separate, but here the contract ties the duty to insure to the liabilities Transocean assumed; scope is congruent and limits coverage |
| Whether contra proferentem (ambiguity) applies | BP: any ambiguity should be resolved for the insured; ATOFINA supports reading coverage from the policy alone | Transocean/Insurers: no ambiguity because only reasonable construction limits BP to assumed liabilities | Not reached on merits — court found no genuine ambiguity because only one reasonable interpretation exists |
Key Cases Cited
- Evanston Ins. Co. v. ATOFINA Petrochems., Inc., 256 S.W.3d 660 (Tex. 2008) (four-corners rule governs whether and when policy language alone defines additional-insured coverage)
- Urrutia v. Decker, 992 S.W.2d 440 (Tex. 1999) (an external contract may be incorporated into an insurance policy by explicit reference)
- Getty Oil Co. v. Ins. Co. of N. Am., 845 S.W.2d 794 (Tex. 1992) (indemnity and insurance clauses can impose separate obligations)
- Aubris Res. LP v. St. Paul Fire & Marine Ins. Co., 566 F.3d 483 (5th Cir. 2009) (court must examine policy language and the underlying contract when policy requires it)
- Becker v. Tidewater, Inc., 586 F.3d 358 (5th Cir. 2009) (construing similar additional-insured language to limit coverage by reference to the underlying contract)
- Owen v. Hendricks, 433 S.W.2d 164 (Tex. 1968) (incorporation by reference can be effected without specific "magic" words; intent to include is key)