24 F.4th 422
5th Cir.2022Background
- After the Deepwater Horizon spill, BP contracted O’Brien’s and NRC for cleanup; O’Brien’s agreement required CGL (comprehensive general liability) with $2,000,000 minimum per-occurrence and named BP as an additional insured.
- O’Brien’s maintained a Primary Bumbershoot (umbrella) policy and a First Excess Bumbershoot policy (combined $100M max); O’Brien’s also had a Starr CGL-like policy and a COPS policy (each $1M per-occurrence) that have been exhausted.
- The MDL B3 Master Complaint and subsequent Medical Settlement (2012–2013) created BELO (latent-injury) claims for class members who followed the settlement procedures; some B3 plaintiffs opted out and pursued individual (opt-out) claims.
- BP sought indemnification from O’Brien’s and NRC for ~1,800 BELO claims by O’Brien’s employees, ~200 by NRC employees, and some opt-out B3 claims; BP also asserted it was an additional insured under O’Brien’s bumbershoot policies.
- The district court denied BP coverage and indemnity; on appeal the Fifth Circuit held BP is an additional insured only to the extent of the contractually required $2M CGL limit, that Starr and COPS cannot be aggregated to satisfy that $2M minimum, that O’Brien’s is excused from indemnifying BELO claims because BP materially breached the consent/notice/control provisions, and remanded for claim-by-claim factual determinations on opt-out claims and NRC indemnity.
Issues
| Issue | Plaintiff's Argument (BP) | Defendant's Argument (Navigators / Responders) | Held |
|---|---|---|---|
| Is BP an additional insured under O’Brien’s bumbershoot policies? | Policy language and §12.02 require BP be named on “all policies” O’Brien’s obtains, so BP is an additional insured on bumbershoot policies. | Bumbershoot differs from CGL; BP was only entitled to be added on the Starr and COPS (CGL-type) policies that satisfied the contract. | BP is an additional insured under the bumbershoot policies to the extent required by the BP–O’Brien’s Contract (i.e., up to the $2M contractual CGL minimum). |
| Does O’Brien’s $2M contractual CGL minimum entitle BP to full bumbershoot policy limits ($100M)? | BP: “all policies” means all coverage O’Brien’s purchased; BP should get full policy limits. | Navigators: additional-insured coverage is limited to the contractual minimum; policy incorporation limits coverage to what the contract requires. | Limits follow the contractual obligation: additional insured coverage is limited to the $2M minimum required by the contract (not the full $100M). |
| Can Starr and COPS policies be combined to meet the $2M contractual CGL minimum? | BP: Starr + COPS together satisfy the $2M minimum. | Navigators/O’Brien’s: Starr and COPS are complementary layers covering distinct gaps and should not be aggregated to meet the single per-occurrence CGL minimum. | Starr and COPS cannot be combined for the contractual minimum; together they count as $1M toward the $2M requirement. |
| Did BP’s Medical Settlement and litigation conduct bar O’Brien’s indemnity (material breach) for BELO and opt-out B3 claims? | BP: settlement addressed existing B3 claims; many BELO/opt-out claims arose later so BP had no duty to get prior consent or immediate tender. | O’Brien’s: Medical Settlement compromised future BELO claims and BP settled without notice/consent, breaching control/consent/notice and materially prejudicing O’Brien’s. | BELO claims: BP materially breached consent/notice/control—O’Brien’s excused from indemnifying BELO claims. Opt-out B3 claims: materiality and notice issues require claim-by-claim factual inquiry—remanded. |
| Is NRC obligated to indemnify BP under BP–NRC Agreement given responder immunity and settlement effects? | BP: some claims may fall within NRC’s contractual indemnity (gross negligence/willful misconduct and outside responder immunity). | NRC: many claims are barred by responder immunity; district-court precedent forecloses indemnity. | Whether NRC must indemnify is a claim-specific factual question (responder-immunity and causation issues); district court erred to foreclose indemnity categorically—remanded for fact-finding. |
Key Cases Cited
- In re Deepwater Horizon, 470 S.W.3d 452 (Tex. 2015) (insurance policies may incorporate and enforce limits in underlying contracts)
- Ironshore Specialty Ins. Co. v. Aspen Underwriting, Ltd., 788 F.3d 456 (5th Cir. 2015) (additional-insured coverage limited to contractual obligation; Erie-guess context)
- Musgrove v. Southland Corp., 898 F.2d 1041 (5th Cir. 1990) (extra-contractual excess coverage cannot be read to supply obligations the contract did not require)
- Forest Oil Corp. v. Strata Energy, Inc., 929 F.2d 1039 (5th Cir. 1991) (distinguishing policies that extend coverage to contractual limits from those that do not)
- Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004) (factors for determining whether a breach is material)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (burden and effect of asserting prior material breach defense)