Texas Supreme Court to Rule on BP-Transocean Coverage Dispute

(Tex. Sept. 6, 2013) 

The Texas Supreme Court announced Friday that it would enter the fight over $750 million in insurance coverage for the catastrophic BP oil spill that occurred in April 2010.

This past March, the Fifth Circuit rule on the scope of BP’s additional insured coverage under excess policies issued to Transocean. The Fifth Circuit ruled that “where an additional insured provision is separate from and additional to an indemnity provision, the scope of the insurance requirement is not limited by the indemnity claims.” Accordingly, the Fifth Circuit held that where the umbrella policies between the insurers and Transocean did not impose any relevant limitation upon the extent to which BP was an additional insured, and because the additional insured provision in the drilling contract was separate from and additional to the indemnity provisions therein, BP was entitled to coverage under each of Transocean’s policies as an additional insured. In so ruling, the Fifth Circuit rejected the insurer’s argument that the scope of additional insured coverage should be limited by the indemnity provision in the drilling contract between BP and Transocean’s predecessor, which made BP responsible for subsurface pollution.

On August 29, 2013, the Fifth Circuit unanimously withdrew its opinion, reasoning that because the case involved “important and determinative questions of Texaslaw as to which there is no controlling Texas Supreme Court precedent,” it should certify questions to the Texas Supreme Court instead. Specifically, the Fifth Circuit certified the question of whether Evanston Ins. Co. v. ATOFINA Petrochems., Inc., 256 S.W.3d 660 (Tex. 2008) compels a finding that BP is covered for the damages as issue because the language of the umbrella policies alone determines the extent of BP’s coverage as an additional insured if, and so long as, the additional insured and indemnity provisions of the drilling contract are “separate and independent.” The Fifth Circuit also certified the question of whether the doctrine of contra proferentem applies to the interpretation of insurance coverage provision given the sophistication of the parties involved.

This past Friday, the Texas Supreme Court pronounced that it had accepted the certified questions. A date for oral argument has not yet been set.

For a copy of the decision, click here. .

 

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