May 21, 2013 Articles

Fifth Circuit Reverses in Favor of BP in Deepwater Horizon Litigation

In a major victory for BP, the Fifth Circuit ruled that BP was entitled to coverage as an additional insured under the policies of Transocean, owner of the oil rig that exploded

by Charles Platto, Joseph G. Grasso, and Michael Menapace [1]

The same week in which the trial of the multibillion dollar claims by the U.S. government and private parties against BP and the other parties involved with the Deepwater Horizon drilling rig was getting under way in federal court in New Orleans, the Fifth Circuit Court of Appeals was putting the finishing touches on its decision in the declaratory judgment case brought by Transocean’s primary and excess insurers against BP. It involved BP’s claim for coverage as an additional insured under the policies of Transocean, owner of the rig.

On Friday, March 1, 2013, the Fifth Circuit unanimously reversed the decision of the U.S. District Court for the Eastern District of Louisiana, which had previously granted judgment in the insurers’ favor denying coverage to BP. In a major victory for BP, the Fifth Circuit ruled that BP was entitled to coverage as an additional insured under the Transocean policies.[2]

We have been following and reporting on this case since its inception.[3] As previously reported, Transocean maintained primary and excess liability coverage in the amount of $750 million covering the period during which the explosion of the Deepwater Horizon drilling rig took place.[4] Transocean was a contractor to BP, and BP and its affiliated entities were named as additional insureds under the policies.[5] The dispute with the insurers arose because under the drilling contract between BP and Transocean, Transocean was only obligated to indemnify BP and to name BP as an additional insured for surface pollution, and the major pollution claims resulted from subsurface pollution caused by the well blowout.[6] However, there was a question as to whether the insurance policies were similarly limited.

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