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BP Drops Rehearing Motion For Transocean’s Policy After Settlement of Deepwater Claims

Case:   In re Deepwater Horizon, 2015 Tex. LEXIS 141, 58 Tex. Sup. J. 330 (Tex. 2015)
              Supreme Court of Texas
              No. 13-0670 (February 13, 2015)

In the last edition, we reported on the response by the Texas Supreme Court to the certified questions from the United States Fifth Circuit Court of Appeals concerning to what extent BP was entitled to coverage as an additional insured under Transocean’s first $750 million in insurance. BP sought coverage for its subsurface pollution exposure, arguing that only the wording of the policies (and not the terms of the Drilling Contract) could be considered in determining the scope of coverage afforded to them as an additional insured, and that as the policies had no express limitations on the coverage afforded, BP was entitled to full coverage, even for the obligations it assumed through the indemnity provisions of the Drilling Contract between the parties. This position was rejected by the Texas Supreme Court upon its finding that the policies in question included sufficient language to require consultation of the Drilling Contract to ascertain the extent of additional insured coverage to be afforded. On April 22, 2015, BP filed a Motion for Rehearing, seeking reconsideration of the issues.

Thereafter, citing a May 20, 2015 confidential settlement between BP, Transocean and Halliburton, on May 27, 2015 BP withdrew its Motion for Rehearing, such that the Texas Supreme Court’s February 13, 2015 decision will stand as the most recent statement of Texas law on construing additional insured coverage in connection with the terms of a contract the policy incorporated by reference. The Texas Supreme Court sanctioned the well established practice of incorporating the terms and limitations of drilling contracts into additional insured requirements of policies to effectuate the parties intention of having the additional insured obligations be co-extensive with the liabilities, i.e. the indemnities assumed.

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