$750,000,000 Missing Comma Comes Unhinged In BP’s Additional Insured Claim

Maritime

Action Item: Courts must consider whether an insurance policy incorporates other documents and the extent thereof in evaluating the existence of additional insured coverage. Parties should evaluate the policy and underlying contract language to ascertain whether the insurance coverage matches indemnity obligations.

In the ongoing Deepwater Horizon saga, Transocean and its insurers contested whether BP was entitled to additional insured status under Transocean's policy and the parties' drilling contract. The case went before the Fifth Circuit Court of Appeals, which at first ruled in BP's favor, and then withdrew its opinion and certified two questions for the Texas Supreme Court's consideration. The first asked whether an earlier decision in Evanston Insurance Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660 (Tex. 2008), compelled a finding that BP was covered for the subsurface pollution damages claimed because the language in the umbrella policy alone determines the extent of BP's coverage as an additional insured so long as the additional insured and indemnity provisions of the drilling contract are “separate and distinct.”

In a long-awaited decision, the Court ruled 8-to-1 on February 13, 2015, that BP's additional insured claim is inextricably intertwined with the provisions of its drilling contract with Transocean. See In Re Deepwater Horizon, Relator, No. 13-0670, slip opinion (Tex. Feb. 13, 2015). Because the only reasonable construction of that contract's additional insured clause is that BP's status as an additional insured is limited to liabilities assumed by Transocean, and BP assumed liabilities for subsurface pollution, BP is not covered for the damages claimed. Id. Because of that holding, the Court did not reach the second question, which asked whether the contra proferentum doctrine applied to the interpretation of the insurance coverage provision in the drilling contract.

One portion of BP's argument hinged on a missing comma (following the word “Compensation”) in the drilling contract's additional insured clause, which read:

[BP], its subsidiaries and affiliated companies, co-owners, and joint venturers, if any, and their employees, officers, and agents shall be named as additional insureds in each of [Transocean's] policies, except Workers' Compensation for liabilities assumed by [Transocean] under the terms of this contract. BP argued that the missing comma meant that its coverage extended to the full limit...