The $750,000,000 Missing Comma?
In April 2010, the mobile offshore drilling unit ("MODU") Deepwater Horizon suffered an explosion and catastrophic fire that led to the rig's sinking, the loss of eleven lives, and the largest oil spill disaster in U.S. history. The event sparked an onslaught of litigation, which was consolidated in a multi-district litigation ("MDL") proceeding in New Orleans. Transocean Offshore Deepwater Drilling Inc. ("Transocean") owned the rig and insured it through Ranger Insurance Co. Ranger provided $50 million in general liability coverage, and underwriters from London market syndicates provided four layers of excess coverage worth $700 million. The Ranger and excess policies contained materially equivalent terms. BP America Production Company ("BP") had entered a Drilling Contract with Transocean to employ the rig to exploit the Macondo well. Various BP companies were included as additional insureds under Transocean's policy.
In a short-lived decision, In re Deepwater Horizon (Ranger Insurance, Limited v. Transocean Offshore Deepwater Drilling, Inc.), 710 F.3d 338 (5th Cir. 2013), the Fifth Circuit held that the umbrella insurance policy, and not the indemnity provisions in the Drilling Contract, controlled the extent to which BP was covered for operations under the Drilling Contract.
The Drilling Contract required Transocean to maintain insurance covering its operations per Exhibit C to the contract, which obligated Transocean to name BP and its affiliated companies "as additional insureds in each of [Transocean's] policies, except Worker's Compensation for liabilities assumed by [Transocean] under the terms of this Contract." While the parties agreed that the Drilling Contract constituted an "Insured Contract" under the policy, the insurers sought declaratory judgment that they owed no additional insured obligation to BP with respect to pollution claims emanating from the Macondo well. BP argued that it was an additional insured under the policies, and that the policies aloneand not the Drilling Contract's indemnity obligationsgoverned the scope of BP's additional insured coverage.
But for a missing comma, the world was lost? The insurers argued that their additional insured obligation was limited to liabilities assumed by Transocean under the Drilling Contract's terms. Because the Drilling Contract did not impose indemnity obligations upon Transocean with respect to pollution-related liabilities, the lower court found that BP was not covered...
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