In re Deepwater Horizon

Transocean (defendant) owned the Deepwater Horizon, a mobile offshore-drilling platform located in the Gulf of Mexico. Transocean entered into an oil-drilling contract with BP p.l.c. (plaintiff), the oil-field developer. Under the terms of the drilling contract, Transocean assumed the risk for any above-surface pollution, and BP assumed the risk for subsurface pollution. The drilling contract required Transocean to indemnify BP for the liabilities it assumed in the contract. Transocean’s insurance policies did not name BP as an additional-insured party but did provide for additional-insured coverage if required by contractual obligation. After an explosion occurred on the Deepwater Horizon, it caught fire and eventually sank, killing 11 crew members. As a result of the accident, a subsurface discharge of millions of gallons of oil occurred, resulting in tremendous ecological damage. Numerous legal claims arising from the disaster were filed. In one suit, BP made a demand for coverage against Transocean’s insurers (the insurers) (defendants) as an additional-insured party on Transocean’s insurance policies. Transocean intervened in the suit as a defendant with the insurers. The insurers and Transocean claimed that BP was only an additional-insured party for above-surface pollution liabilities and therefore not entitled to coverage for the Deepwater Horizon incident, which involved subsurface pollution. The district court agreed with the insurers and Transocean and granted summary judgment in their favor. BP appealed, and the court of appeals reversed the district court, holding that the insurance policies did not place such a limitation on BP’s additional-insured status. On rehearing, the court of appeals withdrew its decision and certified the question of BP’s coverage under Transocean’s policies for this incident to the Texas Supreme Court.