For those regular readers of the offshore bulletin who have been following the BP and Transocean saga (sometimes referred to as Ranger Insurance), which flowed from the Deepwater Horizon disaster, there has recently been a surprising development.

As reported in our June 2014 bulletin (http://www.hfw.com/Offshore-Bulletin-June-2014), the Texas Supreme Court had accepted the case as an appeal by BP and requested briefs from all parties, with oral arguments scheduled for 16 September 2014. The Court had been asked to decide whether:

  1. Evanston Ins. Co. v ATOFINA Petrochems, Inc.1, compels a finding that BP is covered for the damages at issue, because the language of the umbrella policies alone determines the extent of BP’s coverage as an additional insured if, and so long as, the additional insured and indemnity provisions of the drilling contract are “separate and independent”?
  2. The doctrine of contra proferentem2 applies to the interpretation of the insurance coverage provision of the drilling contract under the ATOFINA case, given the facts of this case?

In a judgment issued on the 13 February 20153 the Texas Supreme Court held that while BP was an additional insured under Transocean’s policies, this was only to the extent that Transocean had assumed responsibility in the drilling contract. BP was therefore not covered under the Transocean policies for the subsurface pollution because BP, not Transocean, had assumed liability for such claims.

The court chose not to answer the second question concerning the doctrine of contra proferentem as, based on their analysis, it was unnecessary.

In light of this result BP applied for a Motion for Rehearing on 22 April 2015. Then on the 27 May 2015 BP made an application to the Supreme Court of Texas withdrawing the Motion for Rehearing as a confidential settlement agreement had been reached. Further, it was agreed that the parties would move the United States Court of Appeals for the Fifth Circuit to dismiss the appeal In re Deepwater Horizon4.

We have no way of knowing the details of the confidential settlement agreement, but, as the rehearing did not occur, it is the Texas Supreme Court’s opinion of 13 February 2015 that remains the controlling precedent.

Ultimately the lesson to be learnt in relation at least to the insurance aspect of this incident is that all parties need to check the terms of the insurance to ensure that:

  1. Appropriate cover is in place.
  2. Any limits to the cover are clear.