Multimillion-Dollar Commas and “Magic Words”: The In re Deepwater Horizon Additional Insured Dispute

Alana Riksheim | Comment

The Deepwater Horizon oil spill in April 2010 caused unprecedented and catastrophic loss to communities, economies, and the environment in the Gulf of Mexico. Amidst the sea of ensuing litigation that has focused on apportioning liability, one legal battle centered on British Petroleum’s (BP) claim to additional insured coverage under the rig-owner Transocean’s primary- and excess-insurance policies. The dispute was neither insignificant in dollars-at-stake ($750 million) nor impact for the offshore insurance industry.

The additional insured dispute in the In re Deepwater Horizon saga has illustrated the difficulty courts face in determining the scope of additional insured coverage and interpreting cross-referencing provisions in umbrella insurance policies and underlying service contracts. Part II of this Comment briefly reviews the theory of indemnity and additional insured provisions as risk allocation techniques and presents relevant legal precedent with a Texas law focus. Part III then analyzes the progression of the In re Deepwater Horizon insurance dispute: from the district court’s initial order to the Texas Supreme Court’s opinion of February 13, 2015, upon certification from the United States Court of Appeals for the Fifth Circuit. The section emphasizes in detail the courts’ reasoning at each stage. Lastly, Part IV generally endorses the Texas Supreme Court’s decision to deny BP additional insured coverage broader than Transocean’s contractual indemnities, but identifies some lingering concerns raised by the court’s opinion.