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Deepwater Horizon

By Robert M. Browning
April 01, 2016

Catastrophic events often engender litigation that pushes the limits of our legal system. However, the tragic circumstances of the blowout of the Macondo Well that was being drilled in the Gulf of Mexico by Deepwater Horizon have helped clarify how to determine the extent of insurance coverage that is extended to parties who contract with the insured to be named as an additional insured on its liability policies.

Background

No other industry surpasses oil and gas exploration and production for the extent of its contractual allocation of responsibility for losses. The drilling contract between well operator British Petroleum (BP) and drilling contractor Transocean contained the industry's standard reciprocal allocation of risk. For example, Transocean agreed to indemnify BP for injuries and deaths of employees of Transocean and its contractors, and BP agreed to indemnify Transocean for injuries and deaths of employees of BP and its contractors (other than Transocean). With respect to pollution, Transocean agreed to indemnify BP for pollution originating above the ocean surface (from Transocean's rig), and BP agreed to indemnify Transocean for pollution originating below the surface of the water (from BP's well). In addition to the indemnity obligations, the drilling contract required Transocean to carry liability insurance and to name BP as an additional insured on all of its liability policies for “liabilities assumed by [Transocean] under the terms of [the Drilling] Contract.”

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