Transocean Defends $1 Billion Insurance Tower in Gulf Spill Litigation
By GREGORY DL MORRIS, who has covered the chemical and financial industry issues for the past 20 years
In mid-March 2011, Transocean and its operating subsidiaries petitioned in federal court to intervene on behalf of its underwriters, Ranger and a Lloyd's syndicate, against BP, Anadarko, and Moex, as the oil producers sought to recover damages from the tragic Macondo blowout and oil spill last year. The same day, on March 16, Moex, a subsidiary of the big Japanese trading and investment house Mitsui, filed a complaint against Transocean in support of BP and Anadarko.
To a man, none of the attorneys involved in the case would comment on the filings. But a source familiar with both explains that the stakes are not obscure admiralty law but Transocean's $1 billion insurance tower.
"BP is trying to claim entitlement to Transocean's tower," the source said, "which is directly at odds with BP's public statements that it alone would cover all the damages from the spill. Apparently not."
Another complexity in the case is that Transocean remains a co-defendant with BP, Anadarko and Moex, in the bulk of the damages cases brought by individuals and companies all along the Gulf Coast. Legal experts note that the adversarial relationship in the insurance cases is likely to complicate a coordinated defense for the other cases because of conflicting confidentiality obligations.
The main damages case is still in the briefing stage, with defendants moving for dismissal and plaintiffs opposing. That process is expected to continue through the summer, according to the judge's orders for briefs, replies, and hearings.
FIGURING OUT ALL THE FILINGS
The insurance litigation began as a separate action in the wake of the April 20, 2010, disaster that killed 11 workers on Transocean's Deepwater Horizon rig. When the rig collapsed and sank, it snapped off the riser pipe from the well, allowing 5 million barrels of oil to flow into the Gulf of Mexico, closing the Gulf to fishing and fouling beaches across five states in the worst spill in U.S. history. Anadarko was a 20 percent partner in the Macondo well, while Moex held 10 percent.
In our October 2010 cover story on the Deepwater Horizon disaster, Risk & Insurance® reported that one of the few uncomplicated aspects of the loss was the insurance on the rig: the charred hulk was a total loss at the bottom of the ocean and the claim was paid. The complex aspects of the loss were paying out the $30 billion Gulf Coast Claims Facility that BP set up under federal supervision, as well as the hundreds of lawsuits.
The securities litigation has been consolidated into a single proceeding in U.S. District Court for the Southern District of Texas, in Houston before Judge Keith Ellison. The damages litigation was consolidated into a single proceeding in U.S. District Court for the Eastern District of Louisiana in New Orleans before Judge Carl J. Barbier.
The insurance litigation was opened as a separate action on May 21, just four weeks after the blowout, when "certain underwriters at Lloyd's of London and various other insurance companies" filed suit against BP, seeking a summary judgment that the oil company was not an additional insured on Transocean's policy. Two weeks after that, on June 7 Ranger sought the same protection.
The cases simmered with little action until February 11, when the United States Judicial Panel on Multidistrict Litigation consolidated both the Lloyd's and Ranger action under the damages proceeding in New Orleans.
Then Moex filed its complaint in intervention March 16. It asserts that BP's drilling contract "required Transocean to obtain liability insurance and mandated that (BP), its subsidiaries and affiliated companies, co-owners and joint venturers, if any, and their employees, officers and agents shall be named as additional insureds in each of (Transocean's) policies ... for liabilities assumed by (Transocean) under the terms of this contract,'" and that "Moex, as a co-owner of the leasehold containing the Macondo Prospect, is a party to whom Transocean is obliged to provide liability coverage."
Moex further claims that, "to comply with its obligations under the drilling contract, Transocean purchased certain insurance policies, including the Lloyd's policies at issue in this action. The Lloyd's policies extend coverage to Moex as an additional insured. Endorsement 1 of the Lloyd's policies provides that 'where required by written contract ... additional insureds are automatically included hereunder.' "
BP and Anadarko have made similar assertions in their complaints.
Shortly after the Moex filing, Transocean filed its complaint in intervention against BP, Anadarko and Moex and in support of Lloyd's and Ranger, claiming that its insurers have no "additional-insured obligations" to BP, Anadarko and Moex regarding pollution claims against BP for Macondo oil.
March 1, 2011
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