Mealey's Reports: Excess insurers say no coverage is afforded for gulf oil spill

HOUSTON – (Mealey’s) Transocean Ltd.’s excess insurers filed a complaint for declaratory judgment Friday in a Texas federal court, seeking a ruling that no additional insured coverage is owed to BP plc. with respect to pollution claims arising out of the explosion of BP’s oil well in the Gulf of Mexico (Certain Underwriters at Lloyd’s, London, et al. v. BP plc. et al., No. 10-01823, S.D. Texas).

The complaint, filed in the U.S. District Court for the Southern District of Texas by Certain Underwriters of Lloyd’s, London, alleges that BP is not entitled to coverage as an additional insured because the release of oil on April 20 emanated from BP’s well and not Transocean’s oil rig.  Transocean owned the Deepwater Horizon oil rig that BP contracted to use for its drilling activities.

Pursuant to the drilling contract, BP was named as an additional insured under Transocean’s excess policies issued by Certain Underwriters.  On May 14, BP filed a claim for coverage with Transocean’s excess insurers.  In response, the insurers filed the instant suit.

The insurers maintain that the policies provide coverage to BP only for surface pollution from substances in Transocean’s possession and liabilities that originate above land and water.

“Because liabilities BP faces for pollution emanating from BP’s well are from below the surface and from BP’s well, those liabilities are not within the scope of the additional insured protection,” the insurers claim. 

[Editor's Note:  Full coverage will be in the May 26 issue of Mealey’s Litigation Report: Insurance.  In the meantime, the complaint is available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.  Document #03-100526-002C.  For all of your legal news needs, please visit www.lexisnexis.com/mealeys.]

For more information, call editor Gina Cappello at 610-205-1108, or e-mail her at gina.cappello@lexisnexis.com.