BP wins coverage for Deepwater Horizon pollution claims

The Deepwater Horizon rig operated under a drilling contract between BP and Transocean.  The contract had indemnity provisions between BP and Transocean for pollution claims depending on whether the contamination originated above water.  The contract also required Transocean to maintain BP as an additional insured under Transocean’s liability coverage.  In Ranger Insurance v. Transocean Offshore, the parties agreed that BP was entitled to some coverage as an additional insured, but disputed whether that coverage reached pollution liability, since the spill originated below water in BP’s area of responsibility under the indemnity clauses.  No. 12-30230 (March 1, 2013).  The Fifth Circuit reasoned: (1) Texas law begins by examining the policy, which did not restrict pollution coverage when read in light of earlier cases involving similar clauses; (2) the terms of the drilling contract did not change that conclusion, as its indemnity provisions were sufficiently “discrete” from its additional insured provision.  The opinion reviews what the Court saw as a consistent line of Fifth Circuit and Texas authority about the interplay of indemnity and “additional insured” clauses.