Lloyd's and others resist BP's bid for coverage

Steve Korris Aug. 15, 2011, 2:00pm


NEW ORLEANS – Insurers who covered pollution claims against Deepwater Horizon owner Transocean insist they didn't cover pollution claims against rig operator BP.

On Aug. 11, underwriters at Lloyd's, London and other insurers countered BP's bid for coverage as an additional insured under Transocean's excess liability policies.

Richard Dicharry of New Orleans wrote, "The pleadings do not establish that BP is entitled to unlimited coverage for the pollution liabilities for which it seeks coverage."

"BP's additional insured status under the excess policies only extends to the liabilities assumed by Transocean in its drilling contract with BP and cannot extend to any of the liabilities assumed by BP under that contract," Dicharry wrote.

"BP specifically assumed liability for pollution liabilities emanating from below the surface of land or water."

He wrote that BP never negotiated coverage under the policies.

"Instead, BP urges the court to believe that it is entitled to a free pass to unlimited coverage for the pollution liabilities that BP assumed from Transocean based on what BP incorrectly perceives is a mistake in the wording of the excess policies," he wrote.

He wrote that BP asked the court to disregard the clear intent of Transocean and the underwriters in negotiating the policies.

After the explosion, BP sought coverage from Transocean's underwriters.

The underwriters challenged BP's claim in federal court at Houston.

The U.S. Judicial Panel on Multi District consolidated the case with damage suits from many federal courts and assigned them to U.S. District Judge Carl Barbier.

BP moved for judgment on the pleadings, and the underwriters opposed it.

Dicharry wrote that Transocean assumed BP's liabilities in connection with injuries to employees, pollution originating on the surface, and other types of injury and damage.

"Discovery will confirm that Transocean and BP never intended that BP would be entitled to unrestricted assitional insurance coverage under Transocean's excess policies and that BP has never requested or obtained such broad coverage in any other relevant drilling contract," he wrote.

"Similarly, discovery will confirm that Transocean and underwriters, as the contracting parties to the excess policies, intended the excess policies to provide additional insurance coverage only to the extent provided by the drilling contract," he wrote.

"BP assumed responsibility for all pollution related liabilities not assumed by Transocean," he wrote.

He wrote that BP can't have greater rights under the policies than Transocean.

"As a stranger to the contract, BP's interpretation is irrelevant," he wrote.

He wrote that the policies recognize additional insureds only where required by written contract, bid or work order.

"Discovery will confirm that it is uncommon or nonexistent in the drilling industry for a well operator like BP to expect or require a drilling contractor, such as Transocean, to bear the well operator's liabilities through unrestricted access to the drilling contractor's insurance coverage," he wrote.

Dicharry practices at Phelps Dunbar.

George Gilly, Evans Martin and Kyle Moran, all of the same firm, worked on the brief.

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