Lloyd's, along with other excess insurers, recently filed suit against BP, seeking a declaration that there is no obligation to cover BP as an additional insured in policies issued to Transocean Ltd. Certain Underwriters at Lloyd's London v. BP P.L.C., No. 4:10-cv-01823 (S.D. Tex. filed May 21, 2010) (See Complaint).
Transocean owns the Deepwater Horizon drilling rig that was under contract to BP at the time of explosion and sinking of the rig on April 20, 2010. In the contract addressing use of the rig, Transocean agreed to defend, indemnify and hold BP harmless from liability for pollution or contamination that originated above the surface of the land or water from spills, leaks or discharges of oil in the possession and control of Transocean. BP, on the other hand, agreed to defend, indemnify and hold Transocean harmless from liability for pollution or contamination arising out of operations under the contract and not assumed by Transocean. The contract further provided that BP would be added as an additional insured under policies issued by Lloyd's and other excess insurers only "for liabilities assumed by Transocean under the terms of the contract", i.e., above land or water surface pollution from substances in Tranocean's possession.
On May 14, 2010, BP asked Lloyd's for coverage under Transocean's policies. BP's request was denied. The excess insurers contend there is no coverage because BP faces liability for its work done below the surface and from BP's well, which was not in Transocean's possession.
The suit seeks a declaration that BP assumed full responsibility in the drilling contract for all liabilities arising out of the release of oil from BP's well and that the additional insured status in the drilling contract does not extend to the pollution liabilities BP has and will incur. Finally, the excess insurers request a declaration that BP is not entitled to coverage under any of the policies for its pollution liabilities.
The complaint states Transocean has excess coverage of $700 million. BP and Transocean, however, face more than 130 lawsuits already filed by thousands of commercial fishermen, property owners, and tourist businesses in the Gulf area.
