Additional insured provisions are a common risk allocation technique. Unfortunately, they often give rise to litigation over the scope of coverage afforded to the additional insured, and particularly over the role of the underlying contract in determining that scope of coverage. The latest illustration is the Texas Supreme Court’s much anticipated opinion issued on Friday, February 13, in In re Deepwater Horizon, No. 13-0670, ___ S.W.3d ___ (Tex. Feb. 13, 2015). As will be seen, this holding appears to represent a significant expansion of the type of policy language that will be considered sufficient to incorporate limitations on the scope of coverage from an outside contract.

Shortly after the Macondo blowout, BP made a claim as an additional insured seeking full coverage on Transocean’s entire $750 million insurance stack. Given the magnitude of the spill, this claim could seriously deplete coverage for Transocean’s own potential liabilities. Transocean and its insurers naturally contended that the scope of coverage to which BP was entitled was no broader than Transocean’s very limited indemnity obligations and, in particular, did not protect BP for subsurface pollution.

The litigation in federal court illustrates the difficulty courts have in addressing this type of additional insured coverage issue. The federal district court held that BP’s coverage was no broader than Transocean’s indemnity obligations. The Fifth Circuit later reversed that decision (see our earlier post here) and granted BP full access to the policies but—on rehearing—vacated its own decision and certified two questions to the Texas Supreme Court

 

JUNEAU, Alaska, (Reuters) - Investigators are reviewing the cause of an oil production pipeline breach on Alaska's North Slope where upwards of 4,000 gallons (15,100 liters) of fluid spilled, state officials said on Monday.

 

The production facility is jointly owned by Hilcorp and BP Alaska, but it is operated by Hilcorp, which took over operations from BP in November when that company sold off some of its Alaska assets. 

 

The ruptured line sprayed the fluid – made up of oil, natural gas and water – on Saturday over an area covering about 38,000 square feet (3,500 square meters), according to a Department of Environmental Conservation report on Monday.

 

March 6, 2015

GALENA, Ill. (AP) — A freight train loaded with crude oil derailed in northern Illinois on Thursday, bursting into flames and prompting officials to suggest that everyone with 1 mile evacuate, authorities said.

 

The BNSF Railway train derailed around 1:05 p.m. in a rural area where the Galena River meets the Mississippi, according to company spokesman Andy Williams. The train had 103 cars loaded with crude oil, along with two buffer cars loaded with sand. A cause for the derailment hadn't yet been determined. No injuries were reported.

 

The derailment occurred 3 miles south of Galena in a wooded and hilly area that is a major tourist attraction and the home of former President Ulysses S. Grant. The Jo Daviess County Sheriff's Department confirmed the train was transporting oil from the Northern Plains' Bakken region.

 

SEATTLE (Reuters) - A coalition of environmental groups sued the Port of Seattle on Monday to stop the lease of a terminal to Royal Dutch Shell Plc's Arctic oil drilling fleet, arguing a proper environmental review was never conducted, court records showed.

 

Earthjustice, along with other groups including the Sierra Club, filed the suit in a Washington state court, alleging the drilling operation was substantially different from the terminal's prior use, meaning an environmental review had to be done under state law.

 

The complaint against the port and Foss Maritime Co, which would work for Shell under the two-year lease, also alleged that officials reached the arrangement without public disclosure and that the fleet could pollute the area's water.