Hous. Cas. Co. v. Anadarko Petroleum Corp.
| Decision Date | 17 November 2016 |
| Docket Number | NO. 09–14–00459–CV,09–14–00459–CV |
| Citation | 552 S.W.3d 268 |
| Parties | HOUSTON CASUALTY COMPANY, et al., Appellants v. ANADARKO PETROLEUM CORPORATION and Anadarko E&P Company, L.P., Appellees |
| Court | Texas Court of Appeals |
Allyson L. Wilkinson, Houston, Robert Dubose, Jeffrey Bentch, Charles T. Frazier, Dallas, Neil E. Giles, William P. Maines, J. Clifton Hall III, Houston, Roger Townsend, for Appellants.
Marie R. Yeates, Houston, John D. Shugrue, Joe Michels, for Appellees.
Before McKeithen, C.J., Kreger and Horton, JJ.
This is an insurance coverage dispute arising from the Deepwater Horizon Oil Spill in the Gulf of Mexico. At issue in this case is the interpretation of an insurance policy establishing an indemnity obligation for defense costs resulting from the spill. Houston Casualty Company, Allianz Global Corporate & Specialty AG, Clearwater Insurance Company, Hudson Insurance Company, Lancashire Insurance Company (UK) Limited, Navigators Insurance Company, and Underwriters at Lloyd's Syndicate Nos. 33, 457, 510, 609, 623, 958, 1036, 1084, 1183, 1919, 1209, 1221, 1225, 2003, 2007, 2121, 2623, 3000, 4020, 5000 (collectively "Underwriters") filed a petition for permissive appeal of the trial court's order denying their motion for summary judgment and granting Anadarko Petroleum Corporation and Anadarko E&P Company, L.P.'s (collectively "Anadarko") motion for partial summary judgment. Anadarko filed a response and cross-petition for permissive appeal. We granted the petition and the cross-petition for permissive appeal of the trial court's order. We reverse the trial court's judgment and render judgment in favor of Underwriters.
Many of the facts leading up to the Deepwater Horizon Oil Spill are well-known. The Macondo Well was an exploratory well located offshore in the Gulf of Mexico. The Deepwater Horizon, a mobile offshore drilling vessel owned and operated by several Transocean entities, drilled the Macondo Well. Certain British Petroleum entities (collectively "BP"), MOEX Offshore 2007 LLC ("MOEX"), and Anadarko entered into an offshore oil and gas lease with the United States for the continental shelf block in which the well was located (the "Offshore Lease"). BP, MOEX, and Anadarko entered into the Macondo Prospect Offshore Deepwater Operating Agreement (the "Operating Agreement"). BP was the designated operator of the Macondo Well, while Anadarko and MOEX were non-operators. Anadarko owned a 25 percent working interest in and to the Offshore Lease.
Underwriters issued an Energy Package Policy to Anadarko covering the period from June 30, 2009, to June 30, 2010 (the "Policy"). Section III of the Policy provides excess liability insurance coverage and has a limit of liability of $150 million per "Occurrence" if Anadarko owns 100 percent of the insured operation. The Coverage provision of Section III (hereinafter "Coverage Provision") provides:
Section III includes an endorsement titled, "Joint Venture Provision[,]" which replaces the joint venture provision in the Insuring Agreements of Section III. The Joint Venture Provision provides:
As reflected above, the first paragraph of the Joint Venture Provision is a general scaling provision, which proportionally reduces Underwriters' limit of liability under Section III in accordance with the percentage of Anadarko's ownership interest in any given joint venture. The second and third paragraphs of the Joint Venture Provision provide two exceptions to the general scaling provision in the first paragraph.
On April 20, 2010, BP and Transocean were completing temporary abandonment operations of the Macondo Well when the well experienced a blowout and the Deepwater Horizon drilling rig exploded, burned, and sank, resulting in a discharge of oil into the Gulf of Mexico for nearly three months (the "Macondo Incident"). See In re Oil Spill by Oil Rig "Deepwater Horizon" in the Gulf of Mexico, on Apr. 20, 2010 , 148 F.Supp.3d 563, 565–66 (E.D. La. 2015). A number of lawsuits were filed as a result of the Macondo Incident. Id. at 566. Most federal cases arising from the Macondo Incident were consolidated into Multidistrict Litigation 2179. Id. The United States filed suit against BP, MOEX, Transocean, and Anadarko, seeking civil penalties under the Clean Water Act and a declaratory judgment of liability under the Oil Pollution Act of 1990 ("OPA"). Id. at 566–67. In February 2012, the MDL Court granted the United States' request for a declaratory judgment finding that BP and Anadarko were jointly and severally liable under the OPA for removal costs and damages related to the subsurface discharge.1 See 33 U.S.C.S. § 2717(f)(2) (Lexis through Pub. L. No. 114–229) ( that in an action for removal costs, "the court shall enter a declaratory judgment on liability for removal costs or damages that will be binding on any subsequent action or actions to recover further removal costs or damages.").
Disputes also arose between the defendants. BP submitted a claim against Anadarko for costs incurred by BP in connection with the Macondo Incident. In October 2011, Anadarko entered into a settlement agreement with BP wherein Anadarko and BP mutually agreed to release all claims against each other associated with the Macondo Incident. Anadarko agreed to pay BP $4 billion and to transfer its 25 percent interest in the Offshore Lease to BP. BP agreed to release Anadarko from all claims arising under the Operating Agreement and to indemnify Anadarko, with limited exceptions not relevant here, for all future liability, including damages or removal costs under the OPA.
On November 30, 2015, the MDL Court issued its Findings of Fact and Conclusions of Law concerning the amount of civil penalties Anadarko is required to pay under the Clean Water Act. In re Oil Spill , 148 F.Supp.3d at 565. The MDL Court found Anadarko liable to the United States for civil penalties under the Clean Water Act in the amount of $159.5 million. Id. at 584.
The Macondo Incident implicated two sections of the Policy issued by Underwriters. Section II provided "Control of Well and Extra Expense" insurance coverage, which insured against costs associated with certain types of well blow-outs. As noted above, Section III of the Policy provided "Excess Liability" insurance coverage, which insured against claims in excess of Anadarko's underlying insurance or self-insured retention. Underwriters paid Anadarko $37.5 million under Section III of the Policy. Anadarko released Underwriters from liability under the Policy, except with regard to "Defence Expenses[.]"2
In August 2012, Anadarko filed suit seeking coverage from Underwriters under Section III of the Policy for defense, investigation, and adjustment costs and expenses paid by Anadarko arising out of the Macondo Incident. Underwriters moved for summary judgment, seeking dismissal of Anadarko's claims and contending essentially that it has fully paid and extinguished all liability for coverage under the Policy....
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Anadarko Petroleum Corp. v. Hous. Cas. Co.
...permissive appeal, reversed the trial court's judgment, and rendered judgment for the Underwriters. Hous. Cas. Co. v. Anadarko Petroleum Corp. , 552 S.W.3d 268, 271 (Tex. App.—Beaumont 2016). The appellate court agreed with the trial court that the first clause applies to defense expenses b......