Ranger Ins., Ltd. v. Transocean Offshore Deepwater Drilling, Inc. (In re Horizon)

• Decision Date: 01 March 2013
• Docket Number: No. 12–30230.,12–30230.
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: In re DEEPWATER HORIZON. Ranger Insurance, Limited, Plaintiff–Appellee v. Transocean Offshore Deepwater Drilling, Incorporated; Transocean Holdings, L.L.C.; Transocean Deepwater, Incorporated; Triton Asset Leasing GMBH, Intervenor Plaintiffs–Appellees v. BP P.L.C.; BP Exploration & Production, Incorporated; BP American Production Company; BP Corporation North America, Incorporated; BP Company North America, Incorporated; BP Products North America, Incorporated; BP America, Incorporated; BP Holdings North America, Limited, Defendants–Intervenor Defendants–Appellants Certain Underwriters at Lloyd's London, Plaintiff–Appellee Transocean Offshore Deepwater Drilling, Incorporated; Transocean Holdings, L.L.C.; Transocean Deepwater, Incorporated; Triton Asset Leasing GMBH, Intervenor Plaintiffs–Appellees v. BP P.L.C.; BP Exploration & Production, Incorporated; BP American Production Company; BP Corporation North America, Incorporated; BP Company North America, Incorporated; BP Products North America, Incorporated; BP America, Incorporated; BP Holdings North America, Limited, Defendants–Intervenor Defendants–Appellants.

710 F.3d 338

In re DEEPWATER HORIZON.

Ranger Insurance, Limited, Plaintiff–Appellee

v.Transocean Offshore Deepwater Drilling, Incorporated; Transocean Holdings, L.L.C.; Transocean Deepwater, Incorporated; Triton Asset Leasing GMBH, Intervenor Plaintiffs–Appellees

v.BP P.L.C.; BP Exploration & Production, Incorporated; BP American Production Company; BP Corporation North America, Incorporated; BP Company North America, Incorporated; BP Products North America, Incorporated; BP America, Incorporated; BP Holdings North America, Limited, Defendants–Intervenor Defendants–Appellants

Certain Underwriters at Lloyd's London, Plaintiff–Appellee

Transocean Offshore Deepwater Drilling, Incorporated; Transocean Holdings, L.L.C.; Transocean Deepwater, Incorporated; Triton Asset Leasing GMBH, Intervenor Plaintiffs–Appellees

v.BP P.L.C.; BP Exploration & Production, Incorporated; BP American Production Company; BP Corporation North America, Incorporated; BP Company North America, Incorporated; BP Products North America, Incorporated; BP America, Incorporated; BP Holdings North America, Limited, Defendants–Intervenor Defendants–Appellants.

No. 12–30230.

United States Court of Appeals, Fifth Circuit.

March 1, 2013.

Michael John Maloney, Maloney, Martin & Associates, David Wallace Holman, Holman Law Firm, P.C., Byron Charles Keeling, Keeling & Downes, P.C., Houston, TX, for Plaintiff–Appellee Ranger Insurance Limited.

Steven Lynn Roberts, Rachel Giesber Clingman, Kent C. Sullivan, Sutherland Asbill & Brennan, L.L.P., John Michael Elsley, Royston, Rayzor, Vickery & Williams, L.L.P., Daniel O. Goforth, Goforth Geren Easterling, L.L.P., Houston, TX, Brad D. Brian, Daniel Benjamin Levin, Munger, Tolles & Olson, L.L.P., Los Angeles, CA, Edward F. Kohnke, IV, Preis & Roy, A.P.L.C, Kerry J. Miller, Frilot, L.L.C., New Orleans, LA, Edwin G. Preis, Jr., Preis & Roy, A.P.L.C., Lafayette, LA, for Intervenor Plaintiffs–Appellees.

David B. Goodwin, Covington & Burling, L.L.P., San Francisco, CA, Allan Baron Moore, Covington & Burling, L.L.P., Washington, DC, for Defendants–Intervenor Defendants–Appellants.

Richard N. Dicharry, Evans Martin McLeod, Phelps Dunbar, L.L.P., New Orleans, LA, Kyle S. Moran, Attorney, Phelps Dunbar, L.L.P., Gulfport, MS, for Plaintiff–Appellee Certain Underwriters at Lloyd's London.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before JOLLY, BENAVIDES, and HIGGINSON, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

This appeal presents only one of the many disputes that have arisen and will arise from the explosion and sinking of Transocean's Deepwater Horizon in April 2010. Today we address the obligations of Transocean's primary and excess-liability insurers to cover BP's pollution-related liabilities deriving from the ensuing oil spill in the Gulf of Mexico. Applying Texas law, especially as clarified since the district court's decision, we find that the umbrella insurance policy—not the indemnity provisions of Transocean's and BP's contract—controls the extent to which BP is covered for its operations under the Drilling Contract. Because we find this policy imposes no relevant limitations upon the extent to which BP is covered, we REVERSE the judgment of the district court and REMAND the case for entry of an appropriate judgment in accordance with this opinion.

I.

Transocean Holdings, Inc. (“Transocean”) owned the Deepwater Horizon, a semi-submersible, mobile offshore drilling unit. In April 2010, the Deepwater Horizon sank into the Gulf of Mexico after burning for two days following an onboard explosion (“Incident” or “ Deepwater Horizon Incident”). At the time of the Incident, the Deepwater Horizon was engaged in exploratory drilling activities at the Macondo Well under a Drilling Contract between the Appellant BP America Production Company's (together with its affiliates, “BP”) predecessor and Transocean's predecessor. This Contract required Transocean to maintain certain minimum insurance coverages for the benefit of BP. The extent to which these policies covered BP's pollution-related liabilities arising from the Deepwater Horizon Incident is the subject of this appeal.

The Insurance Policies

Transocean held insurance policies with a primary liability insurer, Ranger Insurance Ltd. (“Ranger”), as well as several excess liability insurers led by London market syndicates (“Excess Insurers;” together with Ranger, “Insurers”). Transocean's insurance policy with Ranger provided at least $50 million of general liability coverage, and its policies with the Excess Insurers formed four layers of excess coverage directly above the Ranger Policy that provided at least $700 million of additional general liability coverage. The Ranger and Excess Policies contain materially identical provisions. ¹ The Policy terms that are important to this case are “Insured” and “Insured Contract.” The Policies define “Insured” as including the Named Insured, other parties, and

(c) any person or entity to whom the “Insured” is obliged by any oral or written “Insured Contract” (including contracts which are in agreement but have not been formally concluded in writing) entered into before any relevant “Occurrence”, to provide insurance such as is afforded by this Policy....

The Policies define “Insured Contract” as follows:

The words “Insured Contract”, whenever used in this Policy, shall mean any written or oral contract or agreement entered into by the “Insured” (including contracts which are in agreement but have not been formally concluded in writing) and pertaining to business under which the “Insured” assumes the tort liability of another party to pay for “Bodily Injury”, “Property Damage”, “Personal Injury” or “Advertising Injury” to a “Third Party” or organization. Tort Liability means a liability that would be imposed by law in the absence of any contract or agreement.²

The Drilling Contract

The Drilling Contract defines BP's and Transocean's obligations to one another, separately identifying the liabilities each party assumes. Article 20 of the Contract is a singular provision that imposes upon Transocean an insurance requirement:

20.1 INSURANCE

Without limiting the indemnity obligations or liabilities of CONTRACTOR [Transocean] or its insurer, at all times during the term of this CONTRACT, CONTRACTOR shall maintain insurance covering the operations to be performed under this CONTRACT as set forth in Exhibit C.

(Emphasis added.) Exhibit C to the Drilling Contract is titled “Insurance Requirements” and establishes the types and minimum level of coverage that Transocean is obligated to maintain. This Exhibit provides that Transocean shall carry all insurance at its own expense and that the policies “shall be endorsed to provide that there will be no recourse against [BP] for payment of premium.” Further, Exhibit C states:

[BP], its subsidiaries and affiliated companies, co-owners, and joint venturers, if any, and their employees, officers and agents shall be named as additional insureds in each of [Transocean's] policies, except Workers' Compensation for liabilities assumed by [Transocean] under the terms of this Contract.

(Emphasis added.)

The Procedural History

Following the Incident, BP notified the Insurers of its Deepwater Horizon-related losses. The Excess Insurers and Ranger each filed a one-count declaratory judgment action against BP.³ The Insurers' complaints are substantively identical—both request a declaration that the Insurers have “no additional-insured obligation to BP with respect to pollution claims against BP for oil emanating from BP's well” as a result of the Deepwater Horizon Incident. The Insurers acknowledge that “the [D]rilling [C]ontract requires additional insured protection in favor of certain BP entities.” Thus, all parties concede that the Drilling Contract is an “insured contract” under the policies and that the policies provide some insurance coverage to BP as an additional insured. The issue in contention is the scope of BP's insurance coverage.

In July 2011, BP moved for judgment on the pleadings, under Rule 12(c) of the Federal Rules of Civil Procedure, against the Insurers. Relying upon Texas and Fifth Circuit precedent as developed in Evanston Ins. Co. v. ATOFINA Petrochems., Inc., 256 S.W.3d 660 (Tex.2008), and in Aubris Resources LP v. St. Paul Fire & Marine Ins. Co., 566 F.3d 483 (5th Cir.2009), BP argued (1) it was an “additional insured” under the insurance policies at issue and (2) the insurance policies alone—and not the indemnities detailed in the Drilling Contract—govern the scope of BP's coverage rights as an “additional insured.” ⁴

The district court found ATOFINA and Aubris are distinguishable from the case at hand and denied BP's Rule 12(c) motion in November 2011. In particular, the court read Transocean's insurance obligation in Exhibit C to be to name BP as an “additional insured[ ] in each of [Transocean's] policies ... for liabilities assumed by [Transocean] under the terms of the contract.” That is, the district court found BP's proffered reading of this clause unreasonable, and read the clause as if there were a comma following the phrase “except Workers' Compensation;” this reading rendered those three words their own discrete carve out from liability. Reasoning further that this interpretation required Transocean to name BP as an insured only for liabilities Transocean explicitly assumed under the contract, the court then looked to Article 24 of the Drilling Contract to conclude that BP was not covered under Transocean's policy for the pollution-related liabilities deriving from the Deepwater Horizon Incident (as the spill originated below the surface of the water).⁵

Following further submissions of the parties, the district court then entered a partial final judgment on the Insurers' complaints under Rule 54(b). Effective March 1, 2012, the court held “by its terms, the Court's Order and Reasons [on BP's motion for judgment on...