Deep Water Horizon Disaster Insureds Get Covered For Their Defense Costs

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Anadarko Petroleum Corp. and Anadarko E&P Co. (collectively “Anadarko”) were minority-interest owners in the Deepwater Horizon offshore drilling operation that, in April 2010, suffered a massive blow-out resulting in loss of life and catastrophic environmental damage.  During the ensuing litigation, Anadarko incurred over $100 million in defense costs. Andarko sought reimbursement from its excess-liability insurers, which had issued coverage of $150 million per occurrence. The insurers paid $37.5 million (25% of the limit) based upon Anadarko’s 25% ownership in the joint venture that operated the offshore drilling rig.  Anadarko sued for the balance, and the trial court ruled in its favor. The Court of Appeals reversed, setting the stage for a showdown in the Supreme Court of Texas.

At the center of the dispute was the following clause from a policy endorsement:

[A]s regards any liability of [Anadarko] which is insured under this Section III and which arises in any manner whatsoever out of the operation or existence of any joint venture . . . in which [Anadarko] has an interest, the liability of the Underwriters under this Section III shall be limited to the product of (a) the percentage interest of [Anadarko] in said Joint Venture and (b) the total limit afforded [Anadarko] under this Section III.

While at first, it would seem that the clause conclusively resolves the dispute in the insurers’ favor, Anadarko interpreted it differently.  It argued that the introductory phrase “as regards any liability” means that the entire clause only limits the insurance company’s exposure for Anadarko’s liability to third parties, but does not limit coverage for the costs incurred in defending the lawsuits.  And, indeed, the Supreme Court of Texas agreed.

In the case, tens of millions of dollars changed hands on the basis of a few simple introductory words – proof positive that every coverage denial deserves a second look. Language that may seem plain, at first, can prove to be otherwise in the hands of a law firm experienced in recovering benefits from insurance companies.

Anadarko Petroleum Corp. v. Houston Casualty Co. (Tex., Sep. 17, 2018)

Evan-Schwartz

Evan S. Schwartz
Founder of Schwartz, Conroy & Hack
800-745-1755
ESS@schlawpc.com

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