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Texas SC rules insurance policy covers Anadarko Petroleum's costs of Deepwater Horizon litigation

By Takesha Thomas | Feb 6, 2019

AUSTIN, Texas (Legal Newsline) – The Texas Supreme Court has reversed an appellate court's decision in a dispute over insurance coverage related to the April 2010 Deepwater Horizon drilling rig accident.

On Jan. 25, the Supreme Court ruled to reverse the partial summary judgment granted by the 9th District Court of Appeals in the matter involving Anadarko Petroleum and Houston Casualty Co. The two companies disputed how much in legal fees and related expenses should be paid from lawsuits over the drilling rig accident. 

"The trial court agreed with Anadarko, but the Court of Appeals agreed with the underwriters," Justice Jeffrey S. Boyd wrote in the opinion. "Because we conclude that the provision does not limit the excess coverage for defense expenses, we reverse the Court of Appeals’ judgment, render judgment granting Anadarko’s motion for partial summary judgment, and remand the case to the trial court for further proceedings." 

Anadarko Petroleum was a minority interest owner in the Deepwater Horizon operation. According to the opinion, Anadarko alleged that its policy through Houston Casualty "covers all of its defense expenses, up to the policy’s $150 million excess-coverage limit."

However, Houston Casualty contended that "a negotiated policy provision caps the excess coverage at 25 percent of that limit," or reduces the $150 million limit when Anadarko's "liability arises out of the operations of a joint venture in which Anadarko has an ownership interest," the opinion states.

"The Ultimate Net Loss that section III insures includes defense expenses, but the legally imposed liability that triggers the underwriters’ duty to indemnify the Ultimate Net Loss does not. Instead, the liability insured and defense expenses are two separate components of the Ultimate Net Loss. As used in the coverage provision, the term liability does not include Anadarko’s voluntarily assumed obligation to pay lawyers, investigators, or others for services provided to defend against the liability," Boyd wrote.

Anadarko also argued that the lawsuits against it fall under the Joint Venture Provision, which reduces the amount that the underwriters must pay to cover Anadarko's joint-venture liabilities.

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