Insurance Law Blog

August 29, 2013
Dear Colleague,

While we await the Supreme Court of Texas' ruling in Ewing Construction v. Amerisure Insurance Co., the same Court will now have the opportunity to address new certified questions regarding additional insured coverage from the U.S. Fifth Circuit Court of Appeals in In re Deepwater Horizon. Today, the Fifth Circuit withdrew its prior opinion in Deepwater Horizon that was issued on March 1, 2013 and in which the court had held that the policies issued to Transocean covered BP as an additional insured. The case arises from the explosion on the Deepwater Horizon oil rig during drilling operations in the Gulf of Mexico.

Finding that the "case involves important and determinative questions of Texas law as to which there is no controlling Texas Supreme Court precedent, the panel, . . . withdraws the previous opinion and substitutes the following certified questions to the Supreme Court of Texas":

1. Whether Evanston Ins. Co. v. ATOFINA Petrochems., Inc., 256 S.W.3d 660 (Tex. 2008), compels a finding that BP is covered for the damages at issue, because the language of the umbrella policies alone determines the extent of BP's coverage as an additional insured if, and so long as, the additional insured and indemnity provisions of the Drilling Contract are "separate and independent"?

2. Whether the doctrine of contra proferentem applies to the interpretation of the insurance coverage provision of the Drilling Contract under the ATOFINA case, 256 S.W.3d at 668, given the facts of this case?

The issues that will now be before the Supreme Court of Texas are difficult to digest. However, the basic point is determining whether an additional insured's coverage is determined solely by the policy language or whether such coverage also depends on the interpretation of the indemnity provision in the drilling contract. Previously, the Supreme Court, in ATOFINA, found that in the contract before it the indemnity provision was "separate and independent" and played no role in determining additional insured coverage. The Fifth Circuit originally applied the same analysis, finding that BP was covered as an additional insured. The insurers involved, as well as Transocean, urged a different result because the scope of the additional insured provision was much more limited than the one at issue in ATOFINA -- namely, it specifically limited such coverage to only those liabilities Transocean specifically assumed in the drilling contract. Thus, unlike in ATOFINA, the provisions arguably were not "separate and independent."

If the Supreme Court of Texas finds that the provisions of the drilling contract limit BP's additional insured coverage, then the second issue before the Court will be how to interpret the additional insured provision in the drilling contract. Interestingly, the Fifth Circuit has shaped the certified question such that the Supreme Court will be left to decide whether the doctrine of contra proferentem applies to the drilling contract provisions that the insurers had no role in drafting. And, if applicable, a further question exists as to whether the Court will adopt a "sophisticated insured" exception to that rule.

As the Fifth Circuit noted, these are important issues in the State of Texas and, if the Supreme Court accepts the questions (and it usually does), the Court can provide further clarity on the application of ATOFINA to other fact patterns.

As the case proceeds, you will hear the latest news from the Shidlofsky Law Firm. So, stay tuned -- We've Got You Covered.

In the meantime, we certainly hope that the Court issues the Ewing decision tomorrow morning. However, Lee and Doug will both be out of the office at meetings, so, if the opinion comes out tomorrow, our Insurance Law Blog regarding the decision will be delayed. Cross your fingers!


Lee Shidlofsky
Member of Shidlofsky Law Firm

Douglas P. Skelley
Senior Associate of Shidlofsky Law Firm