Deepwater Horizon

Supreme Court of Texas · 2015 · Torts

470 S.W.3d 452 (2015)

Updated July 31, 2026

insurance coverageadditional insuredincorporation by referencecontract interpretationinsured contractfour cornersATOFINAUrrutia

Facts

Transocean owned the Deepwater Horizon rig and operated it under a drilling contract with BP's predecessor. In that drilling contract, Transocean agreed to indemnify BP for above-surface pollution, while BP agreed to indemnify Transocean for pollution liabilities not assumed by Transocean, including subsurface pollution. The contract also required Transocean to name BP as an additional insured in Transocean's policies, except workers' compensation, for liabilities assumed by Transocean under the contract. Transocean's insurance policies extended insured status to any entity Transocean was obliged by an insured contract to provide insurance to, and BP sought coverage under those policies for subsurface-pollution liabilities arising from the blowout.

Issue

When an insurance policy grants additional-insured status only where and as required by an underlying insured contract, must the court consult that contract to determine the scope of coverage? If so, did the drilling contract limit BP's additional-insured coverage to liabilities Transocean assumed, excluding subsurface-pollution liabilities assumed by BP?

Rule

The scope of additional-insured coverage is determined first from the language of the insurance policy, but if the policy clearly refers to and depends on an underlying contract, the court must consult that incorporated contract to determine the existence and extent of coverage. A named insured may procure more coverage than a contract requires, but only when the policy language does not tie additional-insured status or scope to the underlying agreement. Where the only reasonable construction of the incorporated contract limits additional-insured status to liabilities assumed by the named insured, coverage is limited accordingly.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Mesa Quarry Services hired Harbor Plains Hauling to transport equipment near Tulsa, Oklahoma. Harbor Plains's liability policy states that any entity Harbor Plains is "obliged by written insured contract to provide insurance to" is an additional insured, and the hauling contract requires Mesa to be named as an additional insured only for liabilities Harbor Plains assumes in the contract; Harbor Plains assumed responsibility for damage caused during loading, while Mesa assumed responsibility for damage caused after delivery.

A machine is damaged after delivery, and Mesa seeks coverage as an additional insured under Harbor Plains's policy. Is Mesa most likely covered for that loss?

Explanation. Begin with the policy language. Here, the policy grants additional-insured status only to entities Harbor Plains is obliged by an insured contract to insure, so the contract is incorporated by reference to determine the existence and scope of coverage. If the contract limits additional-insured coverage to liabilities assumed by the named insured, the additional insured is covered only for those liabilities. Mesa therefore lacks coverage for a risk it assumed itself. (Derived from Deepwater Horizon (2015).)