Macondo Litigation Update-How Court Decisions Will Impact Oilfield Contracting and Insurance Practices

摘要

Decisions in the Macondo litigation pending in a U. S. District Court in New Orleans will impact operators, drillers, service and supply companies as well as insurance underwriters. Phases I and II of the Macondo trial have been concluded. Phase III is expected to commence in the first half of 2014. The paper primarily reviews pre-trial, trial and appellate court proceedings relating to the contractual indemnification, release and insurance provisions of the applicable drilling and cementing contracts that BP entered into with Transocean and Halliburton, respectively. The paper includes commentary from the author based on over 35 years of experience as a drilling company legal, contractual and risk management executive. Initial pre-trial Macondo Court rulings addressed whether contractual indemnification or releases may apply even in the event of gross negligence, strict statutory liability or willful misconduct. These rulings also determined whether indemnification may include punitive damages or apply to penalties assessed under the Oil Pollution Act of 1990 ("OPA'90"), the Clean Water Act ("CWA") or the Outer Continental Shelf Lands Act ("OCSLA"). In future proceedings, the Court is expected to determine if a material breach of contract will invalidate traditional oilfield indemnity and release provisions. Trial and appellate court rulings in Macondo-related litigation have considered the nature and scope of insurance coverage accorded to BP as an additional insured party under Transocean's liability insurance policies. These rulings focus on both the drilling contract provisions naming BP as an additional assured and the terms of the associated insurance agreements. Although this litigation is currently under a second appellate review, the important implications of these proceedings on oilfield contracts and insurance agreements are discussed in the paper. There can be no doubt that the Macondo litigation will have a profound impact on the way oilfield activities are conducted, contracted and insured. The paper is intended to assist those involved in contracts and risk management in understanding the judicial proceedings and determining how they may impact oilfield contracts and insurance agreements.