The Deepwater Horizon oil spill has given rise to some interesting insurance cases which have the potential to impact insurance disputes regardless of venue. Consequently, although these cases have primarily been litigated in Texas, they are worthy of further review, even for the New York insurance practitioner. In the most recent decision, the Supreme Court of Texas ruled that a clause that reduces the insurers’ liability for joint venture risks by the insured’s percentage interest in the joint venture did not limit the insured’s right to recover defense expenses. Anadarko Petroleum v. Houston Cas. Co., No. 16-1013, 2019 WL 321921, at *1 (Tex. Jan. 25, 2019).

Anadarko Insurance Dispute

Anadarko Petroleum owned a 25 percent stake in the Macondo well. In April 2010, the Macondo well blowout destroyed the Deepwater Horizon oil rig and caused the largest offshore oil spill in U.S. history. Prior to the oil spill, Anadarko had purchased an energy package insurance policy providing excess liability insurance through the Lloyd’s London market. Id. at *2. The policy provided coverage in accordance with its terms and conditions up to a limit of liability of $150 million. Id. However, with respect to liability arising out of joint ventures, the policy limit was reduced based on Anadarko’s interest in the joint venture in accordance with the following clause:

[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 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.