BP Told It Can’t Use Transocean Insurance for Gulf Spill

A federal judge rejected BP Plc’s bid to use insurance coverage from Transocean Ltd to cover costs stemming from last year’s record oil spill in the Gulf of Mexico.

Tuesday’s decision by U.S. District Judge Carl Barbier in New Orleans rejected BP’s bid to win access to $750 million of insurance coverage under nine policies.

It was the second legal setback that Barbier dealt BP in two days. On Monday, the judge said Alabama and Louisiana may seek punitive damages from BP and other companies for spill damages, though he dismissed some of the states’ other claims.

The Deepwater Horizon drilling rig’s April 20, 2010 explosion caused 11 deaths and led to the largest offshore oil spill in U.S. history.

Transocean owned the rig, while BP owned a majority of the Macondo well whose blowout led to the spill. Barbier oversees hundreds of lawsuits arising from the spill.

“BP, under the drilling contract, assumed responsibility for Macondo well oil release pollution liabilities,” Barbier wrote. “The Deepwater Horizon incident entailed a subsurface release; thus, Transocean did not assume pollution liabilities arising from the incident.”

A spokesman for London-based BP did not immediately respond to a request for comment. Transocean spokesman Lou Colasuonno had no immediate comment.

BP has also sued Halliburton Co., which did cement work on the well, and Cameron International Corp., which made a blowout preventer, to share in spill costs. The contractors have countered with lawsuits of their own.

Last month, Anadarko Petroleum Corp., which owned 25 percent of the Macondo well, agreed to pay BP $4 billion toward clean-up costs and victims compensation.

Earlier Tuesday, Transocean Chief Executive Steven Newman said at a Bank of America Merrill Lynch conference that his company plans to invoke indemnity provisions as a basis for any settlement with BP. He called BP’s contractual promise to cover clean-up costs as “iron-clad.”

Alabama and Louisiana are seeking money for damages to natural resources and property, economic damages such as lost tax revenue, cleanup costs and damages to reputation.

Barbier had in August allowed thousands of individuals and business owners claiming damages to also pursue punitive damages. The judge has set a February 2012 start date for a trial to apportion blame.

The case is In re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, U.S. District Court, Eastern District of Louisiana, No. 10-md-02179.

(Reporting by Jonathan Stempel in New York and Braden Reddall in San Francisco; editing by John Wallace, Dave Zimmerman)