Read your insurance policies and your contracts!

14 Jul 2010

In all the furor over the BP Deepwater Horizon spill, one point has received little notice in the popular press.  It’s well known that the rig was owned by Transocean, Ltd. and was being operated under a contract with BP. What has not received much press is that Transocean agreed in the contracts to obtain insurance for BP.

Lloyds of London – with $700 Million in excess coverage exposure filed suit in Texas federal court arguing that it was not obligated to BP at all because, it claims, the drilling contract only obligated Transocean to insure BP  for pollution related losses due to contamination originating “above the surface of land or water.”  Lloyds argues that because the pollution originates below the ocean floor,  there is no coverage.

While this is yet to be resolved, the lesson here is – read your contracts and your insurance policies. Don’t just assume that you’re covered.

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