A Deepwater Horizon litigation highlights the need for companies to link their business contracts with their insurance policies. We discuss the interaction between compensation agreements and “additional insured” arrangements and the importance of retaining contract engineers to deal with some very important pitfalls. While this concern has always been at the heart of insurance advisors` concerns, two more significant events have highlighted the issue of insurance compensation: the recent deepwater Horizon coverage battle and the insurance industry`s proclamation of a new language of insurance. Together, these two events highlight how negotiating compensation rules, without a full understanding of the insurance policies associated with them, can lead to disastrous results. If the language of the insurance policy alone determines the extent of BP`s insurance coverage as an additional insured if and as long as the supplementary insurance and compensation provisions of the drilling contract are “separate and independent”; It is customary between commercial enterprises to compensate each other for losses resulting from their joint activities. Similarly, it is customary for these companies to be added as “additional insured” under the general liability insurance of the other. The question is: If a loss occurs, is the amount of recovery determined by the compensation contract or the insurance policy? That is the question that must be decided by the Texas Supreme Court. Non-cust contracts have become standard elements of construction contracts. In a detention agreement (also known as a compensation agreement), a party (the beneficiary of the compensation) agrees to pay for damages caused to another party (compensation) for liability in the event of injury or property damage resulting from the project. There are three basic types of capital-damage agreements that have different effects on a contractor`s liability insurance. The issue of supplementary insurance status is a challenge. Many misunderstandings arise when the contracting parties add to each other`s insurance policies as additional insured. There is also the fierce struggle between insurers and compensation payers who want to limit the level of additional insurance coverage as part of their policies and to compensate them who want to maximize coverage in compensation policies.
In addition, the interaction between supplementary insurance status and indemnification clauses, insurance requirements and other contractual provisions is unique and complex. These complications have resulted in numerous hedging disputes and, as a result, a series of revisions to standard insurance forms and insurance supplements. However, litigation continues unabated and controversy and confusion over supplementary insurance status in primary and liability policies, compensation contracts and insurance certificates continue. The first major problem is the drafting of contracts. BP argues that the decision of an “additional insured” is only the language of the insurance policy, referring to cases such as EVANSTON INSURANCE COMPANY/ATOFINA PETROCHEMICALS, INC., no 03-0647. The insurers argue that the extent of the coverage they promised BP was limited to the scope of transocean`s agreement to provide that coverage and, therefore, excludes the rights invoked here. The above disagreement raises the central legal question: can the scope of an insurance policy be changed by a separate commercial contract? Broad form: The exemption giver assumes responsibility for accidents resulting from the project, regardless of the culprit.