O'Brien's Resp Manage v. BP Expl & Prod, et
24 F.4th 422 | Court of Appeals for the Fifth Circuit | 2022
What This Case Means for Subcontractors
BP hired O'Brien's to clean up after the Deepwater Horizon spill and claimed to be an additional insured under O'Brien's insurance policies. The Fifth Circuit ruled that BP's additional insured status was limited to only the $2 million minimum required by contract, not the full $100 million in coverage. The court also found BP couldn't collect indemnification from O'Brien's because BP itself had breached the indemnification agreement. This matters to subcontractors because it shows courts will strictly limit additional insured coverage to what contracts actually require and won't let contractors dodge indemnification obligations by claiming breach.
Key Takeaways
- •Additional insured coverage is capped at the minimum amount stated in your contract—not the full policy limits—unless the contract explicitly says otherwise.
- •You cannot combine multiple insurance policies to meet a single minimum coverage requirement; each policy stands alone.
- •If your client breaches the indemnification clause in your contract, they may lose the right to demand indemnification from you, even if they're named as an additional insured.
BP was an additional insured up to the minimum amount required by its contract.
Frequently Asked Question
If I name a client as an additional insured, are they automatically covered for the full amount of my insurance policy?
No. The court ruled that additional insured coverage is limited to the minimum amount required by your contract, not the full policy limits. You must clearly state in your contract what coverage amount applies to the additional insured. Also, if the client breaches the indemnification clause, they may lose their right to indemnification entirely.
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