Navigating Uncharted Waters? Indemnities and Releases in Offshore Drilling Contracts Post-Macondo Litigation

08/29/2012

The enforceability of Transocean's and Halliburton's indemnity agreements with BP were major issues in the Macondo Multi-District Litigation. The two opinions by the U.S. District Court for the Eastern District of Louisiana on the Transocean and Halliburton cases break from the rule that releases and indemnities for claims caused by gross negligence are not permissible under maritime law. For the first time, the court determined that maritime law does allow indemnification for the compensatory damages portions of claims, but not for the punitive damages portions or for fines or penalties assessed under the Clean Water Act. In their analysis of the groundbreaking opinions, the authors of this article say that while possibly expanding parties' freedom to contract and allocate risk among themselves, the court rulings could complicate enforceability analysis even more.

Introduction

In the litigation arising from the Macondo incident, the Court made groundbreaking rulings with respect to the enforceability of Transocean's and Halliburton Energy Services Inc.’s (Halliburton) indemnity agreements with BP Exploration and Production Inc. (BP). These rulings are significant, not only because of the media attention surrounding the Macondo incident, but also because the Court ruled for the first time that, under maritime law, an indemnity compensating a third party for claims arising out of gross negligence is enforceable, but only with respect to the compensatory damages portion of the claim.

Excerpted from Bloomberg Law, Daily Environment Report, August 29, 2012. © 2012 Bloomberg Finance L.P. To continue reading this article, click on the PDF linked below.

PDF - Bloomberg-Daily-Environmental-Report-Eldridge-Rivera.pdf

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