Firms in gulf drilling are working to limit liability in spill

BP, the government and an army of volunteers are fighting to contain and clean the millions of gallons of oil spewing from the site of the Deepwater Horizon explosion in the Gulf of Mexico.
By David S. Hilzenrath and Kimberly Kindy
Washington Post Staff Writers
Thursday, June 24, 2010; 12:48 PM

As BP opens its checkbook to pay damages related to the Gulf of Mexico oil spill, it is beginning to do battle over a high-stakes question: Who else bears liability?

Some of the companies involved in the drilling operation are laying the groundwork to argue: not us.

In recent regulatory filings and other statements, they deflect responsibility, setting the stage for what is likely to be a years-long legal battle over corporate liability for a disaster whose financial toll is already estimated in the billions.

Halliburton, a project contractor, says it followed instructions from the well owner, a group led by BP. Transocean, which leased the rig to BP, says it was liable only for surface spills -- not those emanating from the sea bottom. Anadarko Petroleum, a venture partner, implies that it may be off the hook because BP likely engaged in "gross negligence or willful misconduct." Schlumberger, another contractor, says it is figuring out if it is contractually insulated from liability.

"The responsibility for this event will be debated for some time, and there is a lot of confusion around where liabilities begin and end," said Bart Nash, a spokesman for the London-based Lloyd's marketplace, whose insurance syndicates face hundreds of millions of dollars of losses from the catastrophe.

(Photos of the wildlife affected by the oil spill)

As the daily specter of gushing oil, fouled coastline, dying wildlife and struggling families illustrates, the corporations connected to the Macondo well have powerful reasons to man the legal barricades. If they are found liable, the cost of compensating victims and cleaning up the mess -- if that is ever possible -- could inflict a heavy blow.

Those in line for payment include workers who made a harrowing escape when the Deepwater Horizon rig burned April 20 -- and survivors of the 11 crew members who perished.

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Disclosures from several firms sued alongside BP indicate that their insurance coverage pales beside the potential costs.

Robert P. Hartwig, president of the Insurance Information Institute, said companies involved in the project had "limited insurance in place" and estimated total coverage between $1.5 billion and $3.5 billion. BP was essentially uninsured for disasters such as the gulf blowout, relying on its formidable profits and cash reserves.

Early maneuvers are underway in federal courts to sort out liability, and lawyers seeking damages on behalf of spill victims say they will look beyond BP for compensation.

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