U.S. District Judge Carl Barbier on Tuesday upheld Halliburton’s claim that its contract with BP requires BP to defend and indemnify Halliburton against any and all claims related to a blowout or uncontrolled well condition and relating to pollution and/or contamination from the reservoir.
BP must indemnify Halliburton for third-party compensatory claims that arise from pollution or contamination that did not originate from the property or equipment of Halliburton located above the surface of the land or water, even if Halliburton’s gross negligence caused the pollution.
Halliburton may still be liable for punitive damages and for civil penalties under Section 311(b)(7) of the Clean Water Act.
BP has previously claimed that Halliburton’s shoddy cement work on the Macondo oil well resulted in the Deepwater Horizon incident which killed 11 workers in April 2010 and released millions of gallons of oil into the Gulf of Mexico.
BP also has alleged that Halliburton made fraudulent statements and concealed information concerning cement tests it conducted. BP alleges that the unstable cement slurry poured into the well led to the well blowout.
BP had argued that it was not required to indemnify Halliburton for punitive damages, fines or penalties, and that it opposed Halliburton’s motion on the grounds that Halliburton had committed fraud and breached the contract, which would discharge BP from indemnity obligations.
The court deferred ruling on whether Halliburton breached the contract, and if that breach would invalidate the indemnity clause. BP also is not obligated to fund Halliburton’s defense at this time.
While the court agreed that fraud could void an indemnity clause on public policy grounds, it ruled that mere failure to perform contractual obligations as promised does not constitute fraud but is instead breach of contract.
Earlier this month, Barbier ruled that BP must indemnify Transocean for some of the costs related to the Macondo oil spill.