In 2010, a drilling rig owned by Transocean and developed by BP exploded in the Gulf of Mexico, leading to months of subsurface oil leakage, damage to coastal communities and industries, and other serious claims. In the parties’ drilling contract, Transocean was to be responsible for above-surface pollution risks while BP was to be responsible for subsurface pollution risks. Another provision of the contract required Transocean to provide "additional insured" protection to BP.

BP sued over the scope of this "additional insured" coverage, arguing that Transocean’s insurers must cover BP’s losses, regardless whether the specific cause was above or below the surface.

The Fifth Circuit originally ruled in favor of BP, concluding that the insurance policy itself did not limit the scope of coverage afforded to BP and that, under EVANSTON INSURANCE COMPANY v. ATOFINA PETROCHEMICALS, INC., No. 03-0647, it should not look beyond the text of that document to find a limitation to coverage. On rehearing, however, the Fifth Circuit withdrew its opinion and chose to certify this question to the Texas Supreme Court to authoritatively address two questions under Texas law:

1. Does ATOFINA compel a finding that BP is covered for these damages?

2. Does the doctrine of contra proferentem (that is, construing a contract against the person who drafted it) apply even in a sophisticated commercial context?

The Texas Supreme Court reached the opposite result, basing its decision on a less restrictive reading of ATOFINA, one that is compatible with the idea that an insurance policy can effectively “incorporate” another document needed to understand its scope:

Texas law has long allowed insurance policies to incorporate other documents by reference, and policy language dictates the extent to which another document is so incorporated. The policies here provide additional-insured coverage automatically where required and as obligated by written contract in which an insured has agreed to assume the tort liability of another party. Because BP is not named as an insured in the Transocean policies or any certificates of insurance, the insurance policies direct us to the additional-insured provision in the Drilling Contract to determine the existence and scope of coverage. Applying the only reasonable construction of that provision, we conclude that, as it pertains to the damages at issue, BP is an additional insured under the Transocean policies only to the extent of the liability Transocean assumed for above-surface pollution.

Having concluded that BP is covered by Transocean’s policies only to the extent that the drilling contract required, the Court answered the first question no, that there is no coverage.

The Court did not reach the second question about the contra preferentum doctrine because that rule applies only to ambiguous text, and it saw no ambiguity here.