NEW ORLEANS (CN) - BP must indemnify Halliburton for damages from the Deepwater Horizon oil spill, but not punitive damages or the cost of defense, a federal judge ruled.
U.S. District Judge Carl Barbier's order does not pertain to BP's charge of fraud against the cement manufacturer.
"BP is required to 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," Barbier wrote in the order issued Tuesday.
Barbier, who is overseeing the consolidated litigation over the worst oil spill in history, issued a similar order last week, that BP must indemnify Transocean for third-party compensatory claims.
"A remaining issue that was not addressed in the Transocean indemnity order concerns fraud," Barbier wrote in his latest order. "BP alleges in its cross complaint and third party complaint that Halliburton made fraudulent statements and fraudulently concealed material information concerning the cement tests it conducted and other matters, and that BP, relying on these statements, allowed Halliburton to pour the unstable cement slurry that led to the uncontrollable well and blowout. BP asserts that the language of the indemnity does not extend to fraud, nor would public policy permit such indemnification, given that fraud involved willful misconduct exceeding gross negligence. Halliburton denies that it committed fraud, but also argues that BP's allegations are merely breach of contract claims cloaked as fraud. ...
"The court agrees that fraud could void an indemnity clause on public policy grounds, given that it necessarily includes intentional wrongdoing. ... The court is also mindful that 'mere failure to perform contractual obligations as promised does not constitute fraud but is instead breach of contract.'
"Consequently ... there are material issues of fact that preclude summary judgment on the issue. The court defers ruling on this issue." (Citations omitted.)
The first liability trial in the oil spill is to begin on Feb. 27.