Halliburton 2013 Annual Report Download - page 76

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Indemnification and Insurance. Our contract with BP Exploration relating to the Macondo well generally provides for
our indemnification by BP Exploration for certain potential claims and expenses relating to the Macondo well incident,
including those resulting from pollution or contamination (other than claims by our employees, loss or damage to our property,
and any pollution emanating directly from our equipment). Also, under our contract with BP Exploration, we have, among other
things, generally agreed to indemnify BP Exploration and other contractors performing work on the well for claims for personal
injury of our employees and subcontractors, as well as for damage to our property. In turn, we believe that BP Exploration was
obligated to obtain agreement by other contractors performing work on the well to indemnify us for claims for personal injury
of their employees or subcontractors, as well as for damages to their property. We have entered into separate indemnity
agreements with Transocean and M-I Swaco, under which we have agreed to indemnify those parties for claims for personal
injury of our employees and subcontractors and they have agreed to indemnify us for claims for personal injury of their
employees and subcontractors.
In April 2011, we filed a lawsuit against BP Exploration in Harris County, Texas to enforce BP Exploration’s
contractual indemnity and alleging BP Exploration breached certain terms of the contractual indemnity provision. BP
Exploration removed that lawsuit to federal court in the Southern District of Texas, Houston Division. We filed a motion to
remand the case to Harris County, Texas, and the lawsuit was transferred to the MDL.
BP Exploration, in connection with filing its claims with respect to the MDL proceeding, asked that court to declare
that it is not liable to us in contribution, indemnification, or otherwise with respect to liabilities arising from the Macondo well
incident. Other defendants in the litigation discussed above have generally denied any obligation to contribute to any liabilities
arising from the Macondo well incident.
In January 2012, the court in the MDL proceeding entered an order in response to our and BP’s motions for summary
judgment regarding certain indemnification matters. The court held that BP is required to indemnify us for third-party
compensatory claims, or actual damages, that arise from pollution or contamination that did not originate from our property or
equipment located above the surface of the land or water, even if we are found to be grossly negligent. The court did not
express an opinion as to whether our conduct amounted to gross negligence, but we do not believe the performance of our
services on the Deepwater Horizon constituted gross negligence. The court also held, however, that BP does not owe us
indemnity for punitive damages or for civil penalties under the CWA, if any, and that fraud could void the indemnity on public
policy grounds, although the court stated that it was mindful that mere failure to perform contractual obligations as promised
does not constitute fraud. As discussed above, the DOJ is not seeking civil penalties from us under the CWA, but BP has filed a
claim for equitable contribution against us with respect to its liabilities. The court in the MDL proceeding deferred ruling on
whether our indemnification from BP covers penalties or fines under the OCSLA, whether our alleged breach of our contract
with BP Exploration would invalidate the indemnity, and whether we committed an act that materially increased the risk to or
prejudiced the rights of BP so as to invalidate the indemnity. We do not believe that we breached our contract with BP
Exploration or committed an act that would otherwise invalidate the indemnity. The court’s rulings will be subject to appeal at
the appropriate time.
The rulings in the MDL proceeding regarding the indemnities are based on maritime law and may not bind the
determination of similar issues in lawsuits not comprising a part of the MDL proceeding. Accordingly, it is possible that
different conclusions with respect to indemnities will be reached by other courts.
Indemnification for criminal fines or penalties, if any, may not be available if a court were to find such indemnification
unenforceable as against public policy. In addition, certain state laws, if deemed to apply, would not allow for enforcement of
indemnification for gross negligence, and may not allow for enforcement of indemnification of persons who are found to be
negligent with respect to personal injury claims.
In addition to the contractual indemnities discussed above, we have a general liability insurance program of $600
million. Our insurance is designed to cover claims by businesses and individuals made against us in the event of property
damage, injury, or death and, among other things, claims relating to environmental damage, as well as legal fees incurred in
defending against those claims. We have received and expect to continue to receive payments from our insurers with respect to
covered legal fees incurred in connection with the Macondo well incident. Through December 31, 2013, we have incurred legal
fees and related expenses of approximately $264 million, of which $235 million has been reimbursed under or is expected to be
covered by our insurance program. To the extent we incur any losses beyond those covered by indemnification, there can be no
assurance that our insurance policies will cover all potential claims and expenses relating to the Macondo well incident. In
addition, we may not be insured with respect to civil or criminal fines or penalties, if any, pursuant to the terms of our insurance
policies. Insurance coverage can be the subject of uncertainties and, particularly in the event of large claims, potential disputes
with insurance carriers, as well as other potential parties claiming insured status under our insurance policies.
BP’s public filings indicate that BP has recognized in excess of $40 billion in pre-tax charges, excluding offsets for
settlement payments received from certain defendants in the proceedings described above under “Litigation,” as a result of the
Macondo well incident. BP’s public filings also indicate that the amount of, among other things, certain natural resource
damages with respect to certain OPA claims, some of which may be included in such charges, cannot be reliably estimated as of
the dates of those filings.