Comma for Sale! Only $750 Million!

What is the value of a comma?  No, I do not mean the intrinsic value of the Oxford comma.  I am talking about the cash value of a comma.  That is a question you should must ask yourself whenever you are hiring a lawyer to help you negotiate a contract or deal.  While it might sound like a silly question, mega-company BP should have hired an attorney that appreciated the value of grammar.  First, the story.

Once upon a time in a land far, far from Ohio, BP hired Transocean (an offshore subsurface drilling company) to drill for oil in the Gulf of Mexico.  In order to formalize their relationship, BP and Transocean signed a contract.  As both companies approached the deal, each had a different expectation about how much protection Transocean’s insurance company would provide BP if something bad happened.  Well, something bad happened.

You probably remember the story, but a little history is helpful.  Transocean’s drilling rig – the Deepwater Horizon – exploded.  That explosion took the lives of 11 roughnecks (injuring 16 more) and dumped nearly 210 million gallons of Texas tea into the Gulf.  The oil spill damaged nearby beaches, wetlands, the travel industry, and just about everything else.  Lawyers showed up shortly after the spill, suddenly taking an interest in the citizens of Louisiana.

BP realized it had a problem.  BP looked to shift liability to its insurance providers, suppliers, vendors, and even its vendor’s insurance providers.  Any port in the storm.  Now, we can talk about the comma – the missing comma.

When BP and Transocean signed their drilling contract, there was a requirement that Transocean add BP as an “additional insured” under the policy.  In addition, the same section of the drilling contract also contained more language.  The express language of the contract required Transocean to add BP:

As additional insureds in each of [Transocean’s] policies, except workers’ compensation for liabilities assumed by [Transocean] under the terms of [the Drilling] Contract.

Like Transocean’s and BP’s lawyers, you probably had a hard time understanding what both parties were getting at.

If you look carefully, you can see that the sentence stops making sense after the word “except.”  Or does it make perfect sense?  The Supreme Court of Texas answered that question recently.  BP argued that the phrase makes perfect sense, and they were supposed to be covered by Transocean’s insurance policies.  Conversely, Transocean argued that their drilling contract and insurance contract had to be read in harmony with each other.  Transocean argued that if the two contracts were read in context, a comma must be impliedly inserted after the word “compensation” for that provision to make sense.  Who do you think prevailed?

The Supreme Court of Texas held that a comma should be implied after “compensation.”  And guess what grammarians?  The ghost comma changes the entire interpretation of the contract.  With the ghost comma inserted into the sentence, the phrase “As additional insureds in each of Transocean’s policies” is now qualified or limited by the phrase “for liabilities assumed by Transocean under the terms of the Drilling Contract.”  English scholars unite!  No BP pun intended, there.

In other words, the Court determined that Transocean never assumed liability for subsurface pollution – only BP did.  So, what is the cash value of this ghost comma?  The comma is worth $750,000,000.00.  Transocean had two insurance policies that BP was attempting to raid.  The first was with Ranger Insurance for $50 million.  The second was with Lloyd’s of London for $700 million.  By limiting the contract in this fashion, the Supreme Court of Texas prevented BP from accessing any of that money.  The legal implications of the absent, but later implied, comma are profound.  The financial implications are more profound.

The Court’s interpretation of that sentence also implies that both sets of lawyers messed up.  While no one probably considered the catastrophic oil spill as a likely event, that’s what contracts (and insurance) are for – providing certainty after unlikely events.  Transocean’s attorneys should have realized that a comma was missing after “compensation.” The Court bailed them out.

BP’s attorneys should have worked with that sentence so it made sense without the comma.  Put another way, BP should have valued the additional insurance coverage enough to haggle over that sentence to ensure maximum coverage.  I would guess that BP’s attorneys either: (A) missed it entirely; (B) assumed they’d snuck one by Transocean’s attorneys; or (C) actually thought it made sense.  In any event, both sets of lawyers should have fought more for precise language in the Drilling Contract.

Don’t miss the moral of this story, though.  Hiring a good attorney can make a big difference.  In this case, the ghost comma (and bad sentence) cost BP $750 million.  For you, the ghost comma could cost you a valuable opportunity with a new client, your house, or your retirement.  Should you ever have a question about what commas should be contained in your contract, please do not hesitate to contact me directly at (513) 852-6071 or by e‑mailing me at bwfox@woodlamping.com.  You could also call any one of our Commercial Finance and Contract attorneys at Wood & Lamping LLP.  Our attorneys have accumulated years of experience providing sophisticate counsel to businesses, large and small.

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