The Fifth Circuit ruled Friday that BP PLC can tap into Transocean Ltd.'s $750 million in coverage for the Deepwater Horizon oil spill, a decision experts say will intensify the energy giant's tug-of-war with Transocean over insurance proceeds in district court, where carriers have asked for guidance on how to handle payouts.

The appeals court overturned U.S. District Judge Carl Barbier's holding that indemnity provisions in BP's drilling contract with rig owner Transocean blocked the oil giant from receiving coverage under Transocean's insurance policies for the disastrous spill.

According to the decision, the drilling contract's indemnity provisions were fully separate from language in Transocean's policies naming BP as an additional insured. The Fifth Circuit held that Transocean's insurance policies, taken alone, didn't nix BP's status as an insured for the spill costs.

If the ruling stands, a major question going forward is how much insurance will be left for Transocean to cover its own liabilities from the spill, according to Huhnsik Chung, an insurance partner at Edwards Wildman Palmer LLP.

"This decision will raise a lot of interesting issues regarding the fight for the insurance proceeds," Chung told Law360 on Monday. "There's a limited amount of money that's available, and the claims are probably going to attach to all of the available insurance."

BP's demand for more than $700 million in coverage has driven a slew of Transocean's insurers to Louisiana federal court, where a judge will ultimately decide which company will get what amount under the policies at issue. The insurers agree with Transocean that BP isn't covered under their policies, but they have left it up to the court to decide how to proceed.

When insurers hand the ball to courts on ensuring proper payments, judges typically look at which parties are insured under the policies, which parties have filed a claim, when those claims are filed, and which parties have judgments against them, according to Anderson Kill & Olick PC shareholder Bob Horkovich.

Payments are usually made on a first-come, first-served basis, since many policies don't include a specific mechanism for determining the priority given to claims, experts say.

"Sometimes, it's a pure race," said Horkovich, who is also co-insurance counsel to the plaintiffs' steering committee in multidistrict litigation over the Deepwater Horizon spill.

But courts may also look at the fairness of their decisions, including which policyholder needs the money more, according to Horkovich. Some judges have been willing to set up a fund to make sure the insurance money ends up in the hands of victims.

Reed Smith LLP partner John Ellison said it wouldn't be shocking if the judges involved in a high-profile matter like insurance for the BP spill would take an active role in making sure the money gets to the parties that were injured.

That's exactly what Horkovich hopes will happen.

"To the extent the court's looking at who should get the money, at the end, neither Transocean or BP should get the money," Horkovich said. "It should really go to cover the loss. ... We would hope that the court makes sure the money goes to the claimants in some way."

In the wake of the Fifth Circuit ruling, it's possible that coverage issues that have until now taken a backseat to the additional insured issue will now be litigated for quite a while, especially considering the high stakes involved, according to Ellison.

"Given that both Transocean and BP now have rights under those policies by virtue of this decision, it's hard to imagine a scenario where those policies won't be fully exhausted," Ellison said. "The liability figures that are floating out there are far in excess of those policy limits — by multiples."

Some of Transocean's insurers might still pursue defenses that could reduce or even eliminate the coverage they have to provide, including arguments the spill-related damages were caused through intentional acts or bad faith conduct, according to Ellison. Discovery on the questions of responsibility and intent will be detailed and involve a great deal of paper, he said.

"It's a time-consuming process," Ellison said. "The insurers of Transocean were hoping to avoid some of that, if not all of it, by getting a ruling on the additional insured issue, that they had no obligations with respect to BP."

There's a chance, though, that the Fifth Circuit ruling Friday won't be the final word. Transocean could ask for the entire Fifth Circuit to rehear the case.

A three-judge panel in the Fifth Circuit ruled that Texas case law made clear that when indemnity provisions are separate from additional insured provisions, the insurance policies alone can limit the scope of coverage for an additional insured.

The appeals court was unswayed by Transocean's argument that the additional insured provision limited BP's coverage to only the liabilities that Transocean specifically assumed under the drilling contract.

Under the drilling contract, Transocean took responsibility for above-surface pollution stemming from the Macondo well, while BP assumed liability for subsurface pollution occurring during the 2010 spill.

The Fifth Circuit stressed that the additional insured provision in Transocean's policies was identical to the one analyzed by the Texas Supreme Court in an analogous coverage fight, where the high court ruled that the umbrella policy alone dictated coverage.

It noted that after Judge Barbier handed down his decision in the case, a Texas appeals court ruled on a lawsuit raising a similar coverage question and cemented Texas case law favoring BP's position.

Attorneys for BP declined to comment on the ruling. Transocean CEO Steven Newman said Monday that the company was disappointed in the ruling, but cautioned that it was still covered by the policies.

"We continue to be a full insured under our policies and will pursue our claims for insurance payment and reimbursement in the district court where we will seek our fair share of the policy proceeds," Newman said in a statement.

Judges E. Grady Jolly, Fortunato "Pete" Benavides and Stephen Higginson sat on the Fifth Circuit panel.

The BP companies are represented by Allan Moore, David Goodwin, Seth Tucker, Mark Herman and M. Alexia dePottere-Smith of Covington & Burling LLP.

The Transocean companies are represented by John Elsley of Royston Rayzor, Steven Roberts, Rachel Giesber Clingman and Sean Jordan of Sutherland Asbill & Brennan LLP, Edwin Preis Jr. of Preis & Roy PLC, Kerry Miller of Frilot LLC, and Brad Brian and Daniel Levin of Munger Tolles & Olson LLP.

Lloyd's of London is represented by Richard Dicharry, Evans "Marty" McLeod, Kyle Moran and George Hall Jr. of Phelps Dunbar LLP.

Ranger Insurance Inc. is represented by Michael Maloney of Maloney Martin LLP, Byron Keeling and Ruth Downes of Keeling & Downes PC, Dwayne Day of Dwayne Day PC and Robin M. Ziek.

The case is In re: Deepwater Horizon, case number 12-30230, in the U.S. Court of Appeals for the Fifth Circuit.