Raylin Richard v. Anadarko Petroleum Corporation, 850 F.3d 701

Background

Raylin Richard, an OES casing supervisor, was injured on an Anadarko drilling project; he sued Anadarko, Dolphin Drilling, and Smith International. OES (his employer) defended and paid a $2.5 million settlement under contractual indemnity chains.
OES and Anadarko were parties to a Master Services Contract (MSC) containing reciprocal indemnity language; dispute arose over whether that MSC covered Anadarko’s contractors (Dolphin, Smith) as indemnitees.
OES sought reimbursement from its insurer, Liberty Mutual, which denied coverage for amounts OES paid on behalf of Dolphin and Smith. Liberty Mutual also disputed reimbursement for attorneys’ fees.
The district court (1) permitted reformation of the MSC to reflect a mutually intended “knock-for-knock” indemnity scheme, (2) awarded OES $900,000 for settlement (policy limit less deductible), and (3) awarded full attorney’s fees ($468,599.90).
On appeal, the Fifth Circuit affirmed reformation of the MSC but held Liberty Mutual is liable only for a pro-rata share of attorneys’ fees ($168,695.96) rather than the full amount.

Issues

Issue	OES/Anadarko (Plaintiff) Argument	Liberty Mutual (Defendant) Argument	Held
Whether the MSC may be equitably reformed to reflect a mutual, knock-for-knock indemnity	The parties mutually intended broader indemnity (industry practice and post-contract conduct show shared intent); parol evidence may prove mutual mistake	Reformation is barred by maritime parol rule and would unfairly prejudice Liberty Mutual, a third-party insurer who relied on the written contract	Affirmed: reformation permitted under federal maritime law; parol evidence admissible to show mutual mistake; third-party interest did not preclude reformation given Liberty Mutual did not rely on the MSC and evidence met clear-and-convincing standard
Whether federal admiralty courts can reform maritime contracts	Admiralty courts may reform maritime contracts to correct mutual mistakes	Reformation unavailable or improper in admiralty context	Admiralty courts may reform maritime contracts; district court had authority
Whether Liberty Mutual must reimburse OES for all attorneys’ fees OES incurred defending indemnitees	Endorsements read together permit full reimbursement; ambiguous provisions construed against insurer	Policy endorsements create a pro‑rata allocation; Endorsement 3’s pro‑rata formula applies, limiting Liberty Mutual’s share	Reversed in part: insurer entitled to pro‑rata interpretation; Liberty Mutual owes $168,695.96 in attorneys’ fees
Proper interpretive approach to policy endorsements (Endorsements 3 and 34)	Endorsements allow ambiguity and favor insured; district court reasonably adopted interpretation awarding full fees	Only the interpretation giving effect to both endorsements (pro‑rata) is reasonable; cannot disregard Endorsement 3	Adopted insurer’s reading: interpret endorsements together; only the pro‑rata reading gives effect to the policy as a whole

Key Cases Cited

Am. Elec. Power Co. Inc. v. Affiliated FM Ins. Co., 556 F.3d 282 (5th Cir. 2009) (distinguishing reformation where third party relied on unambiguous policy language)
Wilcox v. Wild Well Control, Inc., 794 F.3d 531 (5th Cir. 2015) (reformation requires clear proof of mutual error; courts resist expanding unambiguous contractual definitions)
Travelers Indem. Co. v. Calvert Fire Ins. Co., 798 F.2d 826 (5th Cir. 1986) (parol evidence admissible to prove mutual mistake in maritime context)
Pioneer Expl., L.L.C. v. Steadfast Ins. Co., 767 F.3d 503 (5th Cir. 2014) (insurance contract interpretation reviewed de novo; ambiguous terms construed against insurer only if multiple reasonable interpretations exist)
Motors Ins. Co. v. Bud’s Boat Rental, Inc., 917 F.2d 199 (5th Cir. 1990) (admiralty courts may apply state law reformation principles to maritime contracts)
Demette v. Falcon Drilling Co., 280 F.3d 492 (5th Cir. 2002) (indemnity provisions for offshore casing services are maritime contracts)