IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 10-31178

MICHAEL J FRUGE, ET AL,

Plaintiffs,

v.

AMERISURE MUTUAL INSURANCE COMPANY,

Defendant–Appellant

Cross-Appellee

v.

CHUBB CUSTOM INSURANCE CO,

Defendant–Appellee

Cross-Appellant.

Appeals from the United States District Court

for the Western District of Louisiana

Before JONES, Chief Judge, HAYNES, Circuit Judge, and ENGELHARDT,

District Judge.*

PER CURIAM:

Amerisure Mutual Insurance Company appeals the district court’s

summary-judgment ruling determining that Louisiana law prohibits the

United States Court of Appeals

Fifth Circuit

F I L E D

November 22, 2011

Lyle W. Cayce

Clerk

 District Judge of the Eastern District of Louisiana, sitting by designation. *

Case: 10-31178 Document: 00511673235 Page: 1 Date Filed: 11/22/2011
No. 10-31178

consideration of extrinsic evidence to prove mutual mistake; ranking Amerisure 

as the primary insurer; and allowing another third-party insurer, Chubb Custom

Insurance Company, to bring a cross-claim for defense fees. Because the district

court erred in refusing to consider extrinsic evidence to prove the theory of

mutual mistake, we reverse and remand without considering ranking or

standing. 

I

Appellant–Cross-Appellee Amerisure Mutual Insurance Company

(Amerisure) and Appellee–Cross-Appellant Chubb Custom Insurance Company

(Chubb) each issued policies to Rockbit Holdings-owned corporations. This case

arises from a motion for summary judgment on the validity of, ranking of, and

reimbursements due under, insurance policies issued by Amerisure.

Rockbit Holdings owns Ulterra Drilling Technologies (Drilling), which in

turn owns Ulterra MWD (MWD). Drilling manufactures and sells drill bits;

MWD conducts site-specific installation and drilling. Ronald F. Thomason, Chief

Financial Officer for both Drilling and MWD, contacted Cameron Jones of the

William Rigg Company (Rigg) to purchase insurance policies for both companies. 

Rigg filed commercial insurance applications on behalf of Drilling and

MWD. Chubb issued two policies to MWD: a commercial general liability (CGL)

policy with a $1,000,000 limit and an umbrella policy with a $5,000,000 limit. 

Both policies covered MWD from November 2005 to November 2006. Amerisure

issued two policies to Drilling: a CGL policy with a $1,000,000 limit and an

umbrella policy with a $10,000,000 limit. Both policies covered Drilling from

December 31, 2005 for one year. Importantly, both of the Drilling policies issued

by Amerisure also named MWD as an insured.

In August 2006, a drill sensor installed by MWD exploded, severely

injuring Michael Fruge. Fruge sued Drilling and MWD (among others) for

negligence. Amerisure and Chubb assumed MWD’s defense in May 2007. Fruge

2

Case: 10-31178 Document: 00511673235 Page: 2 Date Filed: 11/22/2011
No. 10-31178

voluntarily dismissed Drilling in June 2007. On September 6, 2007, Amerisure

issued two Policy Change Forms deleting MWD as a named insured. Amerisure

then terminated its defense of MWD on September 18, 2007, effective October

19, 2007, claiming its addition of MWD to Drilling’s policy was a clerical error.

Chubb continued defending MWD but filed a cross-claim against

Amerisure for a declaration of Amerisure’s obligation to defend MWD, a

declaration of ranking of the two policies as applied to MWD, and a declaration

of Amerisure’s duty to contribute to defense costs. Amerisure moved to dismiss

Chubb’s cross-claim for failure to state a claim on which relief could be granted

and moved for summary judgment on the grounds that: (1) no valid insurance

contract between Amerisure and MWD was formed, due to a mutual mistake; (2)

Chubb was solely responsible for defending MWD; and (3) Chubb lacked

standing to sue Amerisure for defense costs or to compel Amerisure to defend

MWD. 

The district court granted Chubb’s motion and denied Amerisure’s,

concluding that: (1) the parties impliedly consented to the application of

Louisiana law; (2) Chubb could bring a cause of action against Amerisure to

determine Amerisure’s liability to MWD; (3) Louisiana law prohibited

considering extrinsic evidence of mutual mistake in a facially unambiguous

contract; (4) Louisiana law prohibited reformation of Amerisure’s insurance

policies in any event; (5) Amerisure’s policies clearly insured MWD; and

(6) Amerisure’s CGL policy ranked as the primary policy, Chubb’s CGL policy

ranked as the excess policy, and all liability on umbrella policies required a prorata division in proportion to policy limits of 2:1 between Amerisure and Chubb. 

The district court’s memorandum decision did not address Chubb’s request for

reimbursement of defense costs. 

Amerisure and Chubb settled Fruge’s suit with MWDsubjectto Amerisure

reserving the right to appeal the district court’s rulings to this court. Amerisure

3

Case: 10-31178 Document: 00511673235 Page: 3 Date Filed: 11/22/2011
No. 10-31178

appeals the district court’s application of Louisiana law and its rulings regarding

the inapplicability of extrinsic evidence, preclusion of reformation, insurance

policy rankings, and Chubb’s ability to bring a cross-claim. Chubb cross-appeals,

requesting this court to rule that Chubb is entitled to contribution of legal

defense fees from Amerisure.

II

We review the grant or denial of a motion for summary judgment de novo.1

“Summary judgment is proper if there is no genuine issue of material fact and

the moving party is entitled to judgment as a matter of law.” This court views 2

all disputed facts in the light most favorable to the non-moving party. We 3

review the district court’s determination of state law de novo.4

A

The district court applied Louisiana law, concluding that the parties

agreed that Louisiana law governed the interpretation of the insurance policies. 

Amerisure asserts on appeal that the district court should have applied Texas,

rather than Louisiana, law. However, Amerisure briefed only Louisiana law

before the district court, never asserting that Texas law should apply or that the

district court should engage in a choice-of-law analysis. Indeed, Amerisure

relied exclusively on Louisiana law in its motion for summary judgment and in

opposing Chubb’s motion for summary judgment at the district court level. Now,

for the first time on appeal, Amerisure argues that the district court should have

independently analyzed Louisiana’s choice-of-law rules and applied Texas law. 

Catalyst Old River Hydroelectric Ltd. P’ship v. Ingram Barge Co., 639 F.3d 207, 210 1

(5th Cir. 2011).

 FED. R. CIV. P. 56(a); Catalyst, 639 F.3d at 210. 

2

See United States ex rel. Farmer v. City of Houston, 523 F.3d 333, 337 (5th Cir. 2008).

3

Moore v. State Farm Fire & Cas. Co., 556 F.3d 264, 269 (5th Cir. 2009).

4

4

Case: 10-31178 Document: 00511673235 Page: 4 Date Filed: 11/22/2011
No. 10-31178

Failure to raise an argument before the district court waives that argument,

including an argument for choice-of-law analysis. Amerisure has thus waived 5

its choice-of-law argument. 

B

Pursuant to Amerisure’s motion for summary judgment seeking a

declaration that it owed no contractual obligations to MWD, Amerisure offered

affidavits of Rigg, MWD, and Amerisure officials. The district court rejected the

consideration of the affidavits and Amerisure’s mutual mistake theory on two

grounds: (1) because the contract was unambiguous, further interpretation was

prohibited, and (2)Louisiana law categorically prohibits reformation “that limits

the recovery of a third party tort victim through post-accident invalidation of an

instrument” by agreement or judicial decree. 

In determining that Louisiana law prohibits the consideration of extrinsic

evidence, the district court applied Louisiana’s general contract interpretation

rule—when the terms of a written contract are clear, unambiguous, and lead to

no absurd consequences, further interpretation of the parties intent is

prohibited. However, Amerisure did not assert that the language of the 6

contract was ambiguous. Rather, Amerisure asserted that there was a mutual

mistake. In rejecting this argument, the district court failed to acknowledge

that “[t]here is ample authority in [Louisiana] jurisprudence to allow

reformation of an insurance policy when, because of mutual error or mistake, the

See Arthur W. Tifford, PA v. Tandem Energy Corp., 562 F.3d 699, 705 n.2 (5th Cir.

5

2009) (“Under the Erie rule, we must apply the substantive law of the forum state—including

choice of law rules, which may dictate applying another state’s laws.”); Thompson & Wallace

of Memphis, Inc. v. Falconwood Corp., 100 F.3d 429, 434 n.3 (5th Cir. 1996) (finding any

choice-of-law argument to be waived); Kucel v. Walter E. Heller & Co., 813 F.2d 67, 74 (5th Cir.

1987) (holding that the choice-of-law issue was not waived because the issue was called to the

court’s attention in time to be properly considered). 

 LA. CIV. CODE ANN. arts. 2045-2046 (2008).

6

5

Case: 10-31178 Document: 00511673235 Page: 5 Date Filed: 11/22/2011
No. 10-31178

policy fails to reflect the intent of the parties.” Instead, the court relied on 7

Louisiana Revised Statutes section 22:1262 and Washington v. Savoie to 8

conclude that Louisiana’s public policy broadly precludes post-injury contract

reformation—even for mutual mistake—when reformation would prejudice an

injured third party. Here, however, we do not deal with an injured third-party

tort victim, whose rights we do not address here. The “third party” in this case

is an insurance company that expressly contracted for a risk without relying in

any way on any other coverage. Indeed, Chubb could not have relied on

Amerisure’s coverage because the Chubb policy precedes the Amerisure policy. 

Thus, we find the district court’s rationale unpersuasive for several reasons. 

Louisiana law clearly allows contract reformation. Reformation is an

equitable remedy designed to correct an error in the contract. “An insurance 9

policy is a contract between the parties and should be construed by using the

general rules of interpretation set forth in the Louisiana Civil Code.” As with 10

other written agreements, insurance policies may be reformed if, through mutual

error or fraud, the policy as issued does not express the agreement of the

parties. “Parole [sic] evidence is admissible to show mutual error even though 11

the express terms of the policy are not ambiguous.” To reform an instrument, 12

“there must be clear proof of the antecedent agreement as well as the error in

Staten v. Sec. Indus. Ins. Co., 414 So. 2d 1328, 1331 (La. App. 2d Cir. 1982); see, e.g.,

7

Samuels v. State Farm Mut. Auto. Ins. Co., 939 So. 2d 1235 (La. 2006).

634 So. 2d 1176 (La. 1994). 

8

Valhi, Inc. v. Zapata Corp., 365 So. 2d 867, 870 (La. App. 4th Cir. 1978). 

9

Cadwallader v. Allstate Ins. Co., 848 So. 2d 577, 580 (La. 2003). 10

Samuels, 939 So. 2d at 1240. 11

Id. 12

6

Case: 10-31178 Document: 00511673235 Page: 6 Date Filed: 11/22/2011
No. 10-31178

committing it to writing.” “The burden is on the one seeking reformation to 13

prove the error alleged by clear and convincing evidence.” Louisiana law is

14

clear: a party may present extrinsic evidence to prove mutual mistake, even

when the language of the contract is not ambiguous.15

Specifically, Louisiana cases have allowed post-accident contract

reformation. In Samuels v. State Farm, a homeowner purchased an umbrella

policy from State Farm and a separate policy from Evanston Insurance for

additional umbrella liability coverage. An Evanston employee misidentified 16

the underlying State Farm policy in the Evanston policy documents. After the 17

insured suffered an accident and made a claim, Evanston submitted multiple

affidavits to demonstrate a mistake, which the Louisiana trial court rejected.18

State Farm argued the lack of ambiguity in Evanston’s policy prevented the

court from reforming it. The Louisiana Supreme Court rejected this argument, 19

stating that parol evidence “is admissible to show mutual error even though the

express terms of the policy are not ambiguous.” The court expressly 20

First State Bank & Trust Co. of E. Baton Rouge Parish v. Seven Gables Inc., 501

13

So. 2d 280, 285 (La. App. 1st Cir. 1986), writ denied, 502 So. 2d 103 (La. 1987). 

Id. 14

We do not decide today whether Amerisure can meet the required burden of clear and 15

convincing evidence, but only that the district court erred in refusing to consider extrinsic

evidence to prove mutual mistake.

 939 So. 2d. at 1237. 16

Id. at 1238. 17

Id. at 1238-39. 18

Id. at 1241. 

19

Id. at 1240. 20

7

Case: 10-31178 Document: 00511673235 Page: 7 Date Filed: 11/22/2011
No. 10-31178

distinguished “interpreting an ambiguity in [a] policy” from “correcting a clerical

error to reflect the parties’ mutual intent.” 

21

The district court acknowledged that Louisiana law allows reformation

when a written instrument does not reflect the true intent of the contracting

parties but differentiated the present case as being barred by Louisiana Revised

Statutes section 22:1262 and public policy. We find the district court’s reliance

on this statute to be misplaced. Section 22:1262 provides:

No insurance contractinsuring against loss or damage through legal

liability for the bodily injury or death by accident of any individual,

or for damage to the property of any person, shall be retroactively

annulled by any agreement between the insurer and the insured

after the occurrence of any such injury, death, or damage for which

the insured may be liable, and any such annulment attempted shall

be null and void.22

The language and purpose of section 22:1262 suggests its irrelevance to a

reformation action. By its terms, 22:1262 prohibits insurers and insureds from

rescinding or annulling policy contracts by agreement. Amerisure does not 23

seek to annul the contract by agreement; it seeks reformation based on mutual

mistake. Louisiana courts have not interpreted this statutory language. In the

absence of controlling authority by the Louisiana Supreme Court, Erie requires

this court to predict how the Louisiana Supreme Court would determine this

Id. at 1241. 21

 LA. REV. STAT. ANN. § 22:1262 (2010).

22

The Louisiana Supreme Court considers highly analogous decisions from other courts 23

as persuasive authority. C H F Fin. Co. v. Jochum, 127 So. 2d 534, 539 (La. 1961). Thus it

is relevant that several other state and federal courts interpreting similar provisions also

suggest the statute’s irrelevance to a reformation action. See, e.g., State Compensation Fund

v. Mar Pac Helicopter Corp., 752 P.2d 1, 7-8 (Ariz. Ct. App. 1987) (holding a similar provision

“by its very terms governs bilateral agreements [and] therefore does not apply to an insurer’s

unilateral rescission of a contract”); Am. Cont’l Ins. Co. v. Steen, 91 P.3d 864, 870 n.3 (Wash.

2004) (en banc) (“[The provision] voids agreements between insureds and insurers to

retroactively annul a policy . . . . It is an important difference the legislature has declared

law.”).

8

Case: 10-31178 Document: 00511673235 Page: 8 Date Filed: 11/22/2011
No. 10-31178

issue and apply Louisiana law accordingly. It is unlikely the Louisiana 24

Supreme Court would interpret section 22:1262 as barring all post-accident

reformation in light of the Louisiana cases discussing post-accident reformation

in various contexts, none of which apply, or even address, section 22:1262 or its

predecessor, section 22:639.25

Washington v. Savoie, dealing with the particular requirements of

uninsured motorist coverage, does not require judgment for Chubb here. The 26

tortfeasor has settled. The only dispute lies in who must bear the loss of

settlement. Additionally, by the parties’ admissions, there is no evidence that

Chubb relied on Amerisure’s insuring MWD. In fact, Chubb issued its policies 27

to MWD before Amerisure included MWD in its Drilling policies. 

Whether the parties actually made a mutual mistake remains an open

question. Amerisure claims it listed MWD on its policies only through an

unintended clerical error, and Amerisure’s affidavits unequivocally disavow any

Moore v. State Farm Fire & Cas. Co., 556 F.3d 264, 269 (5th Cir. 2009).

24

 See, e.g., Palmer v. Martinez, 42 So. 3d 1147, 1156-57 (La. App. 2d Cir.) (reversing 25

improper reformation to include uninsured party in insurance contract without discussing

22:1262), writs denied, 50 So. 3d 804, 805 (La. 2010); Hope v. S & J Diving, Inc., 996 So. 2d

50, 54-55 (La. App. 4th Cir. 2008) (discussing Louisiana’s insurance reformation principles in

maritime-insurance context without reference to 22:1262); Farmers-Merchants Bank & Trust

Co. v. St. Katherine Ins. Co., 693 So. 2d 876, 880-81 (La. App. 3d Cir.) (noting court’s

“consistent” holding “in certain instances of negligence, mistake, error or fraud on the part of

an agent or employee of an insurer,” that an insurance contract may be reformed in a case

when loss already occurred without reference to section 22:1262), writ denied, 703 So. 2d 25

(La. 1997); Stanley v. Safeway Ins. Co., 682 So. 2d 951, 954 (La. App. 3d Cir. 1996) (rejecting

reformation of applicable insurance date without reference to 22:1262), writ denied, 689 So.

2d 1371 (La. 1997).

See 634 So. 2d 1176 (La. 1994). 

26

Cf. Samuels v. State Farm Mut. Auto. Ins. Co., 939 So. 2d 1235, 1239-40 (La. 2006) 27

(finding it “significantthat State Farm in no way relied on this clerical error” and emphasizing

that rather than the amount of coverage the insured will receive, “the only issue is which

insurance company will benefit from [the] decision.”). 

9

Case: 10-31178 Document: 00511673235 Page: 9 Date Filed: 11/22/2011
No. 10-31178

intention to insure MWD. Louisiana law permits consideration of this evidence

to determine whether there was mutual mistake that merits reformation. 

* * *

For the foregoing reasons, we REVERSE and REMAND the district court’s

judgment.

10

Case: 10-31178 Document: 00511673235 Page: 10 Date Filed: 11/22/2011