## Facts

- A consortium of pipeline owners (Signal, Louisiana Land & Exploration, Amerada Hess, and Marathon) owned a 12¾-inch offshore pipeline carrying oil from a platform in the Gulf of Mexico to shore.
- Sun Oil acquired a minority interest in the pipeline and obtained contractual rights to connect its nearby platform to the consortium’s pipeline at the consortium’s platform.
- Sun hired J. Ray McDermott & Co. as contractor to construct the connection; McDermott hired Williams-McWilliams to provide the Barge W-701 and crew for the offshore work.
- During construction, the barge’s anchor fouled the existing pipeline; the barge captain’s attempt to free the anchor ruptured the pipeline, causing substantial damage and production losses.
- The district court (in earlier proceedings) found the barge captain’s negligence was the sole cause of the rupture; liability findings were previously affirmed on appeal.
- Contractual arrangements created an indemnity chain in which Sun indemnified the pipeline owners and McDermott indemnified Sun; Williams-McWilliams and McDermott had no express indemnity agreement between them.
- The district court allowed Williams-McWilliams to limit liability under the Limitation of Liability Act to the vessel’s post-casualty value and placed remaining losses on McDermott through the indemnity chain.
- McDermott appealed, challenging the interaction between Williams-McWilliams’ limitation and the contractual allocation of loss.

## Issues

1. Whether Williams-McWilliams, as owner of the Barge W-701, could limit liability under the Limitation of Liability Act despite the vessel’s negligence being the sole cause of the damage.
2. Whether the vessel owner’s limitation of liability alters or negates separate contractual indemnity obligations among other parties, thereby changing the agreed allocation of risk.
3. Whether indemnity or contribution theories could be used to impose liability on the vessel owner beyond the limitation fund.

## Decision

- The Fifth Circuit upheld Williams-McWilliams’ right to limit liability to the barge’s value because the negligent act occurred without the owner’s privity or knowledge.
- The court affirmed enforcement of the contractual indemnity chain, which required McDermott (and, as applicable, Sun) to bear damages exceeding the vessel owner’s limited exposure.
- The court maintained the limitation cap as to claims against Williams-McWilliams and did not permit indemnity claims to expand the owner’s liability beyond the limitation fund.

## Legal Principles

- Under the Limitation of Liability Act, a vessel owner may cap liability to the post-casualty value of the vessel and pending freight when the casualty occurs without the owner’s privity or knowledge.
- Limitation restricts recovery against the vessel owner as owner; it does not, by itself, void or rewrite separate maritime indemnity contracts among non-limiting parties.
- Maritime law generally enforces express indemnity provisions allocating risk among sophisticated commercial parties, absent a public-policy bar.
- Indemnity or contribution cannot be used as an indirect method to collect from a limiting vessel owner beyond the statutory limitation fund.

## Conclusion

The Fifth Circuit held that Williams-McWilliams could limit liability for the barge crew’s negligence under the Limitation of Liability Act, while contractual indemnity obligations among the other parties remained enforceable and shifted the excess loss to McDermott (and, as applicable, Sun) according to their agreements.


Signal Oil & Gas Co. v. The Barge W-701, 654 F.2d 1164 (5th Cir. 1981)