Opinion
No. 5300.
Argued March 3, 1965.
Decided July 21, 1965.
1. Where the insurer of goods in transit stipulated that it should be subrogated to the shipper's right to hold the carrier liable for damage to the goods in transit the insurer was held effectively subrogated to the shipper's cause of action against the carrier for the damages he sustained notwithstanding the stipulation in the carrier's bill of lading issued to the shipper that the carrier should be entitled to the benefit of any insurance.
2. In such case the evidence warranted the finding that certain expenses incurred by the shipper to repair the damaged goods at their destination rather than having them returned to the shipper were reasonably incidental to the loss sustained.
The following reserved case was transferred by Grant, J.
"Assumpsit to recover damages to personal property delivered by the plaintiff to the defendant for carriage by the latter to the plaintiff's consignee at Reno, Nevada. The plaintiff paid for the carriage of the goods which were delivered in a damaged condition. The action was defaulted, and upon a motion to strike the default the Court, subject to exception, ruled that the matter be heard upon an assessment of damages. On that restricted issue a hearing was had before the Court. The `goods' in question were a high temperature electric furnace consigned to the U.S. Bureau of Mines with a value of some $15,817 and a so-called pyrometer of a value of some $2,800.
"Upon learning of the damage to the units described the Brew Co. sent one Lloyd Palmer, a shop foreman, to Reno to survey and repair the equipment. The defendant contends that the expenses thus incurred are not proper items of damages as the damaged goods could have been returned to the plaintiff's factory in Concord for repairs at no transportation expense to plaintiff. This was not disputed, and Mr. Palmer testified that the work could have been done in Concord. However, the Court feels that Brew was justified in sending a trained expert to Nevada to check and repair the damage, especially to such expensive equipment.
"All the items of damage set forth are found to be proper except that of a claim under the name of Howard Co. for $130. The burden of proof on this was not sustained. The items allowed total $1,727.61 including transportation, lodging and baggage for Palmer.
"Just before the conclusion of the trial it became known to the Court that this was a subrogation case, Brew having been paid its loss by its own insurer who was seeking to recover from Auclair. The plaintiff paid an annual premium of $150 to Employers' Liability Assurance Corp., Ltd. and collected benefits thereunder for the loss herein described."
The contract of insurance provided in part as follows: "6. Benefit of Insurance. It is agreed by the Insured that this insurance shall not inure directly or indirectly to the benefit of any carrier, bailee, or other party, by stipulation in bill of lading or otherwise, and any breach of this agreement shall render this policy null and void."
"The Uniform Straight Bill of Lading delivered to Brew by Auclair Sec. 2, (c) reads:
"`Any carrier or party liable on account of loss of or damage to any of said property shall have the full benefit of any insurance that may have been effected upon or on account of said property, so far as this shall not avoid the policies or contracts of insurance, provided that the carrier reimburse the claimant for the premium paid thereon.' The defendant argues that the limit of its liability is $150, the amount of the annual premium paid by Brew.
"Whether this portion of the Uniform Straight Bill of Lading, only whose legal effect is disputed, relieves the defendant of all damages except the $150 premium is reserved and transferred to the Supreme Court."
McLane, Carleton, Graf, Greene Brown and John A. Graf (Mr. Graf orally), for the plaintiff.
Sheehan, Phinney, Bass, Green Bergevin and Robert E. Dastin (Mr. Dastin orally), for the defendant.
The defendant carrier emphasizes the provisions of s. 2(c) of the bill of lading and contends according to its terms that it is liable only for the amount of the premium on the insurance policy procured by the plaintiff shipper. The insurance company, which is subrogated to the rights of the plaintiff shipper, emphasizes the provisions of the insurance policy that the insurance shall not "inure directly or indirectly to the benefit of any carrier," and contends that it is not subject to the limitation of liability contained in the bill of lading. These contentions are neither novel nor new and there is some logical support for each. The struggle between insurer and carrier as to which will bear the ultimate burden when insured goods are damaged or lost in transit has been a protracted one. Phoenix Ins. Co. v. Erie Transportation Co., 117 U.S. 312; Luckenbach v. McCahan Sugar Co., 248 U.S. 139; The Turret Crown, 297 Fed. 766 (2d Cir. 1924); Note, Subrogation of an Insurer: The Burden of the Loss of Insured Goods in Transit, 37 Harv. L. Rev. 901 (1924); Vance, Insurance 794-796 (3d ed. 1951).
"In the beginning, the insurer of goods in transit was, on paying the insured, subrogated to the insured's claim, as shipper, against the carrier. Then the carrier inserted a stipulation in the bill of lading requiring the shipper to give it the benefit of any insurance that he might have, and this clause was held to cut off the insurer's right of subrogation even though the loss was due to the carrier's negligence [Phoenix Ins. Co. v. Erie Western Transp. Co., 117 U.S. 312 (1886)]. This decision, which caused all the trouble, was an erroneous application of the perfectly sound principle that the insurer is subrogated only to the extent of the insured's claim against the third party. The carrier did not and could not by stipulation extinguish his liability to the shipper; and if the idea of subrogation is sound, the loss should ultimately fall upon the person who had the greater measure of control over it. However, the decision stood, and the insurers countered by inserting a condition, in policies on goods in transit, that the policy should be void if the insured should contract with the carrier that the latter should have the benefit of the insurance. The carrier has not been successful in counteracting the effect of these stipulations; and under most recent decisions, the ultimate loss falls upon the carrier." Patterson, Essentials of Insurance Law 150 (2d ed. 1957).
Contradictory provisions and stipulations in contracts of insurance and carriage must be resolved in spite of logical difficulties. "The apparent circularity of expression may be resolved by interpreting the provision in the bill of lading as entitling the carrier to the insurance if there is no opposing stipulation in the policy or contract of insurance, that is, no warranty or provision for avoidance; and not, if there is. Consequently, the insured may recover from the insurer; the insurer is effectively subrogated to his cause of action against the carrier; and the carrier is not entitled to the insurance." Campbell, Non-Consensual Suretyship, 45 Yale L. J. 69, 85 (1935). See Adams v. Hartford Fire Ins. Co., 193 Iowa 1027; Graysonia Rr. Co. v. Newberger Cotton Co., 170 Ark. 1039; Annot. 39 A.L.R. 1116.
The result of the decisions was succinctly stated in Patterson, Cases and Materials on Insurance 305 (1955) as follows: "The legal impasse created where the insurer of goods in transit stipulated that it should be subrogated to the shipper's right to hold the carrier liable for the loss of the goods, and the carrier in its bill of lading issued to the shipper stipulated that it should be entitled to the benefit of the shipper's insurance, seems finally to have been resolved in favor of the insurer." See Hartford Fire Ins. Co. v. Payne, 199 Iowa 1008; 6 Appleman, Insurance Law and Practice, s. 4056 (1942); Mode O'Day Corp. v. Ringsby Truck Lines, 100 Cal.App.2d 748; 38 Harv. L. Rev. 117 (1924).
We conclude that the answer to the question transferred by the Trial Court without ruling is that the bill of lading does not relieve the defendant of all damages and the liability is not limited to the insurance premium. It follows, on the authorities cited above, that the insurer is effectively subrogated to the shipper's cause of action against the carrier for the damages he sustained. King, Subrogation under Contracts Insuring Property, 30 Tex. L. Rev. 62, 78-81 (1951).
We have examined the record in this case and agree with the conclusion of the Trial Court that competent evidence was submitted to sustain the damage award in the amount of $1,727.61. The action of the shipper in repairing the damaged property in Nevada rather than returning it to New Hampshire was reasonable and the cost of doing it was also reasonable. The expenses which the plaintiff shipper incurred in repairing the damaged property were reasonably incidental to the loss sustained. Davis v. Company, 77 N.H. 403; Hurt v. Hickey, 67 N.H. 411. Nor do we find any evidence to support the proposition that the plaintiff shipper failed to make reasonable efforts to curtail his damages. Novak v. Company, 84 N.H. 93, 96; Dufton v. Bank, 95 N.H. 299.
The plaintiff's verdict in the amount of $1,727.61 is affirmed and the defendant's exceptions thereto are overruled. This makes unnecessary consideration of other issues raised by the plaintiff for sustaining the verdict.
Defendant's exceptions overruled.
All concurred.