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United States v. Auto Driveaway Co.

decided: July 25, 1972.

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE
v.
AUTO DRIVEAWAY COMPANY, RESPONDENT-APPELLANT



Knoch, Senior Circuit Judge, and Kiley and Stevens, Circuit Judges.

Author: Kiley

KILEY, C. J.

This is a mandamus action brought by the government under 49 U.S.C. § 20(9)*fn1 to restrain respondent-appellant (Company) from limiting in its tariff its liability for damages as a common carrier under 49 U.S.C. § 20(11).*fn2 The district court decided that both the original and modified tariffs violated § 20(11) and 49 U.S.C. § 316(d), but that because the Company informed the court that in the future it would not violate § 20(11) the court was "unwilling" to grant the mandamus writ.*fn3 The Company has appealed. We reverse.

The Company, a Pennsylvania corporation with its principal office in Chicago, Illinois, was authorized by the Interstate Commerce Commission to operate as a for-hire common carrier, of motor vehicles, which drives the shipper's (owner's) motor vehicle together with the owner's baggage, sporting equipment and personal effects from one place to another.*fn4 In its original tariff the Company limited its liability to a maximum of $1,000*fn5 or the deductible portion of the vehicle owner's collision insurance (if covered) and disclaimed any liability for loss or damage to "baggage, sporting equipment and personal effects" of owners of the motor vehicles transported by it. Before this suit was filed the Company had been told by Commission employees that its tariff violated § 20(11).

After this suit was filed, on October 30, 1969, the Company filed a new tariff including a Released Rate Order approved by the Commission in which the Company terminated the practice of denying liability for loss or damage to baggage, sporting equipment and personal effects of the owner.*fn6 In addition to terminating the practice of disclaiming liability for the personal contents in the owner's car, the Company, in reissuing its Shipping Order and Freight Bill on January 1, 1970, removed the provision limiting its liability for damages to the car to either $1,000 for cars without collision insurance or the deductible portion of the owner's collision insurance. In its place the Company now claims the benefit of the owner's insurance on the motor vehicle in case of damage or loss as long as that provision does not void the insurance policy and as long as the Company reimburses the owner for the premium.*fn7

The Company having conceded the unlawfulness of the original tariff, the only question raised in this appeal is whether the modified tariff with the "benefit of insurance" provision limits the Company's liability in violation of § 20(11) and is an "undue preference" in violation of § 316(d).*fn8

I.

The government contends that the "benefit of insurance" tariff provision violates § 20(11) because the Company concedes the earlier $1,000 limitation is unlawful and because the result for the Company under the pertinent clause is identical to the earlier result and consequently is also unlawful. It argues that the total effect is an attempt to do indirectly what the Company could not lawfully do directly.

The Company, to sustain the provision, argues that there is no limitation or avoidance of liability since the provision applies only after the Company assumes liability; that its customers are not required to obtain insurance for the Company's benefit; and that the Company reimburses the customer for the premium if the Company actually benefits from the insurance policy. It relies upon Phoenix Ins. Co. v. Erie and Western Transportation Co., 117 U.S. 312, 6 S. Ct. 750, 29 L. Ed. 873 (1886), and Hartford Fire Ins. Co. v. Payne, 199 Iowa 1008, 203 N.W. 4 (1925).

We do not agree with the government that the situations under the earlier and the instant provisions are identical. In the earlier provision there was an express limitation of liability in the case of an insured customer to the deductible amount in the policy, and in the case of the uninsured customer to $1,000. The result was to enable the Company to "exempt" itself from liability for "the full actual loss, damage or injury caused by it" in direct violation of § 20(11). The "benefit of insurance" clause, however, presupposes the Company's liability for the "full" loss in conformity with § 20(11), and does not "exempt" it from that liability. The clause permits the Company to recover from the customer the proceeds of the insurance paid him.

We see no violation of § 20(11) in the "benefit of insurance" clause. There is no express prohibition in § 20(11) which precludes the clause. The Supreme Court, before adoption in 1887 of the Interstate Commerce Act, decided that "As the carrier might lawfully himself obtain insurance against the loss of the goods . . . he may lawfully stipulate with the owner to be allowed the benefit of insurance voluntarily obtained by the latter." Phoenix Ins. Co., 117 U.S. at 325. Presumably the Company's "benefit of insurance" clause will be known to the car owner and under the tariff provisions the clause must not contravene terms of any owner's insurance policy. Practically, the clause does not have significance, since most owners who would engage the Company's services would have insurance. And the insurer is, or can be, protected by a policy endorsement which would effectually conflict with the clause. We conclude that the clause does not "exempt . . . [the Company] . . . from the liability imposed" so as to violate § 20(11).

There is no requirement in the clause that all shippers carry insurance protecting the Company. The part of the premium -- paid by the owner for his liability insurance -- attributed to the custody of the car by the Company is minimal. In the event of a loss, that part is reimbursed by the Company to the owner, and the Company is burdened with the total loss. Accordingly, there is no limitation of liability in violation of § 20(11).

We conclude that the district court erred in deciding that the "benefit of insurance" clause ...


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