United States District Court, Northern District of Illinois, E.D
July 5, 1974
GENERAL EXPRESSWAYS, INC., PLAINTIFF,
SCHREIBER FREIGHT LINES, INC., DEFENDANT.
The opinion of the court was delivered by: Austin, District Judge.
This is an action for recovery under an indemnification clause
of a truck leasing agreement. Federal jurisdiction is predicated
upon the diversity of the parties' citizenship and an amount in
controversy in excess of $10,000.00. The case is presently before
the court to resolve the issue presented by defendant's motion
pursuant to Fed.R.Civ.P. 12(c) for judgment on the pleadings.
The facts set forth in the pleadings are as follows:
Plaintiff General Expressways, Inc. ("General") and defendant
Schreiber Freight Lines, Inc. ("Schreiber") are common carriers
in interstate commerce. On June 27, 1973, the parties entered
into a written "trip lease" agreement whereby Schreiber leased to
General some tractor-trailer trucks for a particular trip General
intended to make. Shortly thereafter, General gained possession
of the trucks, inspected them, loaded them and embarked with the
cargo. Before the cargo reached its destination and while it was
being transported in the Schreiber trucks, it was damaged,
causing General to become liable in the amount of $16,031.00 to
the owner of the shipment. Significantly, no personal injury is
involved in this case. General has paid the owner's claim.
The trip lease agreement between the parties provides, in
"It is understood that the leased equipment under
this agreement is in the exclusive possession,
control and use of the authorized carrier Lessee and
that the Lessee assumes full responsibility in
respect to the equipment it is operating to the
public, the shippers, and the INTERSTATE COMMERCE
COMMISSION. It is agreed that Lessor will carry
acceptable Public Liability and Property Damage
Insurance. Lessor agrees to reimburse and otherwise
indemnify Lessee for any and all losses sustained by
Lessee resulting from the use of the aforesaid
equipment. * * * * * The lessor shall indenify the
Lessee from any loss, damage or happening giving rise
to claims on the part of the shippers, and the Lessee
shall withhold payment of any and all sums then or
thereafter due the Lessor, to the extent of such
expenses and claims until the determination of such
expense and valid claims, which amounts shall then be
deducted to the satisfaction thereof. Lessee shall
not be liable for the loss of, or damage to, the
aforesaid equipment, however caused, while in use
under the terms of this lease. * * * * * Lessor
hereby agrees further to maintain his equipment in a
good and efficient manner, observe all safety and
other requirements of the I.C.C. and all other
regulatory bodies having jurisdiction and to
indemnify carrier against any losses in connection
with this operation."
Thus, General claims it should be indemnified by Schreiber,
pursuant to the terms of the contract, for the loss it has
Schreiber, on the other hand, contends the indemnity provision
is contrary to the public policy embodied in the regulations of
the Interstate Commerce Commission and is therefore
unenforceable.*fn1 Accordingly, Schreiber moves for entry of
judgment on the pleadings in its favor. For the reasons that
follow, that motion must be denied.
It is now established in the Fourth and Fifth Circuits that
indemnification agreements similar to the one here are
enforceable, despite the public policy objections raised by
Schreiber. Carolina Freight Carriers Corp. v. Pitt County
Transportation Co., 492 F.2d 243 (4th Cir. 1974); Allstate
Insurance Co. v. Alterman Transportation Lines, Inc.,
465 F.2d 710 (5th Cir. 1972). As stated in the Allstate case:
"Turning to the indemnification clause itself we find
nothing in the language of 49 C.F.R. § 1057.4(a)(4)
which would prohibit two freely contracting parties
from determining, as
between themselves, which party will ultimately bear
the cost of damages done to a third person. The only
conceivable argument against such an arrangement
would be that the regulation seeks to prevent
indemnification on the theory that a trucking
company, knowing it does not have to pay damages,
might tend to be less careful in supervising and
controlling the actions of its truck drivers.
However, the same can be said of insurance coverage
which the regulations obviously do not prohibit. We
are of the opinion that had the I.C.C. intended to
prevent indemnification between trucking companies it
would have said so in precise terms." Id. at 713.
I find this reasoning inescapable and therefore adopt it as the
law of this case.
In opposition to this conclusion, defendant points to Alford v.
Major, 470 F.2d 132 (7th Cir. 1972), where a conclusion contrary
to that reached by the Fourth and Fifth Circuits was reached.
However, the Alford decision was based upon different facts and
therefore must be distinguished. In the first place, in Alford,
there was a prima facie violation of 49 C.F.R. § 1057.4 (a)(4)
in that the lessee allowed the lessor to retain full control over
the truck and driver during the term of the lease. Accordingly,
the indemnity provision was rightfully held unenforceable. In the
present case, however, there is no such violation of the
Secondly, the public policy of protecting the personal safety
of the public on our highways is not compromised here. For the
claim is based upon damage to the shipment itself, not personal
injury of third persons.
Furthermore, I believe the reasoning of the Court in Chicago,
R.I. & P.R. Co. v. Chicago B. & Q.R. Co., 437 F.2d 6, (7th
Cir. 1971) should control here. In that case, the Burlington
Railroad sought indemnification from the Rock Island Railroad for
damages it paid to passengers injured in a train wreck. The Rock
Island train was travelling on Burlington tracks under an
agreement which required the former to hold the latter harmless
for any claims arising from the former's use of the tracks.
Apparently, the switching signal system on the Burlington line
was defective, causing the train crash. The Rock Island resisted
Burlington's claims on the ground that the public policy in the
Federal Safety Appliance Act of ensuring passenger safety would
be compromised if the negligent party (Burlington) were permitted
to recover under the indemnification clause. The Court rejected
Rock Island's argument, saying:
"(T)he distribution of risks undertaken by this
contract does not impair the policies or force of the
Federal Safety Appliance Act. . . .
(T)hese provisions of the contract represented an
adjustment of the private relations between the two
carriers but did not alter their duties to the public
as common carriers." 437 F.2d at 9-10. (citations
The opinion in Alford apparently overlooks the decision in
Chicago, R.I. & P.R. Co. v. Chicago B. & Q.R. Co., supra. I
consider the latter decision to be more correct under the facts
of the present case.
Any lingering doubt created by Schreiber's public policy
argument is dispelled by the public policy of fostering freedom
of contract. In Baltimore & Ohio Southwestern Railway Company v.
Voigt, 176 U.S. 498, 20 S.Ct. 385, 44 L.Ed. 560 (1900), the Court
said it must not be forgotten that,
"the right of private contract is no small part of
the liberty of the citizen, and that the usual and
most important function of courts of justice is
rather to maintain and enforce contracts than to
enable parties thereto to escape from their
obligation on the pretext of public policy, unless it
clearly appears that they clearly contravene public
right or public welfare."
The defendant's motion for judgment on the pleadings is
It is so ordered.