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GEN. EXPRESS., INC. v. SCHREIBER FREIGHT LINES INC.

July 5, 1974

GENERAL EXPRESSWAYS, INC., PLAINTIFF,
v.
SCHREIBER FREIGHT LINES, INC., DEFENDANT.



The opinion of the court was delivered by: Austin, District Judge.

MEMORANDUM OPINION

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 pertinent part:

  "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 incurred.

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:

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 regulation.

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 ...


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