Court Opinion

ID: 8895516
Source: CourtListenerOpinion
Date Created: 2022-11-26 23:54:53.19985+00
Date Added: 2024-06-11T17:07:28.104584
License: Public Domain

TRASK, Circuit Judge
(dissenting):
I respectfully disagree with the majority. The basic position of the trial court was that subrogation may not be allowed the insurer where to permit it would result ultimately in a judgment over against the shipper who was the original named insured in the policy. Thus, the theory goes, that the case falls within the principle that an insurer may not recover its loss from its own insured. The majority accepts this as the rationale of its position. It holds:
“. . . we decline to grant the equity of subrogation to Atlas and permit suit against Cargill. Such a suit is effectively a suit against Sterling whom we find to be an Assured party.”
First of all, Atlas, the insurer, is not exercising its right of subrogation to assert an action against Sterling, the original shipper and the named insured of Atlas, either “effectively” or any other way. The policy was purchased by Sterling, “for the account of whom it may concern: loss, if any, payable to the Assured or order.” It insured goods shipped by sea under specific bills of lading with a certificate of insurance covering the goods under each of a number of bills of lading, each certificate executed pursuant to the original policy. The goods represented by this documentation were sold to various consignees on a regular CIF basis. When the goods arrived in a damaged condition the purchasers had a cause of action against those who caused the damage. (It was agreed that the damage was caused by stevedores in the course of loading and unloading). But they were not required to pursue this course. They called upon Atlas as their insurer to pay for the damage. Atlas did and became subrogated to the position of the consignees under their bill of lading. Luckenbach v. McCahan Sugar Co., 248 U.S. 139, 149, 39 S.Ct. 53, 63 L.Ed. 170 (1918). As such subrogee it could probably have sued the stevedores directly. It chose to sue the carrier, Car-gill, under the Carriage of Goods by. Sea Act, 46 U.S.C. § 1300 et seq.
This it was clearly entitled to do. Fabbri Co. v. Universal Shipping Corp., 310 F.Supp. 964 (S.D.N.Y.1969). At this point, Atlas, as insurer standing in the shoes of its consignees, should have been accorded the right to a judgment against Cargill, the carrier. It is at this point, however, that the logic of the trial court and the majority becomes derailed. They assert that subrogation cannot be permitted because Cargill in turn seeks third party indemnification against Sterling, the shipper, for payment of the amount Atlas has recovered. This, contends the majority, would be full-circle recovery by Atlas, the insurer, against Sterling, its original insured.
The fallacy is that the indemnification sought by Cargill, carrier, against Sterling, the shipper, does not arise out of any subrogation rights of Atlas on payment of consignees. Cargill is entitled to indemnification against Sterling, if at all, because Sterling in an entirely separate contract (the FIO provision) had agreed to pay any damage which Cargill might be liable for resulting from loading and unloading by the stevedores. Atlas, the insurer, was not a party to this agreement and knew nothing about it; neither did the consignees. Thus, the majority in their statement that “. we decline to grant the equity of subro-*1391gation to Atlas and permit suit against Cargill. Such a suit is effectively a suit against Sterling whom we find to be an Assured party”, is incorrect. The only action available against Sterling is one by Cargill not Atlas. The cause of action is not based upon subrogation, it is based upon the PIO contract entirely between Sterling and Cargill. Then in a final Parthian shot at the by now completely bewildered Atlas, the majority blithely says: “Nor can Atlas complain of unfair surprise at the common and commercially acceptable practice of FIO shipments. Atlas assumed the risk that the goods would be shipped FIO and that the stevedoring would be done by servants of the Assured.” No authorities are cited.1
The other facet of the case with which I cannot agree with my Brethren is that which holds that Sterling, after it had sold the cargo to the consignees remained an Assured party so that the subrogation rights of Atlas should be denied lest the insurer be suing its own insured. Heavy reliance is placed upon Hagan v. Scottish Union & National Insurance Co., 186 U.S. 423, 429-431, 22 S.Ct. 862, 46 L.Ed. 1229 (1902), which is quoted from at length. That was a situation where the Court examined the legal significance of the phrase “for account of whom it may concern” in a policy of marine insurance covering a tugboat. It concluded that the reach of the phrase clearly extended beyond the then owner to “whatever party shall prove to have an insurable interest in the specified subject” (quoting from 1 Phillips Insurance, section 385). In Hagan v. Scottish Union & National Insurance Co., supra, the named insured had sold a half interest in the tugboat to one Martin who held that interest at the time of the loss. That case would have been apposite had Atlas refused to pay the consignees who had purchased the bills of lading and thus the cargo. There was no question raised about such coverage. Atlas did pay those consignees. The majority also relies upon a very broad generalization defining the term “insurable interest” as stated by the District Court in Groban v. S.S. Pegu, 331 F.Supp. 883, 894 (S.D.N.Y.1971). That case relies in turn upon Hagan, supra, and is similar on the facts. The named insured and consignor had bought the tractor parts and had resold them to one of the plaintiffs. The principle to be applied as stated by the court was:
“If an assured has a contract under which the title of a cargo would accrue to him upon delivery and he would suffer from loss of the goods prior to the delivery, an insurable interest exists, . . . ” Groban v. S.S. Pegu at 894.
At the time of the loss here, Sterling, the shipper, had no interest in the goods either present or prospective and liability is not asserted by Cargill based upon the contract of insurance either directly or indirectly but upon the FIO contract to which Atlas was a stranger. Nor is there the slightest evidence in the record that Atlas intended to provide insurance for this unrelated risk.
I would reverse and direct that the judgment entered upon stipulation of the parties be reinstated.

. One cannot help but wonder how an insurer of goods under a CIF contract would calculate its risk and fix its premium under such an “assumption.”