Court Opinion

ID: 9460357
Source: CourtListenerOpinion
Date Created: 2023-08-04 21:47:58.787618+00
Date Added: 2024-06-11T17:36:35.019692
License: Public Domain

GODBOLD, Circuit Judge
(specially concurring):
Because we struggle in this ease, as others have, to accommodate Bisso1 to the context in which towboat and barge seek to decide by contract who will bear the cost of insurance, it may be useful for me to state in a separate opinion my views and process of reasoning. If free to do so, I could with comfort hold that, at least absent monopolistic compulsion, towboat and towed vessel can bargain as they wish over both allocating the cost of insurance and concomitantly releasing from liability for negligence.2
But the fly in the ointment is Crescent Towing & Salvage Co. v. Dixilyn Drilling Co., 372 U.S. 697, 83 S.Ct. 967, 10 L.Ed.2d 78 (1963), a per curiam decision which reversed, citing Bisso, the decision of this court, 303 F.2d 237 (C.A.5, 1962). The clause involved stated:
It is particularly understood and agreed that you are authorized to and by this agreement do release and relieve us from any liability for account of your underwriters and that any damage claims urged by third parties as well as any claim which may be urged by virtue of damage to the drilling rig in the course of the towage shall be for your account and for the account of your underwriters.
It is further understood that the amount of the insurance protection which you have in force equals the value of the hull of the barge as to hull insurance and amounts to four million dollars as to third party claims.
The Supreme Court treated this as “a contract which exempts the tower from *686liability for its own negligence” in violation of Bisso. In essence Dixilyn (towed) agreed to indemnify Crescent (towboat) for third party claims arising from Crescent’s negligence. It appears to me that the agreement did not contemplate that the liability to third parties would ultimately rest on Dixilyn, at least where, as was the case, the liability did not exceed $4,000,000. At first glance this looks about as much like an insurance clause as does the present contract. My Brother Dyer’s distinction is that the Twenty Grand contract does not “relieve the tug owner or the towboat of its liability to the barge owner as the result of the towboat’s negligence,” since the barge could sue the tower if the insurer fails to pay.
I believe this distinction is sound. It is not simply one between situations where the tower remains liable and upon the happening of certain contingencies will have to pay and situations in which the tower has attempted to completely eliminate his liability. The contract in Crescent Towing related to third party claims, and the tower’s liability to third parties could not be affected by an agreement between the tower and the barge — if the barge or its insurers failed to pay, the third party could go against the negligent tower. Rather the distinction is between contracts by which the barge agrees to assume liability for the towboat’s negligence and contracts by which the barge simply agrees to provide an insurer to protect the towboat from some of the financial consequences of liability. In Crescent Towing the barge agreed to indemnify the tower against the tower’s own negligence and coupled that agreement with a commitment to procure insurance assuring the barge’s ability to do so. In the instant case the barge agreed to procure insurance naming the tower as an assured and thereby to provide a third party, the insurer, who would protect the tower from the consequences of its own negligence. The difference between the two cases may initially appear slight, but it is functionally important.
In agreements of the Crescent Towing type, where the barge acts as the indem-nitor and procures insurance primarily to protect itself, it is possible that the barge’s agreement to indemnify may be more inclusive than the insurance coverage which the barge agrees to procure and that, consequently, the barge will be liable for damages in excess of the insurance coverage or even for the entire amount if the insurer is defunct or will not pay. The risk that barge owners might accept Crescent Towing-type clauses in the erroneous belief that they are accepting only the responsibility for procuring insurance may perhaps justify applying Bisso to void such agreements. But in the present agreement this risk is absent, because the responsibility for any liability beyond the insurance which West India Carriers contracted to procure remains on Twenty Grand, the tower. Thus to the extent that one of the Bisso rule’s functions is to protect the barge owner, the rule plays a part in Crescent Towing which it cannot play here.
Beyond protecting barge owners, Bis-so contains a second avowed policy prong, “to discourage negligence by making wrongdoers pay damages.” Neither Bisso nor Crescent Towing, dealing as they did with situations in which a barge rather than a third party insurer had agreed to be the indemnitor, addresses the issue of the impact of liability insurance upon this analysis. The Bisso statement does not and never has meant literally what it says. If it did then Bisso would bar the tower from avoiding responsibility for paying damages from his own pocket through the means of purchasing his own liability insurance. Although for a time in the early decades of this century judges in some dry land jurisdictions were inclined toward invalidating liability insurance contracts as contrary to public policy,3 we have long since decided that *687the benefits afforded by the availability of such insurance outweigh whatever weakening of the deterrent impact of negligence law may flow from that availability. The discouraging of negligence to which Bisso refers must, therefore, relate in the present case to the incentive to careful operation provided by the threat of increased insurance premiums which would result from careless operation, and it is relevant to inquire whether the contract in issue will significantly reduce that incentive. I believe that it does not. Barge owners, when confronted with proposed towage contracts under which they agree to procure insurance protecting the tower, will consider how much that insurance will cost and will take the cost into account in selecting a tower. Whether by purchase of a special policy or extension of the barge owner’s existing policy to a tower (as appears to be the case here) the barge owner can anticipate that sooner or later his pigeons will come home to roost. If he furnishes insurance to careless towers, he can expect an ultimate, if not an immediate impact upon his premium rates. Absent monopoly in the towers’ market, barge owners will have a choice of towers, and, other things being equal, they will avoid the tower who is a bad negligence risk, and competition among towers will provide the incentive for safe operation that would be provided by the threat of increased premiums to the tower itself.
Additionally, to find this contract invalid as against a public policy of discouraging negligence would, for no apparent reason, be a result at odds with the analysis employed in similar cases where shippers extend to carriers the benefit of the shippers’ insurance on goods shipped. In Great Lakes Transit Corp. v. Interstate S.S. Co., 301 U.S. 646, 57 S.Ct. 915, 81 L.Ed. 1318 (1937), the court had before it an insurance contract by which a shipowner had insured against damage to cargo which it carried as a common carrier. The cost of the insurance was included in the rate charged shippers. Through the negligence of the shipowner, cargo was damaged. The insurance company paid the shippers and thereafter sought to recover part of its payment from the shipowner on the theory that even though the insurance named the shipowner as an assured, the insurance was ultimately paid for by and for the benefit of the shippers and, therefore, the insurer was subrogated to the rights of the shippers against the carrier. The court rejected this argument noting,
The underwriters seek to sustain the decree by invoking the doctrine of subrogation, but the equity of subrogation invests the underwriters with the rights of the assured against third persons [citations omitted], not with a right to override its own obligation to the assured. Thus, when a bill of lading provides that in a case of loss the carrier, if liable therefor, shall have the full benefit of any insurance effected upon the goods, the provision limits the right of subrogation of the insurer, upon payment to the shipper, to recover over against the carrier. [Citations omitted.] Such a clause giving the carrier the benefit of insurance effected by the shipper is valid “because the carrier might himself have insured against the loss, even though occasioned by his own negligence ; and if a shipper under a bill of lading containing this provision effects insurance and is paid the full amount of his loss, neither he nor the insurer can recover against the carrier.” Luckenbach v. W. J. McCahan Sugar Ref. Co., 248 U.S. 139, 146, 39 S.Ct. 53, 54, 63 L.Ed. 170, 174, 1 A.L.R. 1522.
301 U.S. at 654, 57 S.Ct. at 918, 81 L.Ed. at 1323-1324. The instant ease ap*688pears to present a similar situation. The barge was to procure insurance and extend the benefit of that insurance to the towboat by having the tug and its owner named as an additional assured and by obtaining a waiver of subrogation from the barge’s insurer. Had it done so and had the insurer then sought recovery against the towboat on the theory that such an extension of insurance benefits was invalid under Bisso, I believe that we could properly refuse to allow recovery on the strength of the analogy to a shipper’s extending the benefits of his cargo insurance to a water carrier. Indeed, we have previously refused to allow a cargo insurer to obtain recovery from a towboat where, pursuant to a contract with the towboat, a cargo owner obtained cargo insurance containing a waiver of subrogation. Fluor Western, Inc., v. G & H Offshore Towing Co., 447 F.2d 35 (C.A.5, 1971). I find no reason to treat the instant case as distinctive because it involves damage to a barge rather than damage to cargo. Nor do I believe that this barge or its insurer should be rewarded because the barge failed to perform its contractual obligation.
In Crescent Towing, Justice Harlan, while expressing his conviction that Bis-so was wrongly decided, cautioned against the hazard of creating indeterminate exceptions to the Bisso rule. Certainty in rules of law governing commercial transactions is clearly desirable. Our decision in this case is consistent with that goal. If pushed to extremes, the deterring negligence rationale of Bisso would demand that towers be barred from insuring themselves against negligence at all. But Bisso has never been so interpreted, and the question, therefore, is not whether to draw a line at all but where to draw it. I believe that the line can, consistent with reason, precedent, and existing business practices, be drawn between valid agreements, such as the one here, which operate purely to allocate the responsibility for obtaining insurance, and agreements, such as the one condemned in Crescent Towing, which go further and seek to shift to the barge the primary responsibility for damage not covered by insurance.

. Bisso v. Inland Waterways Corp., 349 U.S. 85, 75 S.Ct. 629, 99 L.Ed. 911 (1955).

. Even where the tower lias monopoly power, it is by no means clear that Bisso serves much purpose. To the extent that the tower has such power he has the ability to pass on to the barge in the form of an increase in price his cost of insurance. Thus, preventing the tower from contractually assigning to the barge the responsibility for obtaining insurance may accomplish no change in payor but only a transformation in the form in which the barge pays for the insurance — price for towage rather than payments to the insurance company.

. See, e. g., Coffman v. Louisville & N. R. Co., 184 Ala. 474, 63 So. 527 (1913); Employers’ Liability Assur. Corp., Ltd. v. Kelly-Atkinson Const. Co., 182 Ill.App. 372 *687(1913); Aetna Life Ins. Co. v. Week, 163 Ky. 37, 173 S.W. 317 (1915); Standard Life & Acc. Ins. Co. v. Bambrick Bros. Const. Co., 163 Mo.App. 504, 143 S.W. 845 (1912); In re Aldrich, 86 Vt. 531, 86 A. 801 (1913). See generally, W. Prosser, Handbook of the Law of Torts 542-543 (4th Ed. 1971).