347 U.S. 409 (1954), 11, Maryland Casualty Co. v. Cushing

Docket Nº:No. 11
Citation:347 U.S. 409, 74 S.Ct. 608, 98 L.Ed. 806
Party Name:Maryland Casualty Co. v. Cushing
Case Date:April 12, 1954
Court:United States Supreme Court

Page 409

347 U.S. 409 (1954)

74 S.Ct. 608, 98 L.Ed. 806

Maryland Casualty Co.



No. 11

United States Supreme Court

April 12, 1954

Argued April 27-28, 1953

Reargued November 10, 12, 1953




The owner and charterer of a vessel which collided with a pier and capsized in navigable waters in Louisiana filed consolidated petitions in admiralty in the Federal District Court in Louisiana to limit their liability under the provisions of 46 U.S.C. § 183 and 186. Subsequently, basing jurisdiction on diversity of citizenship and the Jones Act, the representatives of five seamen who had drowned brought this consolidated action in the same District Court against the liability underwriters of the owner and charterer of the vessel. For their right to proceed against the insurance companies, the plaintiffs relied on § 655 of the Louisiana Insurance Code, which authorizes direct suit "against the insurer within the terms and limits of the policy," and on the McCarran Act, 15 U.S.C. § 1012. The District Court dismissed the consolidated suit against the insurers. The Court of Appeals reversed.

Held: the judgment of the Court of Appeals is vacated, and the case is remanded to the District Court to be continued until after the completion of the limitation proceeding. Pp. 410-427.

198 F.2d 536, judgment vacated and cause remanded.

The District Court dismissed a consolidated suit brought by respondents against the petitioner insurance companies. 99 F.Supp. 681. The Court of Appeals reversed. 198 F.2d 536. This Court granted certiorari. 345 U.S. 902. Judgment of the Court of Appeals vacated and cause remanded to the District Court with directions, p. 423.

Page 410

FRANKFURTER, J., lead opinion

MR. JUSTICE FRANKFURTER announced the judgment of the Court and an opinion in which MR. JUSTICE REED, MR. JUSTICE JACKSON and MR. JUSTICE BURTON join.

On the evening of May 19, 1950, the towboat Jane Smith, in attempting to pass under a bridge over the Atchafalaya River in Louisiana, collided with a concrete pier and capsized. The owner and charterer of the Jane Smith filed consolidated petitioners in admiralty in the United States District Court in Louisiana to limit their liability under the provisions of 46 U.S.C. §§ 183 and 186.1 The owner and charterer having complied with the procedural [74 S.Ct. 609] requirements of the Limitation Act, the District Court issued an injunction prohibiting suit against them elsewhere than in the limitation proceeding.

Subsequently, in the same District Court, the plaintiffs below, as representatives of five seamen who had been drowned, brought this consolidated action against the owner of the bridge and the liability underwriters of the owner and charterer of the ship.2 Jurisdiction was based on diversity of citizenship and the Jones Act, 46 U.S.C. § 688. For their right to proceed against the insurance companies, the plaintiffs relied on § 655 of the Louisiana

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Insurance Code which authorizes direct suit "against the insurer within the terms and limits of the policy".

The two policies sued upon are (1) a workmen's compensation and employer's liability policy, in the amount of $10,000, issued by the Maryland Casualty Co. in which the charterer alone is named as the insured and which contains a special endorsement making its terms applicable to maritime employment; and (2) a "protection and indemnity" policy in the amount of $170,000 issued by the Home Insurance Company of New York, in which both the owner and the charterer are named. Both policies, by their terms, preclude payment to anyone until the insured shall have been held liable to pay damages.3

The District Court granted a motion for summary judgment dismissing the consolidated suit against the insurers on the grounds that the Louisiana statute was, by its own terms, inapplicable to policies of marine insurance, and that, in any case, application of the statute here would

not only work material prejudice to the characteristic features of the general maritime law, but would

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also contravene the essential purpose expressed by an Act of Congress in a field already covered by that Act. Title 46, § 183.

Cushing v. Texas & P. Ry. Co., 99 F.Supp. 681, 684.

The Court of Appeals, relying solely on diversity jurisdiction, reversed, holding that, as a matter of local law, the District Court had read the Louisiana statute too restrictively, a question not [74 S.Ct. 610] open here, and that the statute was nothing more than a permissible regulation of insurance authorized by the McCarran Act, 15 U.S.C. § 1012, and not in "conflict with any feature of substantive admiralty law, nor with any remedy peculiar to admiralty jurisdiction." 198 F.2d 536, 539. Deeming this ruling important to the proper enforcement of the Limitation Act, we granted certiorari. 345 U.S. 902.

The only question presented in the petition for certiorari is whether the application of the Louisiana statute in this case would violate

the Jones Act, the Limited Liability Act, and the constitutional grant to the federal government of exclusive jurisdiction in maritime matters.

We agree with the Court of Appeals that, since diversity supports federal jurisdiction, the Jones Act need not be drawn upon for jurisdiction. Nor need we be detained by petitioners' contention that, as applied to claims against petitioners as underwriters of the charterer who employed the decedents, the State statute here conflicts with the Jones Act in that it would provide an alternative remedy where Congress has prescribed the means of recovery. Since that Act itself makes its remedy available to a seaman "at his election," we perceive no conflict between the Jones Act and the Louisiana direct action statute.

Respondents, on the other hand, seek to derive support for reliance on the Louisiana statute from the McCarran Act, which provides

No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance . . . unless such Act specifically relates to

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the business of insurance. . . .

15 U.S.C. § 1012. Suffice it to say that even the most cursory reading of the legislative history of this enactment makes it clear that its exclusive purpose was to counteract any adverse effect that this Court's decision in United States v. South-Eastern Underwriters Association, 322 U.S. 533, might be found to have on State regulation of insurance. The House Report on the Bill as enacted is decisive:

It is not the intention of Congress, in the enactment of this legislation, to clothe the States with any power to regulate or tax the business of insurance beyond that which they had been held to possess prior to the decision of the United States Supreme Court in the Southeastern Underwriters Association case.

H.R.Rep. No. 143, 79th Cong., 1st Sess. 3. The question whether application of the direct action statute conflicts with federal maritime law is not touched by the South-Eastern Underwriters case. In the face of this unequivocal expression of congressional meaning, the statute cannot be read as doing something that Congress has told us it was not intended to do. The McCarran Act is not relevant here.

This brings us to the governing issue: does the Louisiana statute enter an area of maritime jurisdiction withdrawn from the States? Since Congress has provided a comprehensive legislative system for adjudicating maritime claims, we pass directly to considering whether the operation of the Louisiana statute conflicts with that system, putting to one side the question whether it encroaches upon the general body of nonstatutory maritime law. Cf. Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109; Just v. Chambers, 312 U.S. 383.

Legislation limiting shipowners' liability was first enacted in 1851 to provide assistance to American shipowners, and thereby place them in a favorable position

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in the competition for world trade. 9 Stat. 635. It provides that, in event of a collision or other [74 S.Ct. 611] maritime mishap occurring "without the privity or knowledge" of the owner (including therein a charterer), liability will be limited to the value of the ship and freight pending.4 The Act also permits the shipowner, by instituting limitation proceedings, to have all claims against him brought into concourse in an admiralty tribunal.

The legislation was designed to induce the heavy financial commitments the shipping industry requires by mitigating the threat of a multitude of suits and the hazards of vast, unlimited liability as a result of a maritime disaster. This Court has been faithful to this ultimate purpose, and has read the statute's words "in a broad and popular sense in order not to defeat the manifest intent." Flink v. Paladini, 279 U.S. 59, 63. Particularly in view of the fact that Congress subjected the whole limitation scheme to scrutiny in 1935 and 1936 as a result of its application to personal injury and death claims resulting from the sinking of the Morro Castle, and did not alter those provisions of the legislation involved here, we must read the statute in the light of its expressed purposes. It is not for us to sit in judgment on the policy of Congress in having all claims disposed of in one proceeding or in apportioning maritime losses.

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The direct action statute clashes with the federal system for marshalling all claims arising from certain maritime causes of action. See the detailed provisions in Admiralty Rules 51-54, 334 U.S. 864. The heart of this system is a concursus of all claims to ensure the prompt and economical disposition of controversies in which there are often a multitude of claimants. The benefits a concursus bestows on the shipping industry were thus described in the hearings on the 1936...

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