Atlas Assur. Co., Ltd. v. Harper, Robinson Shipping Co.

Decision Date07 January 1975
Docket NumberNo. 72-3141,72-3141
Citation508 F.2d 1381
PartiesATLAS ASSURANCE COMPANY, LTD., Plaintiff-Appellant, v. HARPER, ROBINSON SHIPPING CO. et al., Defendants, Portland Stevedoring Company; Schulte & Bruns and Sterling International; Third-Party-Defendants, Sterling International, Third-Party-Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Martin P. Detels, Jr., of Detels, Draper & Marinkovich, Seattle, Wash., for plaintiff-appellant.

George W. McBroom of Shidler, McBroom, Gates & Baldwin, Seattle Wash., for third-party-defendant-appellee.

Before: TRASK and SNEED, Circuit Judges, and JAMESON, * District judge.

OPINION

SNEED, Circuit Judge:

This case presents two interesting questions concerning marine cargo insurance. First, whether a shipper of goods who procures cargo insurance remains an Assured following his transfer of a certificate of insurance with the bill of lading to the consignees of the cargo pursuant to a CIF sale. 1 Second, whether the insurer may be subrogated to the claims of the consignees against the carrier when the cargo damage was caused by stevedores and the cargo was shipped on an FIO basis 2 by the shipper who had procured the insurance. The case was tried on stipulated facts which may be summarized as follows.

The principal parties are plaintiff-appellant Atlas Assurance Company, Ltd., a British insurance company; third party defendant-appellee Sterling International, the shipper; and defendant Cargill, Inc., the carrier.

On March 19, 1968, Cargill time-chartered the M/S Ilse Schulte from its owner Schulte and Bruns. On March 20, 1968, Cargill as disponent owner (time charterer) sub-chartered the vessel (space charter) to Sterling International as shipper, on an FIO ('Free In and Out') basis.

On April 4, 1968, Sterling delivered to the vessel at Longview, Washington, a cargo of Kraft linerboard for carriage to Rotterdam and Hamburg. Bills of lading were issued in identical form by agents for the master to Sterling; the bills were negotiable, order bills.

Plaintiff Atlas Assurance Company, Ltd. insured the cargo under its Marine Open Policy No. 658; the policy insured 'Sterling International, for the account of whom it may concern, loss, if any, payable to the Assured or order.'

The goods insured included 'Kraft Paper' and extended to the perils 'of the sea, fire, rovers, assailing thieves' etc. and 'all other like perils, losses and misfortunes, that have or shall come to the hurt, detriment or damage of the aforesaid subject matter of this insurance or any part thereof.' The policy contained no provision for liability coverage to Sterling and there is nothing in the record to show that Atlas had notice of Sterling's FIO contract with Cargill.

Certificates of insurance in identical form were executed under this policy for each bill of lading. The insurance certificates similarly insured Sterling 'to be insured, for account of whom it may concern' and extended 'Against all risks of physical loss or damage . . .' but did not provide Sterling with any liability coverage.

Thereafter, the Ilse Schulte sailed from Longview and arrived at Rotterdam and Hamburg, there discharging the cargo of Kraft linerboard. Following discharge damage to the cargo was noted by surveyors representing cargo's interests and attributed by them to improper handling by the loading and/or discharging stevedores.

While the vessel was in transit, Sterling negotiated the bills of lading, and insurance certificates on a CIF basis though normal commercial channels for payment against letters of credit held by collecting banks. The letters of credit were honored by consignees' banks and the documents (order bills and insurance certificates) released to the consignees. The insurance certificates provided that loss was paysble on surrender of the policies 'and, on the payment being made, liability under this insurance shall thereby be discharged.' The consignees presented the bills of lading and the cargo was delivered to them at the ports of discharge.

Upon receipt of the goods the consignees made claims against Atlas on the insurance certificates for the cargo damage. Atlas paid the consignees and received a written subrogation assignment from each consignee in identical form. The consignees delivered to Atlas the original bills of lading and the insurance certificates upon payment by Atlas of the consignees' claims.

Thereafter Atlas commenced suit as subrogee of the consignees against Cargill as time charterer and Schulte and Bruns as shipowner for the cargo damage. Cargill and Schulte and Bruns impleaded Portland Stevedoring Co. for causing the damage and Cargill later impleaded Sterling to recover indemnity based upon its FIO contract for any liability for cargo damage. Sterling thereupon filed a cross claim against Atlas for indemnity contending that Atlas had insured Sterling for any damages sustained.

Following discovery and the entry of an order denying Cargill's motion for summary judgment against Atlas, the parties entered into a stipulation for judgment by the terms of which Atlas was to recover judgment as subrogee of the consignees from Cargill for cargo damage for Cargill's obligations under its bill of lading; the judgment was to be in the amount of $5,500 with interest to commence on February 15, 1972. Cargill was to recover indemnity from Sterling (without attorney's fees) based upon the contract between Cargill and Sterling, specifically the FIO provision, and the issues between Atlas and Sterling were reserved. The stipulation provided for dismissal with prejudice of Portland Stevedoring and Schulte and Bruns upon their contribution of $500 and $250 respectively, that Sterling could 'contest the relevancy of the 'FIO' provision,' and that Sterling and Atlas were to stipulate as to the facts on issues between them. On July 7, 1972, judgment on consent was entered on this stipulation.

Sterling and Atlas entered into further stipulations of fact and then argued the issues between them concerning Sterling's claim for indemnity from Atlas. Judgment was entered by the District Court vacating the judgment on consent and dismissing the complaint of Atlas. The judgment of October 2, 1972, states in pertinent part:

The doctrine of subrogation should not be applied herein in favor of Atlas against Cargill and if so applied, should result in judgment over in favor of Sterling against Atlas for any sums recovered by Cargill from Sterling.

It is from this judgment that this appeal is taken.

The basic question then is who must seek recovery against the stevedores because, as stipulated, the negligence was theirs. Atlas, having paid the claim of the consignees, prefers to sue Cargill. Cargill would then be indemnified by Sterling on the FIO agreement, leaving the burden of suing the stevedores on Sterling if Atlas is correct in its contention that it is free from liability derived from the FIO agreement. Sterling's position is that a suit against Cargill is really a suit against Sterling and that Sterling, as an Assured party, cannot be sued by Atlas. This would force Atlas to seek recovery against the stevedores.

Based on our understanding of the terms and purposes of the policy of insurance here in question 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. We therefore affirm the judgment below.

Assured Parties

We can not accept the contention of Atlas that Sterling is not an Assured under the policy. Sterling is the only named Assured:

ASSURED 1. The ATLAS ASSURANCE COMPANY, LIMITED, in consideration of premium at the rate or rates hereinafter stated, does insure

STERLING INTERNATIONAL

2. For account of whom it may concern.

3. Loss, if any, payable to the Assured or order.

4. Upon lawful goods and merchandise of every kind and description consisting principally of Kraft Paper . . .

The phrase 'for account of whom it may concern' does not alter the status of Sterling as an Assured. The Supreme Court has thoroughly discussed the broad coverage which use of this phrase imparts:

We concur in the view that by virtue of the language contained in the policy, 'on account of whom it may concern,' it is not necessary that the person who takes out such a policy should have at that time any specific individual in mind. If he intended the policy should cover the interest of any person to whom he might sell the entire or any part of the interest insured, that would be enough. In Hooper v. Robinson, 98 U.S. 528, 25 L.Ed. 219, it was said that a policy upon a cargo in the name of A, on account of whom it may concern, will inure to the interest of the party for whom it was intended by A, provided he at the time of effecting the insurance had the requisite authority from such party or the latter subsequently adopted it. The facts in that case differ materially from those presented by this record, but the meaning of the language 'on account of whom it may concern' is stated in the opinion of the court, and authorities are therein cited which show that it is not necessary that at the time of effecting the insurance the person taking it out should intend it for the benefit of some then known and particular individual, but that it would cover the case of one having an insurable interest at the time of the happening of the loss, and who was intended to be protected at the time the party took out the insurance.

In 1 Phillips, Insurance, it is stated:

Sec. 385. The rule, that an insurance 'for whom it may concern' will avail in behalf of the party for ahom it is intended, does not mean that any specific individual must be intended . . .. But he may intend it for whatever party shall prove to have an insurable interest in the specified subject, in which case it will be applicable to the interest of any person subsequently ascertained to have such an insurable...

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