Continental Ins. Co. v. Daily Exp., Inc.
| Decision Date | 03 June 1975 |
| Docket Number | No. 448,448 |
| Citation | 68 Wis.2d 581,229 N.W.2d 617 |
| Parties | The CONTINENTAL INSURANCE CO., a Foreign Insurance Corp., Respondent, v. DAILY EXPRESS, INC., Appellant, George Merkley, Defendant. |
| Court | Wisconsin Supreme Court |
Moen, Sheehan & Meyer, Ltd. by L. E. Sheehan, La Crosse, for appellant.
Hale, Skemp, Hanson, Schnurrer & Skemp, La Crosse, for respondent.
The appeal is from a trial court order denying the motion of the defendant, Daily Express, Inc., for summary judgment. The question posed on this appeal is whether the indemnification provision in the trip lease entered into between Daily Express, Inc., lessor, and Jerry Lipps, Inc., lessee, by which the lessor agrees 'to reimburse and otherwise indemnify Lessee for any and all losses sustained by Lessee resulting from the use of the aforesaid equipment,' is unenforceable because it is against public policy, as expressed in the United States Code and the Interstate Commerce Commission regulations. We conclude that the indemnification agreement in the lease is enforceable and not contrary to public policy, and accordingly we affirm the trial court.
On May 20, 1971, Daily Express, Inc., leased a tractor and trailer, including the furnishin of a driver, to Jerry Lipps, Inc. The lease agreement or trip lease covered a one-way trip from Georgia to Minnesota. On May 24, 1971, while goods were being shipped in the leased vehicle, an accident occurred in Monroe county, Wisconsin, which resulted in loss and damage to the goods being shipped. The insurer of Lipps, the lessee, The Continental Insurance Company, paid the shipper for the loss of goods, and it is subrogated to the rights of Jerry Lipps, Inc.
At the time of the accident, both Lipps and Daily Express were licensed motor carriers subject to Interstate Commerce Commission regulations. As the subrogated claimant, Continental Insurance, sought indemnity from the lessor, Daily Express, under the indemnification provision quoted above. Daily Express moved for summary judgment and argued that the indemnification provision was unenforceable as against the public policy stated in the Interstate Commerce Commission regulations. The key regulation, 49 CFR, sec. 1057.4(a)(4), provides:
'Other than equipment exchanged between motor common carriers in interchange service as defined in sec. 1057.5, authorized carriers may perform authorized transportation in or with equipment which they do not own only under the following conditions:
Daily Express contends that the indemnification provision attempts to shift to the lessor the responsibility for the safety and maintenance of the equipment, while the purpose of the I.C.C. regulation is to make the lessee responsible. Daily Express also points out that other provisions of the lease specifically tend to shift the responsibility to the lessor:
'The Lessor agrees to deliver to the Lessee the above equipment in good running order and condition; maintain the same in good working condition, furnishing all necessary oil, gasoline, tires, and repairs for the operation of said equipment and to pay all other expenses incident to such operation.' (Emphasis supplied.)
'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 pay all fines due to overload, overlength, speeding or other willful acts of negligence in the operation of described vehicles, lack of permits or plates or any other fines assessed against him for any cause.'
Continental, on the other hand, argues that under Wisconsin law a contract should be declared void or unenforceable as against public policy only in cases free from doubt. Moreover, Continental points out that indemnification agreements are not expressly prohibited by either the federal statutes or the Interstate Commerce Commission's regulations. It further relies on other terms of the lease which specifically place the responsibility upon the lessee in a manner fully consistent with the letter and the spirit of the I.C.C. regulations. The lease provides:
'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.'
There was also evidence stipulated into the record that Lipps checked the equipment for defects and that the driver was physically examined pursuant to the terms of the lease.
Continental argues that the responsibilities that are placed upon the lessor are in furtherance, and not in contravention, of the I.C.C. safety regulations, because, under the lease, the lessor, too, must adhere to safety standards, although the ultimate responsibility 'to the public, the shippers, and the INTERSTATE COMMERCE COMMISSION' is placed upon the lessee.
To determine whether these provisions are consistent with the policy sought to be implemented by the I.C.C. regulations, it is necessary to discuss the purposes of these regulations. The background problem and the circumstances giving rise to the promulgation of these I.C.C. regulations were discussed in American Trucking Associations, Inc., v. United States (1953), 344 U.S. 298, 302--306, 73 S.Ct. 307, 97 L.Ed. 301.
The United States Supreme Court, in discussing the underlying act, pointed out that interstate commerce authorization in the form of permits or certificates of convenience and necessity were, by virtue of the Motor Carrier Act, preconditions to interstate service by the motor truck industry. Granted only after a showing of fitness and ability to perform and a public need for the proffered service, the authorization specifically limited the scope and business of the permitted operations and the routes and termini to be served by a certified motor carrier. The act, however, waived these conditions of agency authorization and service limitations for certain exempt operations. There was no mandate on the exempt owners-operators to provide adequate and nondiscriminatory service, to adhere to published rates, or to comply with the strict insurance requirements imposed on carriers authorized for general carriage.
Because of the limiting character of the regulatory system, authorized carriers developed a wide practice of using nonowned equipment. One of the practices was the leasing of exempt equipment for authorized operations. The authorized carriers hired the owner-operator truckers, who were exempt, to conduct operations under authorized carriers' permits and certificates.
Oral leases were common and some of the leases were not concluded until the trips were made. These informal and tenuous relationships permitted evasions of the limitations on certified and permitted authority. Since the driver of the exempt equipment was not an employee of the carrier, sanctions for violation of geographical restrictions were difficult to impose, especially in the case of single-trip lessors. Under cover of a lease from a local carrier, authorized carriers conducted operations beyond the territory they were entitled to serve. Other times, some operations were entirely fictional, being created ad hoc after the trip was made.
The United States Supreme Court noted that the I.C.C.'s safety requirements were not observed by the exempt lessors. Because the great bulk of leasing...
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