Travelers Indem. Co. v. Auto Driveaway Co.
| Decision Date | 12 March 1979 |
| Docket Number | No. 78-039,78-039 |
| Citation | 89 Wis.2d 255,278 N.W.2d 262 |
| Parties | The TRAVELERS INDEMNITY COMPANY, Plaintiff-Respondent, v. AUTO DRIVEAWAY COMPANY, Defendant-Appellant. |
| Court | Wisconsin Court of Appeals |
Review Denied.
Richard S. Marcus of Godfrey & Kahn (argued), Milwaukee, John V. Kitzke and Nelson D. Flynn, Milwaukee, on brief, for defendant-appellant.
Brian J. Henderson of Riordan, Crivello, Sullivan & Carlson, Milwaukee, argued and on brief, for plaintiff-respondent.
Before DECKER, C. J., CANNON, J., and ROBERT W. HANSEN, Reserve Judge.
The facts in this case are not in dispute. Appellant, Auto Driveaway Company, is a Pennsylvania corporation whose business is obtaining drivers to transport automobiles from place to place. Respondent, Travelers Indemnity Company, is an insurance company incorporated in Connecticut. Driveaway entered into a contract with Elmore Kraemer, the insured of Travelers, to transport Kraemer's auto from Palm Springs, California, to West Bend, Wisconsin. En route, the car and the driver, hired by Driveaway, disappeared. Neither have been located since. Kraemer made claim against his insurer, Travelers, for the loss of his auto, and travelers paid the claim. Travelers then made claim against Driveaway. After the claim was denied, Travelers commenced this action against Driveaway for its loss under the Kraemer policy.
The trial court rendered judgment in favor of Travelers, finding Driveaway strictly liable as a common carrier pursuant to 49 U.S.C. § 20(11), and further finding Travelers subrogated to the rights which Kraemer had against Driveaway for the nondelivery of the Kraemer car to West Bend. Additionally, the trial court held that the "No Benefit to Bailee" provision in the insurance policy issued by Travelers to Kraemer was in conflict with the "Benefit of Insurance" provision in the shipping contract (bill of lading), with the result that Driveaway was not entitled to the "Benefit of Insurance" provision in Kraemer's policy of insurance with Travelers.
The two pertinent provisions in the automobile insurance policy issued by Travelers to Kraemer are these:
23. NO BENEFIT TO BAILEE (Part V). The insurance afforded by this policy shall not inure directly or indirectly to the benefit of any carrier or other bailee for hire liable for loss to the automobile.
30. SUBROGATION. In the event of any payment under this policy, the company shall be subrogated to all the insured's rights of recovery therefor . . . . The insured . . . shall execute and deliver instruments and papers, do whatever else is necessary to secure such rights and shall do nothing after loss to prejudice such rights.
The pertinent provision, the "Benefit of Insurance" clause, in the contract between Driveaway and Kraemer reads as follows:
Should Driveaway be liable on account of loss or damage to any of said property, it shall have the full benefit of any insurance that may have been effected upon or on account of said property, so far as this shall not avoid the policies or contracts of insurance. Provided, that Driveaway reimburses the claimant for the premium paid thereon.
The crunch between the two provisions in the car owner's insurance policy and the clause in the drive-for-hire contract with the common carrier is obvious. While the issue of liability as here presented between insurer and for-hire carrier has not been decided in this state, it has come to court in other jurisdictions. Actually, the wording in the two contracts, one for insurance protection and the other for transportation of the owner's auto, is the latest chapter in a long and continuing conflict between insurance carriers and common carriers as to who is to bear the burden of ultimate loss in a situation such as the one here presented. See Note, Subrogation of an Insurer: The Burden of the Loss of Insured Goods in Transit, 37 Harv.L.Rev. 901 (1924).
Discussion of these skirmishes in draftsmanship can begin with the decision of the United States Supreme Court, holding that a common carrier has an insurable interest in a shipment and may enter into a valid contract with a shipper/owner which gives the carrier the benefit of any insurance which the shipper/owner procured or may procure on the shipment. Phoenix Ins. Co. v. Erie & Western Trans. Co., 117 U.S. 312, 6 S.Ct. 750, 29 L.Ed. 873 (1886). Way back then, and since, insurance companies responded to the Phoenix decision by adding a clause to their policies which voids the policy of insurance if their insured enters into a contract which gives the carrier-for-hire the benefit of the insurance policy issued to the shipper/owner. Such added clause sets up the conflict, not with the Phoenix holding, but with the usual provision in the common carrier's contract or bill of lading giving the carrier-for-hire the full benefit of any insurance on the property shipped but only "so far as this shall not avoid the policies or contracts of insurance."
Given such conflict or crunch between the provisions of an insurance policy and a carrier-for-hire contract, with no controlling decision found in this state, we go to decisions in other jurisdictions, seeking not authority to follow but logic and reasoning that is persuasive. We find, as did the trial court, the superior logic and more persuasive rationale in those opinions that conclude a carrier-for-hire is entitled to the benefit of a shipper/owner's insurance where its contract or bill of lading with such shipper/owner gives the carrier-for-hire the benefit of insurance upon the goods to be delivered but only "so far as this shall not avoid the policies or contracts of insurance."
One such decision, an early enough case in the neighboring state of Iowa, had the state's highest tribunal holding:
When (the insurer) contracts, therefore, that its undertaking shall be void if the insurer does anything to deprive it of the right, upon paying the loss, to be subrogated to the rights of the shipper and to recover against one whose act or omission caused the loss, a contract between the shipper and carrier that gives the latter the benefit of the insurance voids the contract of insurance for the shipper, and is ineffectual to secure the benefit of insurance to the carrier; that is to say, the...
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