Maryland Cas Company v. Cushing/Dissent Black

Mr. Justice BLACK, with whom THE CHIEF JUSTICE, Mr. Justice DOUGLAS and Mr. Justice MINTON concur, dissenting.

The towboat Jane Smith hit a railroad bridge and sank in Louisiana waters of the Atchafalaya River. Five crew members were drowned. Petitioners, Maryland Casualty Company and Home Insurance Company, had previously sold insurance policies to the boat's owner and its charterer agreeing to repay them for any money they had to pay on account of injury or death caused by the boat. These policies were issued and delivered in Louisiana. A Louisiana statute authorizes injured persons or their heirs to sue insurance companies directly on such policies. Under this law the widows of the drowned crewmen brought these diversity actions in federal court against petitioners. A majority of the Court hold that permitting these suits to go forward to judgments against the insurance companies prior to completion of limitation of liability proceedings under an 1851 Act of Congress would bring this state statute into conflict with that Act. But the 1851 Act was passed to help shipowners by limiting the damages they must pay on account of wrongs inflicted by their agents. I see no possible reason for making insurance companies the beneficiaries of this shipowners' relief act. Neither can I understand why this Court should feel called on to relieve shipowners from even the light financial burden that the 1851 Act left them to bear. Nor do I think the Louisiana Act is subject to any of the constitutional objections the insurance companies urge against it. I agree with the Court of Appeals for the Fifth Circuit that the insurance companies' contentions 'over-inflate a relatively simple proposition with apparent, but unreal, technical problems.' 198 F.2d 536, 539. For that reason without more I would affirm this judgment. But because of the confused state in which this case goes back to the District Court I think it desirable that all questions be discussed. I shall first take up the constitutional objections.

(a) The insurance companies argue that the Louisiana law impairs the obligation of 'maritime contracts.' The implication is that maritime contracts have more constitutional protection than other kinds of contracts. But Art. I, § 10 of the United States Constitution, which forbids states to impair the obligations of contracts, draws no such distinction. And while in general this provision protects valid contracts from impairment by subsequent legislation of states, it does not forbid states to pass laws regulating contracts thereafter to be made. Munday v. Wisconsin Trust Co., 252 U.S. 499, 503, 40 S.Ct. 365, 366, 64 L.Ed. 684. Cf. Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413. Hence the Louisiana law, passed before these insurance policies were issued, does not violate the impairment of contract clause and, unless invalid for some other reason, the state's 'direct action' statute became a part of the contract when it was made just as though written into each policy by the companies. New York Life Ins. Co. v. Cravens, 178 U.S. 389, 395 400, 20 S.Ct. 962, 965-967, 44 L.Ed. 1116. Cf. Farmers' and Merchants' Bank of Monroe, N.C. v. Federal Reserve Bank, 262 U.S. 649, 660, 43 S.Ct. 651, 655, 67 L.Ed. 1157.

(b) Article III, § 2 of the Constitution provides that 'The judicial Power shall extend * *  * to all Cases of admiralty and maritime Jurisdiction *  *  * .' It is contended that this provision not only gives the Federal Government supreme power over maritime affairs but that it also denies any power in states to legislate in this field. This complete denial of state power is said to have been established by Southern Pacific Co. v. Jensen, 244 U.S. 205, 37 S.Ct. 524, 61 L.Ed. 1086; and Knickerbocker Ice Co. v. Stewart, 253 U.S. 149, 40 S.Ct. 438, 64 L.Ed. 834. The opinions in those cases did lend some support to a constitutional doctrine that the Admiralty Clause requires rigid national uniformity in maritime legislation. But this Court rejected that doctrine in Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 44 S.Ct. 274, 68 L.Ed. 582. Mr. Justice Brandeis speaking for the Court in that case made it absolutely clear that the Admiralty Clause does not deprive states of power to make different regulations in regard to maritime affairs unless a state attempts to modify or displace essential features of the substantive maritime law or to modify the remedial law of admiralty courts. See also Standard Dredging Corp. v. Murphy, 319 U.S. 306, 63 S.Ct. 1067, 87 L.Ed. 1416. These cases but reaffirmed a power that states have always exercised. When the Constitution was adopted the Government found state regulatory systems governing local maritime affairs throughout the country. Gibbons v. Ogden, 9 Wheat. 1, 207, 6 L.Ed. 23. Congress has never attempted to supplant all local maritime regulations but has left many in effect as useful aids in carrying out national maritime policies. See Cooley v. Board of Wardens, 12 How. 299, 13 L.Ed. 996; The Hamilton, 207 U.S. 398, 28 S.Ct. 133, 52 L.Ed. 264; Kelly v. State of Washington, ex rel. Foss, 302 U.S. 1, 14-16, 58 S.Ct. 87, 94, 82 L.Ed. 3. For example, states can even create liens on vessels which may be enforced either in state courts or in courts of admiralty, despite the lack of uniformity brought about by 'intricate and conflicting State laws creating such liens * *  * .' The Lottawanna, 21 Wall. 558, 581, 22 L.Ed. 654. In declining to invalidate these state lien laws this Court there pointed out that Congress could terminate the effectiveness of such state legislation at any time it desired to assume control.

The uniformity which the Admiralty Clause of the Constitution requires is limited to one indefinitely defined area-that involving 'the essential features of an exclusive federal jurisdiction.' Just v. Chambers, 312 U.S. 383, 391, 668, 61 S.Ct. 687, 693, 85 L.Ed. 903. Except in instances falling clearly within this area states are free to make laws relating to maritime affairs. Thus, in Just v. Chambers, Florida was permitted to provide a remedy for death due to maritime torts in Florida waters, even though such a remedy was not permissible under maritime law and not available in other states. Here Louisiana has provided a remedy for death due to maritime torts in Louisiana waters and it is therefore difficult for me to see how the present case can be distinguished from Just v. Chambers. Neither Congress nor this Court has provided or forbidden suits against insurance companies in cases like these, or attempted to establish uniform rules for the regulation of maritime insurance to the exclusion of the states. Indeed, it was not until 1870 that this Court finally decided that the regulation of marine insurance was within the jurisdiction of admiralty at all. Insurance Co. v. Dunham, 11 Wall. 1, 2 0 L.Ed. 90. Prior to that time, there was strong support for the belief that the states alone could regulate marine insurance. No act of Congress and nothing this Court has said since the Dunham decision in 1871 has taken away the concurrent jurisdiction of states over maritime insurance policies. No reason has been advanced why marine insurance, long the province of the states, so imperatively requires uniformity that we should now hold that Congress alone can regulate it. Consequently, to enforce the Louisiana law would not impair the uniformity of maritime law, but would once again 'illustrate the alacrity with which admiralty courts adopt statutes granting the right to relief where otherwise it could not be administered by a maritime court * *  * .' Workman v. City of New York City, 179 U.S. 552, 563, 21 S.Ct. 212, 216, 45 L.Ed. 314. See also The Hamilton, 207 U.S. 398, 28 S.Ct. 133, 52 L.Ed. 264.

Louisiana's statute, as sought to be applied here, would further the equitable aims of admiralty by providing relief not otherwise available for maritime wrongs. For behind this 'direct action' statute lies a long history of state attempts to protect the public interest by ensuring that liability policies furnish adequate protection to persons injured. At one time insurance companies were commonly able to avoid payment of a single dollar on their policies whenever the insured was insolvent and therefore judgment-proof. The insurance, although bought and paid for, would remain untouched while valid claims went entirely unsatisfied. To prevent this injustice many states passed laws of one kind or another which required insurance companies to pay injured persons even though the insured had paid out no money. The Massachusetts Supreme Judicial Court took the lead in sustaining a law of this type, Chief Justice Rugg suggesting its need to prevent liability insurance from becoming a 'snare to the insured and a barren hope to the injured.' Lorando v. Gethro, 228 Mass. 181, 189, 117 N.E. 185, 189, 1 A.L.R. 1374. And, despite the fact that these state statutes wrote compulsory terms and obligations into all insurance contracts, this Court sustained such a statute applying to automobile insurance. Chief Justice Taft said that ' * *  * it would seem to be a reasonable provision by the state in the interest of the public, whose lives and limbs are exposed, to require that the owner in the contract indemnifying him against any recovery from him should stipulate with the insurance company that the indemnity by which he saves himself should certainly inure to the benefit of the person who thereafter is injured.' Merchants' Mutual Automobile Liability Ins. Co. v. Smart, 267 U.S. 126, 129-130, 45 S.Ct. 320, 321, 69 L.Ed. 538. The Louisiana statute is an application of this same principle. It expresses the public policy of Louisiana that liability insurance exists for the protection and benefit of the injured as well as the insured. Davies v. Consolidated Underwriters, 199 La. 459, 475-476, 6 So.2d 351, 357. Under Louisiana's law an individual purchases liability insurance not for himself alone but also for those whom he may injure. This bargain is advantageous to the purchaser because claims against him can be satisfied in suits against the insurer.

There can be no constitutional barrier to this Louisiana law passed to protect persons injured within its borders. Consequently, unless Congress has specifically forbidden states to protect seamen this way, Louisiana's statute is valid and should be enforced.

The majority hold that the Limited Liability Act of 1851, as amended, bestows on the shipowner a right to collect all or part of the insurance money for his profit despite Louisiana's statute requiring insurance companies to make their payments directly to the families of persons injured or killed. I think this construction gives shipowners far more than Congress intended. The Limited Liability Act provides that 'The liability of the owner of any vessel * *  * for any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred, without the privity or knowledge of such owner or owners, shall not *  *  * exceed the amount or value of the interest of such owner in such vessel, and her freight then pending.' (Emphasis supplied.) This Act relieves shipowners from a large part of the liability normally imposed on employers for torts of their employees. Under the Act, a shipowner need pay nothing to tort claimants if the ship is a total loss. If it is not wholly destroyed, the shipowner can simply turn a fund equal to the value of his interest in the damaged ship over to a court in a limitation proceeding. All claims against the shipowner must then be satisfied out of that fund, no matter how large the claims or how small the fund. The purpose of Congress in limiting the liability of shipowners was to encourage investment in American ships. But neither the Act nor its history indicates a purpose to encourage investment in insurance companies by limiting their liabilities. The insurance companies contend, however, that requiring them to pay their policy obligations to these claimants will somehow compel shipowners to pay out money in excess of the liability provided by the Act. For the reasons that follow I think this contention is without merit.

(a) The majority appear to hold that if the insurance companies pay out the full amount of their policies in these actions and some recovery is also had against the shipowner in limitation proceedings the shipowner will be unable to get reimbursement for that recovery from the insurers and to that extent will be 'deprived of his insurance.' It was conceded at the bar, however, that the ship here is without value-a total loss. If this is true, there would be no fund in the limitation proceedings and no possibility of any recovery at all against the shipowner. Under these circumstances, the shipowner does not stand to lose a dime if the insurance companies are held liable for the full amount of their policies, and there is no reason for deferring trial of these lawsuits.

(b) Even if the ship has some value and there should be recoveries from the limitation fund, Louisiana's statute would not deprive the shipowner of any right given by the Limited Liability Act. That Act was passed to help shipowners by permitting them to escape full liability for wrongs of their agents. But not a word in it suggests that Congress also intended to give shipowners additional special privileges with respect to liability insurance or to interfere with state regulation of any type of insurance. Nor was any such expanded construction of the Act made by this Court in The City of Norwich, 118 U.S. 468, 6 S.Ct. 1150, 30 L.Ed. 134. That case rested entirely on a holding that money from hull insurance was no part of an owner's 'interest' in his ship which the Limited Liability Act required him to turn over to damage claimants. The Court was concerned only with what made up the limitation fund. The claimants here make no contention that liability insurance is part of the limitation fund. They concede that the shipowner can be made to pay out only the value of his 'interest' in the damaged ship. But they insist that the shipowner should not be allowed to escape loss from even the limited liability which Congress put on him, if the result is to deprive injured persons of insurance bought to protect them. There is a vital difference between liability insurance and hull insurance with which The City of Norwich dealt. The latter provides recovery for loss of the shipowner's property. But liability insurance is not bought to guarantee reimbursement for loss of a shipowner's property. Its purpose is to pay for damage done to others by the shipowner or his agents. The shipowner has an insurable 'interest' in his ship; if it is lost or damaged any insurance money collected is his own. I cannot believe he has an insurable 'interest' in his seamen which could possibly entitle him to reduce the already limited financial obligations the Act imposes by taking for himself insurance money which otherwise would go to compensate seamen or their families for injuries he inflicts. The result of holding that the Act gives the shipowner this insurance benefit is, at least in some circumstances, to leave him with more money after a wreck if he injures people than if he does not. It is a far cry from the decision in The City of Norwich that a shipowner is entitled to keep the insurance collected for loss of his own ship to today's holding that states cannot assure seamen that they instead of the shipowner can get the full benefit of liability policies bought in order to pay their just claims for injuries caused by the ship.

(c) It is said, however, that other shipowners might have to pay higher premiums and also buy more insurance if recoveries are allowed here, and that this would discourage investment in ships. How the Limited Liability Act may be read to impose a ceiling on premiums, over which the states normally have full power, is difficult for me to understand. I have searched the Act's history in vain for any support for this interpretation. Yet 103 years after the Act's passage it is discovered that Congress intended to help shipowners by preventing states from making regulations that might raise the cost of marine insurance. But Congress decided to help shipowners by reducing their obligations due to wrecks, not by reducing the prices they had to pay for carrying on their business either before or after a wreck. Construing the Act to protect shipowners from having to pay higher prices for oil or coal would be no less far-fetched than construing it to keep down insurance premiums. This Court often protests its desire to indulge every presumption in favor of the validity of state legislation. It is hard to reconcile this commendable judicial philosophy with use of attenuated inferences about increased premiums as an excuse for impairing this Louisiana law.

(d) Despite the insistence of petitioner insurance companies that these suits must be wholly barred to save shipowners from injury, it seems plain that the only real beneficiaries of such a holding would be the companies themselves. They, rather than the shipowner, would enjoy the protection sought to be written into the Limited Liability Act. But even the most generous reading of the Act gives no ground for believing that it was intended to help insurance companies, directly or indirectly. And nothing in the records of the congressional debates or reports supports such a strained interpretation. Shipowners, not insurance companies, were the group Congress wanted to help.

(e) For the above reasons I think the Limited Liability Act does not require deferring the present suits so that the shipowner can be the direct beneficiary of these insurance policies at the expense of the families of the deceased seamen. But quite apart from these reasons, the same conclusion is required by specific instructions from Congress. The McCarran Act provides that '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 the business of insurance *  *  * .' 15 U.S.C. § 1012(b) 15 U.S.C.A. § 1012(b). It is unquestionably true that the McCarran Act was passed in response to this Court's decision that insurance was subject to the federal commerce power. But that is no reason for giving the law an unnaturally narrow construction squarely in the teeth of the plain, normal, everyday meaning of the language used. The Act rather shows the strong purpose of Congress to permit states to continue regulating insurance as they always had. Courts are pointedly told to leave states free to regulate 'the business of insurance' in the absence of some congressional act that 'specifically relates' to the same subject. The 'business of insurance' includes marine insurance and by no stretch of imagination can it be said that the 1851 Act 'specifically relates' to insurance. Thus the unambiguous language of the McCarran Act forbids courts to construe federal statutes such as the Limited Liability Act so as to impair a state law like Louisiana's. No legislative history can justify judicial emasculation of this language. I would not disregard its mandate.

Judicial expansion of the Limited Liability Act at this date seems especially inappropriate. Many of the conditions in the shipping industry which induced the 1851 Congress to pass the Act no longer prevail. And later Congresses, when they wished to aid shipping, provided subsidies paid out of the public treasury rather than subsidies paid by injured persons. If shipowners really need an additional subsidy, Congress can give it to them without making injured seamen bear the cost. It is significant that no shipowner has argued here against direct recoveries from the insurance companies.

Today's decision creates unnecessary delay and doubt as to recovery by the families of the Jane Smith's victims. The loss of their breadwinners is not to be shared by the shipping industry the seamen served. It was such results that led to efforts to spread the cost of industrial accidents and disasters through insurance and workmen's compensation laws. Acting consistently with this broad trend in the law, Louisiana has tried to make certain that all liability insurance will get to those for whose protection it was purchased. And application of Louisiana's statute under the circumstances here is also in harmony with the humane policy of the maritime law. Seamen have traditionally been the wards of admiralty, and admiralty has been increasingly solicitous to provide compensation for accidents occurring in their dangerous work. Thus both the general trend of the law and the specific bent of admiralty support the policy of the people of Louisiana which permits recovery here. No language in the Limited Liability Act forbids it; the language of the McCarran Act should compel it.