HIH Marine Insurance Services v. Gateway Freight Services

Seagate Technology (Seagate) hired Dimerco Express (Dimerco), an air-freight forwarder, to ship 20 crates of hard drives from Malaysia to San Francisco. Dimerco picked up the crates and contracted with China Airlines to ship the crates to San Francisco. The airbill from China Airlines contained preprinted terms limiting the liability of the airline and its agents for any shipping losses that might occur while the cargo was in its control. Specifically, the airbill contractually limited liability for cargo losses to $20 per kilogram unless the shipper requested and paid for additional liability coverage. Although it had an opportunity to do so, Dimerco did not request additional coverage from China Airlines. Instead, Dimerco chose to insure the shipment with HIH Marine Insurance Services, Inc. (HIH) (plaintiff), an outside insurance company. In San Francisco, China Airlines used Gateway Freight Services (Gateway) (defendant), a ground-handling service, as its agent to unload and deliver the crates. Gateway transported the crates to its off-airport facility, where four of the crates were stolen. As Dimerco’s insurer, HIH paid Seagate approximately $430,000 for the lost hard drives. Under the doctrine of subrogation, HIH then sued the two thieves (who had been caught) and Gateway to recover the $430,000. The thieves settled with HIH for a total of $120,000. The trial court found that Gateway’s liability was contractually limited to approximately $30,000 and that this liability should be offset by the $120,000 settlement. Thus, Gateway owed HIH nothing, and the trial court dismissed the claims. HIH appealed.