## Facts

- Collier Carbon & Chemical Co. (a Union Oil division) bought the barge *Columbia* in Texas for use in Oregon; the vessel required modifications for a one-time ocean tow to Portland.
- Union retained Nickum & Spaulding Associates, Inc. (naval architects) to design modifications and retained The Salvage Association (surveyor) to inspect the barge and recommend towing precautions.
- Salvage recommended limits on speed and other precautions, including frequent inspection and prompt pumping of water taken aboard.
- Union contracted with Dillingham Tug & Barge Corp. to tow the *Columbia*; the contract included (i) an exculpatory clause for Dillingham’s negligence, (ii) insurance provisions requiring Union to obtain hull insurance with waiver of subrogation and to look only to its insurer for loss, and (iii) a lump-sum towage fee payable even if the barge was lost.
- During the voyage, the barge took on water; Dillingham exceeded recommended towing speeds and did not follow the dewatering precautions.
- The *Columbia* floundered and sank in heavy seas.
- Dillingham sued for the towage fee; Union counterclaimed for the barge loss and impleaded Salvage and Nickum & Spaulding for negligent survey/design.
- The district court found Dillingham, Salvage, and Nickum & Spaulding liable, allocated fault 60/20/20, reduced Union’s recovery for failing to procure the full contemplated insurance, invalidated the exculpatory clause, and denied Dillingham its towage fee.

## Issues

1. Whether the contract’s insurance-allocation and waiver-of-subrogation provisions were enforceable to limit Union’s recovery against Dillingham to the deductible and uninsured amounts.
2. Whether Dillingham’s negligence and breach of an implied warranty of workmanlike performance barred it from recovering the contractual towage fee.
3. Whether the findings of negligence against Nickum & Spaulding and Salvage were clearly erroneous.
4. Whether Union could use the collateral source rule to recover from Dillingham amounts already paid by Union’s insurer.

## Decision

- Affirmed enforcement of the insurance-allocation provisions; Union could not recover from Dillingham amounts paid by the insurer, and Union bore the consequences of failing to obtain the full contemplated coverage (including the deductible/uninsured portion).
- Held the exculpatory clause could not shield Dillingham from its own negligence, but concluded Dillingham breached the implied warranty of workmanlike performance and therefore could not recover its towage fee (with limited adjustment for reimbursable expenses such as canal fees).
- Reversed the district court’s negligence findings against Nickum & Spaulding and Salvage as clearly erroneous; the loss was attributed to Dillingham’s handling of the tow, not defective design or survey work.
- Rejected application of the collateral source rule because the insurance was part of the parties’ negotiated risk allocation and not independent of Dillingham.

## Legal Principles

- In maritime towage contracts, a clause directly exculpating a tower for its own future negligence may be unenforceable on public-policy grounds.
- A separately negotiated insurance-allocation scheme—requiring one party to obtain insurance, waiving subrogation, and channeling loss to the insurer—may be enforceable absent overreaching and will bar recovery against the counterparty for insured amounts.
- Towage contracts include an implied warranty of workmanlike performance; material breach (including unsafe tow handling contrary to known precautions) can bar the tower from collecting its contract compensation.
- The collateral source rule does not apply where insurance payments result from the parties’ contractual risk allocation; allowing double recovery would defeat the waiver-of-subrogation bargain.
- Appellate courts may reverse multi-party maritime negligence allocations when the factual findings rest on unreliable post-accident calculations and the record supports a different causal account.

## Conclusion

The Ninth Circuit enforced the towage contract’s insurance-based risk allocation to prevent Union from shifting insured losses to Dillingham, denied Dillingham its towage fee for breaching the implied warranty of workmanlike performance, and reversed liability findings against the barge’s designer and surveyor because the sinking resulted from Dillingham’s improper tow handling rather than defective modification or survey.


Dillingham Tug & Barge Corp. v. Collier Carbon & Chem. Co., 707 F.2d 1086 (9th Cir. 1983)