Johnson & Higgins of Cal. v. United States

Background

In December 1918 a fire broke out aboard the Army Transport Logan while it carried cargo from San Francisco to Manila. The ship was under U.S. Government control. The cargo included military supplies for American troops in Siberia and the Philippines, supplies for the Philippine government, Red Cross supplies, and some officers’ personal property, all transported free of charge. Some cargo was damaged by water. Marine underwriters claimed contribution under general average (a shared-loss rule). In August 1922 the general superintendent and administrative officer of the Army Transport Service asked a private corporation, doing business as an average adjuster and insurance broker, to prepare a general average statement after the Acting Judge Advocate General recommended referring the claim to an adjuster. The adjuster prepared the usual statement and billed the Government, but the Comptroller General disallowed the charge and the adjuster sued.

Reasoning

The central question was whether the Army Transport Service’s superintendent had authority to hire an adjuster to prepare the shared-loss statement. The Court found that, given the underwriters’ claim and the Judge Advocate General’s advice, the superintendent had the duty to obtain the statement and could properly employ an adjuster to do the work. The Court rejected the Court of Claims’ view that no officer had authority to contract for this service. Because the request and advice created a clear need for the adjustment work, the adjuster’s right to payment did not depend on proving the Government’s ultimate liability for contribution.

Real world impact

This decision lets responsible Army officers hire marine adjusters to prepare contribution and adjustment statements after cargo losses. It enables timely handling of insurer claims and helps establish the factual basis for cost-sharing calculations. The Court did not finally decide whether the Government must pay any contribution itself.