An Example of Limiting Liability Under the Carmack Amendment

Kevin Anderson Cargo Liability, Transportation

For trucking and transportation companies, limiting liability under the provisions of the Carmack Amendment is a particularly important detail that should not be overlooked. Limiting liability under the Carmack Amendment is not as easy as simply putting limiting language in a bill of lading or transportation contract. There are specific steps which must be taken.

The Carmack Amendment was initiated by Congress as a nationwide policy for carriers who do business from state to state. Instead of dealing with 50 different state policies on what to do when cargo is lost, damaged, or stolen, the federal government set up one scheme known as the Carmack Amendment.

The law itself is the embodiment of the common law for carriers, which was developed over hundreds of years and brought from England to America. The main principle behind it is that carriers are primarily responsible for lost, damaged, or stolen cargo when it is in their possession. This principle relieved shippers from the responsibility of insuring their loads, and put the onus on carriers to do a good job with shipment.

Limitations on Liability

A problem with this scheme is the costs that are associated with shipping certain types of cargo. A carrier will easily ship more goods each year than the company itself is worth, so it puts the responsibility of insuring those goods on the carrier itself. Obviously this is a cost-heavy endeavor, and simply is not the answer for many trucking outfits.

Fortunately, the Carmack Amendment allows for the limitation of liability by carriers. There are specific requirements that must be implemented before liability can be limited. This was the lesson learned by a man who sought to have his household goods shipped from Las Vegas to Washington state in 2016. In that case, Kimsey v. SML Relocation Serv’s, many of the man’s household goods were damaged or lost in route. He had agreed with the carrier prior to shipment to limit damages to 60 cents per pound of goods shipped.

Despite that limitation set up in their shipment contract, the man sued to recover more. Citing an important 9th Circuit Court case, the judge dismissed the case. That 9th Circuit Court opinion set out four primary requirements for a carrier to limit liability in shipping goods:

  • Provide a written or electronic copy of the rate, classification, rules, and practices upon which the agreement is based, if requested.
  • Give a shipper two or more levels of liability to choose from.
  • Obtain a shipper’s agreement on a level of liability limitations.
  • Issue a bill of lading prior to shipment reflecting the agreement.

These requirements seem simple enough, but every court will look at them differently, and every case is fact specific.

It is important that your trucking or transportation company understands properly how to limit liability under the provisions of the Carmack Amendment. If you are facing a lawsuit, it is important to have the right legal team defending your limitation of liability under the right framework. At Anderson and Yamada we have the experience your company needs and deserves. Contact us today.