Carmack Amendment Lessons: Limiting Your Company’s Liability

Kevin Anderson Bills of Lading, Cargo Liability, Contracts, Transportation

A seemingly constant theme that enters the legal world of the Carmack Amendment is limiting liability of lost or damaged cargo. Of course this is an important aspect of trucking law because of the nature of the business. Trucking companies transport millions of dollars of cargo everyday, and if that cargo is lost or damaged, it is the trucking company that is responsible for replacing it.

The Carmack Amendment, without being modified, requires a carrier to basically insure the loss or damage of a shipper’s cargo in most instances. To make a case against a carrier a shipper must simply show three things:

  1. that the shipper delivers the goods to be transported free of damages;
  2. that the goods were damaged in some way prior to delivery; and,
  3. the amount of damages that the goods suffered.

Because the threshold for proving a case under the Carmack Amendment is so low, companies understandably seek to limit their liability on the goods they deliver as part of their business.

Federal Judge Rules on Limiting Liability

It is in this environment that a federal judge recently clarified the rules on limiting liability under the Carmack Amendment. The basic rules for limiting liability under the Carmack Amendment include the carrier offering the shipper an agreement that adheres to the following steps:

  • obtain an agreement from the shipper on a choice of the carrier’s liability;
  • give the shipper a choice between two or more levels of liability; and,
  • issue a receipt or a bill of lading to the shipper to memorialize the agreement modifying liability.

The case at issue here involved a shipper who on its face fulfilled all of these requirements. But the shipper still challenged whether the carrier should be liable for the goods that were lost.

Facts of this Case

This case, Choi v. ABF Freight System, Inc., Civ. No. 14-7458 (U.S. Dis. Ct. New Jersey 2015),  involved a shipper who contracted with a national company to have their household goods transported from Texas to New Jersey. En route to New Jersey the truck carrying the goods was in an accident that caused a fire that destroyed all of the goods on the trailer, including the shipper’s goods. The shipper made claims under the Carmack Amendment of more than $60,000 because all of their goods were lost.

Prior to shipping the goods the shipper and carrier entered into an agreement that limited the carrier’s liability to $7,500. The agreement also allowed the shipper to choose between other levels of liability, but chose the maximum of $7,500. The argument the shipper made in this case was that the carrier only offered one level of liability for catastrophic loss, even though there were a number of liability options for other types of loss.

The district judge did not agree with this argument. The ruling in this case was that more than one option was enough, and the carrier did not need to offer different levels of liability for different types of loss. This is another lesson for trucking companies as they seek to limit liability under the Carmack Amendment.

As we have discussed many times on this blog, it is important to have a trusted legal partner when it comes to navigating the ins and outs of the Carmack Amendment. At Anderson and Yamada, P.C., we pride ourselves in providing legal options and solutions to trucking companies regarding all aspects of the trucking industry. Contact us today so we can become partners with you and your company.