A recent opinion by a U.S. District Court Judge should give shippers and carriers alike pause with how they draft and execute bills of lading. The case was brought under the provisions of the Carmack Amendment. 49 U.S. Code § 14706. As most everyone involved in the trucking industry knows that this is the law which imposes liability on carriers for cargo losses and damages.
The provisions of the Carmack Amendment are far reaching and impose absolute liability for losses and damages. The justification for a national law such as the Carmack Amendment is clear: the transportation industry crisscrosses in and out of the fifty states. If there were fifty different sets of laws for liability, transporting goods from state to state would be prohibitively costly.
With all of this in mind, there are ways for carriers to limit liability under the Carmack Amendment. But to do so requires planning and fulfilling specific requirements or any effort will be in vain. Included in those requirements are that the carrier:
- come to an agreement with the shipper on choice of liability;
- give the shipper a choice of different levels of liability; and
- issue a receipt or bill of lading memorializing the agreement modifying liability.
Of course this is a basic guide to limiting liability, and every situation is case specific on whether liability has been limited or not.
The specific requirements announced in the Carmack Amendment to limit liability are intended to prevent carriers from taking advantage of shippers, but what happens when the shipper is the drafter of the agreement that limits liability?
Who Drafts a Bill of Lading Matters
This was the question that a district court judge was recently tasked with answering. In that case, the shipper was seeking to have the carrier reimburse them for over $200,000 in stolen phones designed for a popular big box store. When the carrier asked the court to rule on liability before trial, the court was not willing to do so.
In its opinion, the court drew a distinction of limiting liability when it is the shipper who drafts the bill of lading. According to the court, it is not necessary to protect a shipper from itself, but to protect a shipper from a carrier. This means that it matters who drafts a bill of lading as to who will face liability and how much if cargo is damaged and a dispute arises. As a result, whether the carrier will be liable for the full loss will have to be determined at trial in that case, not in pre-trial procedures.
This case underscores the importance of shipping agreements in the transportation industry. If your company is using stock forms found on the internet, or leaving it to other companies to do all the drafting, contact us. At Anderson and Yamada, P.C., our team of transportation law professionals have decades of experience in all the areas of law affecting trucking companies. We can help your company draft and execute agreements beneficial to you, which accomplish what your company needs to thrive.