Indemnification Without an Agreement

Kevin Anderson Bills of Lading, Cargo Liability, Transportation

One of the risks a carrier often runs involves carrying more valuable cargo than they know about or approve of. This can happen in a number of different scenarios, but one of the riskier situations is where two companies have an existing contract for transportation of goods, and a third party ships goods under that contract. That is what happened in a case earlier this year where a judge had to rule whether indemnification was an option when there was no agreement to indemnify.

In that case, Macy’s Corp. Servs., Inc. v. W. Express, Inc., the shipper had a contract to transport goods for Macy’s, and a third party entered into that contract and had the carrier take a load of goods interstate. Before taking off, the third party and the carrier had a bill of lading with a declared value, and sometime during transit the cargo was stolen.

In most situations like, what should happen is clear: the Carmack Amendment makes it the responsibility of the carrier to pay for the lost goods. When Macy’s did this, they declared the value of the shipment at over $500,000, while the bill of lading said that the goods were only a bit over $90,000. The case went to court, and the carrier sued the third party under a theory of indemnification. Essentially they wanted to make the third party responsible for the value of the freight they did not declare.

Implied-in-Law Contract

While there was no contract for indemnification between the carrier and the third party, the carrier came up with a creative argument as to why they should be made to pay. They argued that there existed an implied-in-law contract between the two parties, which made the third party responsible for the undeclared value of the cargo. This is a principle of equity that the court can apply where an injustice would result if a party were not made to pay.

The court in this case sided with the carrier. In the opinion, the court ruled that because the third party provided inaccurate representations about the value of the freight, it would not be fair to let them get away with making the carrier pay for all of the losses. After all, once a carrier makes a shipment, they have a perception about how much the cargo they are carrying is worth, and how much to insure it for.

Binding Precedent?

While this case is one opinion out of a district court in North Carolina, it does introduce a new way of thinking for carriers. The case is not binding on us in Oregon and our region, but it is an example of how and what a carrier needs to do in order to prevent an unfairness from happening to them, like what happened to this carrier in North Carolina. It is an important lesson for trucking companies to internalize.

If you are a trucking or transportation company in Oregon or the surrounding areas, we are here to serve you. At Anderson and Yamada we have decades of experience helping trucking companies succeed and navigate the legal trouble besetting them. Contact us today.