Limits on Liability, Crux of Carmack Cases

Kevin Anderson Cargo Liability, Transportation

More often than not, a Carmack Amendment case comes down to one simple issue, and that issue is one of the most misunderstood in the industry. The crux of the majority of Carmack Amendment cases revolves around whether a carrier properly limited their liability prior to shipment. Obviously in the wake of lost or damaged cargo, the shipper almost always attempts to avoid full liability, while carriers universally affirm liability was limited.

This argument surfaces again and again in Carmack Amendment cases, in part, because of nature of the carrier shipper relationship. Anytime a relationship begins between shipper and carrier, the two do not hope or anticipate anything going wrong with the shipment, and expectations are high that the cargo will make it to its destination without any problems. But that is just the sort of thinking that gets carriers into trouble and stuck with giant bills that can break a company.

Limiting Liability Under Carmack Amendment

This was the basic scenario which presented itself in a recent case out of Texas involving a shipment of goods from New Jersey to Texas. In that case, Natural Polymer International v. Fedex Co., the shipper contracted with the carrier through a third party account to ship important machinery for its company. Prior to shipment, the third party presented its standard bill of lading to the carrier for shipment, which included provisions that conceivably limited the carrier liability. And that was the argument the carrier made in its attempt to limit its liability from over $80,000 to $30,000.

The problem with this approach in any case is that there are very specific rules that must be followed in order to limit liability for interstate shipments under the Carmack Amendment. At a baseline, the liability for every carrier transporting cargo interstate is full liability for all lost and damaged cargo. That can be limited, but only through a declared value by the shipper, or through specific steps taken by both the carrier and shipper under a valid agreement.

Those steps, necessary to limit liability, are the only way a carrier can escape full liability for the declared or actual value of lost or damaged freight. The steps can vary from circuit to circuit, but essentially they include the following elements:

  • The carrier gives the shipper a reasonable opportunity to choose between two or more levels of liability;
  • The carrier obtained the shipper’s agreement on the level of liability;
  • The carrier issued a BOL prior to shipment including the terms of the agreement.

These and other, subtle requirements are needed before a carrier can escape full liability in a Carmack Amendment case.

Court Declines Limiting Liability

In this case, as is so often the situation, the court declined to limit liability on behalf of the carrier. The requirements to limit liability are very specific, and are in derogation of the common law and statutory law, so they are strictly applied and upheld by courts. That is why having the right approach in issuing BOLs and limiting liability is so important for carriers. At Anderson and Yamada we have decades of experience helping transportation companies deal with all aspects of transportation law, including Carmack Amendment claims. Contact us today.