Originating Carrier versus Subcontractors

Kevin Anderson Cargo Liability, Transportation

The Carmack Amendment is possibly the single most important part of the law relating to interstate trucking and transport of cargo. Under its provisions found in 49 U.S.C. § 14706, a carrier is held liable for any damage or lost cargo meant to be transported interstate. This is an elegant and simple rule to follow, but there are questions that arise with its application in different situations.

Despite being a simple and generally straightforward rule, litigation surrounding how the Carmack Amendment should apply continues to evolve. A particular question arose in Illinois when a carrier was sued over the loss of more than $37,000 in cargo. The cargo was lost when the truck driver responsible for the cargo fell asleep at the wheel and wrecked his truck and all the cargo with it.

Given this factual scenario involved, it seems straightforward that the carrier would be responsible for the lost cargo, but it was disputed nonetheless. The carrier in this case felt that it should not be liable for the losses because it was merely the originating carrier. The actual carrier was a subcontractor of the company the original carrier subcontracted with to move the goods.

Originating Carrier

The originating carrier in this case argued that it should not be liable because it did not lose the cargo. Their argument was that they were simply responsible for issuing the bill of lading, and that it was a different company in charge of actually transporting it. And furthermore, because it was the sub-sub-contractor who wrecked, it was they who should pay for the losses. But the court did not buy that argument.

Long ago the Supreme Court addressed this issue, though not directly. In the 1950 case of Reider v. Thompson, 339 U.S. 113 (1950), the Supreme Court declared that one of the purposes of the Carmack Amendment is to relieve shippers of the cost and responsibility of looking for a particular carrier among the numerous carriers that can be involved in a shipment. This is important for a number of reasons.

When a shipper looks for a carrier to ship cargo they are often at the mercy of the carrier and their terms to have their goods shipped. Few shippers are in a position to bargain very much with carriers when a deal is struck, so many carriers will take the deal and subcontract the actual work down the line. To allow them to escape liability under these conditions and pass it off to a smaller less well-off carrier would defeat in many ways the purpose of the Carmack Amendment.

That is what happened in this case. The court explained in its opinion that the originating carrier who issued the bill of lading is liable for the losses that occur during transit. It is a simple rule that will likely be the standard going forward.

At Anderson and Yamada we have decades of experience counseling and guiding trucking companies regarding the Carmack Amendment and other parts of the trucking related laws. If you find yourself in need of a law firm because of a Carmack Amendment claim or other issue, contact us today.