An issue that is consistently raised in Carmack Amendment litigation is whether a bill of lading or shipping contract effectively limits liability. This is an important issue because of the implications it has for carriers’ bottom lines. Based on prior experience, insurance policies, and contracts, a company has a general idea of what their exposure is. But because of different federal laws, a company may be misguided in this notion.
The Carmack Amendment works as an all inclusive insurance policy. Most people in the trucking industry know this, but they also know that liability can be limited through a bill of lading. What they may not know is that there are specific requirements that must be met for liability to be limited effectively.
In ninety percent of commercial transactions and relationships, the involved parties are free to contract different positions with each other. But in some situations there are laws and cases which limit what positions a company can take. This is true for bills of lading and contracts for shipment of goods across state lines. Under the Carmack Amendment and subsequent cases interpreting it, a company must comply with four steps to effectively limit liability on a shipment of goods:
- maintain a rate in compliance with federal law;
- give a shipper the opportunity to choose between two or more levels of liability;
- obtain agreement from the shipper on liability levels;
- issue a bill of lading that memorializes the agreed level of liability.
With these steps a company can limit their liability for shipments made. But as is the case with litigation and money on the line, the steps can be more complicated than simply checking a box.
This is what happened recently in a case decided by the Third Circuit Court of Appeals involving the Carmack Amendment and limiting liability. In that case, Choi v. ABF Freight System, Inc., the shipper included all of the above steps in their bill of lading to limit liability. The cargo in this case was destroyed, and despite being worth nearly $70,000, was only insured under the bill of lading for $7,500. The difference in sums could make or break a company.
The shipper, understandably, sued for the entire amount of the loss under the theory that the carrier did not offer two levels of liability for the subset of loss of destruction of property. The court did not agree with this position, and ruled that the steps taken were sufficient to limit liability in the case. But this and related issues come up often in Carmack Amendment litigation. This includes issues such as whether the shipper was given ample opportunity to choose, or whether the carrier obtained agreement or just forced it on the shipper.
It is wise for trucking companies to limit liability under the Carmack Amendment. But because of the intricacies of the law, a company should get the right advice and counsel on how to do so. That kind of advice and counsel is essential to successfully navigating through the legalities of federal trucking laws.
At Anderson and Yamada, we have decades of experience counseling and advising trucking companies on how to work with the law to their benefit. As you consider your legal needs, contact us. We are available as you legal counselor, or as need be, partner in litigation. Contact us today.