CARGO LOSS, Continued from page 25
YOUR STAFF CALLS THE INSURANCE AGENT TO
thinks to ask, “Well, did we get that insurance for this load?” Your staff calls the insurance agent to report the loss, and the agent confirms the cover- age. “Good job,” you think, “we dodged a bullet.” Your loss prevention folks now
phone the shipper to report the bad news. You’ve trained your staff to be diplomatic about it. So they apologize, but quickly tell the shipper that they’ve already turned the loss over to the insurance carrier. They re-assure the shipper that the insurance more than covers the released value for the load. But then it gets sticky. The broker
calls. He yells, “That load was worth $8 million. And the shipper is demanding to be paid in full.” You review the bill of lading, the
$100,000 insurance requirement and the released value. Your salesman asks, “I know we might lose the balance of the deal, but should I be blunt and just tell the broker point blank that all the shipper is entitled to is the released value?” So what do you tell him?
UNDERSTANDING THE CARMACK AMENDMENT So now you pick up the phone and
call your company’s lawyer and ask him. For over a century, the interstate
shipments by motor carriers have been largely controlled by a compromise of sorts that came about with the 1906 passage of the Carmack Amendment to the Interstate Commerce Act. Your lawyer explains “That
Amendment was enacted to bring national uniformity to questions over a motor carrier’s liability for property losses associated with interstate ship- ments. Shippers got a valuable benefit – the ability to impose near-presumptive liability on motor carriers for cargo loss or damage occurring in transit.” You tell your lawyer, “That doesn’t
sound good for us carriers.” “Well, in exchange, motor carri-
ARKANSAS TRUCKING REPORT | Issue 5 2014
ers got two critical benefits. First, by establishing a nationwide liability rule, motor carriers would no longer have to confront a bewildering state-by-state patchwork of liability rules that ren- dered risk assessment virtually impossi- ble. We lawyers call that “preemption.” Second, the Amendment formally recognized the motor carriers’ right to limit their liability for damage.” “That sounds better” you say, “but how does that play out for us now?”
SETTING A NEW PRECEDENT Your lawyer pauses, then says “As
the industry has developed, shippers, motor carriers, and now freight brokers have addressed risk assessment through a variety of means, including indemnity agreements and contractual clauses requiring a motor carrier to procure a specified amount of cargo loss/damage insurance.”
“Yeah, I know” but you ask “what’s
the upshot?” Your lawyer continues, “Some
observers, including at least one Arkansas federal court in a case called Bay Machinery Services have asserted that, given industry standards and absent notice to the carrier that additional cargo insurance would be required, contracts stipulating a set amount of insurance coverage can limit a motor carrier’s maximum exposure to the stipulated amount of coverage.” But your lawyer continues, “But
not all industry participants and courts agree. Just two months ago, one fed- eral judge in Ohio addressed a dispute between a broker and a motor carrier under facts similar to what you’ve called me about. In Exel, Inc. v. Southern Refrigerated Transport, a shipper had
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REPORT THE LOSS, AND THE AGENT CONFIRMS THE COVERAGE. “GOOD JOB,” YOU THINK, “WE DODGED A BULLET.”
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