“IF THE SHIPPER SUES FOR THE LOSS OF THE


SHIPPER’S LOAD, THEN THE CARRIER COULD LIMIT ITS EXPOSURE. BUT IF THE SHIPPER HAS THE BROKER FILE SUIT FOR THE VERY SAME LOSS,


THEN THE CARRIER CAN GET POPPED FOR THE WHOLE AMOUNT?”


contracted with a freight broker, Exel, to arrange for the shipment of phar- maceuticals. Exel enlisted Southern Refrigerated Transport (SRT) to carry loads and SRT then signed Exel’s stan- dard ‘Master Transportation Services Agreement.’ That Agreement contained one clause requiring SRT to indemnify the broker for any loss and another clause that required SRT to obtain cargo insurance coverage of $100,000 max per vehicle.” At this point, you jump in “And


lemme guess, one of the loads trans- ported by SRT was stolen, right?” Your lawyer says “Precisely. Though


the bill of lading had a release value of under $57,000, the shipper claimed that the load was pharmaceuticals valued at over $8 million. So Exel presented a claim to SRT on behalf of the ship- per for the full $8 million. And as you might expect, SRT rejected the claim, contending that its liability would be limited under the bill of lading to the release value.” This is starting to sound all too


familiar to you so you ask “What hap- pened?” Your lawyer continues, “Well, the


shipper assigned its claim to Exel and then Exel sued SRT under several theo- ries, including breach of the indemnity clause in the Master Agreement. In response, SRT argued that, in light of Carmack, Exel’s state-based contractual indemnity claim would necessarily be preempted.” “And that’s right, isn’t it? That’s


that ‘compromise’ you mentioned ear- lier, right?”


34 Your lawyer explains “Nope. The


Ohio court rejected SRT’s argument that Carmack preempted Exel’s indem- nity claim. It pointed out that, while a claim brought by the shipper might have been limited to the release value, this suit had been brought by the bro- ker, not the shipper. And while some courts, including one in Arkansas in a case called Propak Logistics, have deter- mined that the Carmack Amendment’s preemptive effect extended not only to shippers, but also to brokers, other courts have ruled to the contrary.” Now you interject “I think I see


where this is going.” “Yes” your lawyer says, “Since


it ruled that Carmack did not pre- empt Exel’s breach of contract claim, the court found that SRT agreed to indemnify Exel for any loss of cargo. And while one provision of the Master Agreement had also obligated SRT to maintain a maximum of $100,000 in cargo insurance, yet another provision stated that the insurance provision did not limit SRT’s liability under other sec- tions in Master Agreement.” “Now wait a minute” you respond.


“You’re telling me that, if the shipper sues for the loss of the shipper’s load, then the carrier could limit its expo- sure. But if the shipper has the broker file suit for the very same loss, then the carrier can get popped for the whole amount?” Your lawyer responds “Yes, that’s


what the judge said.” “That seems nuts! You’re say-


ing that even though SRT had that $100,000 in insurance - the very


amount that the broker told SRT to have - the court refused to cap SRT’s liability at the $100,000 level?” “Yep” your lawyer replies. “SRT got


stuck for the full $8 mil.” Now you’re starting to worry. You


mutter “So what do we do?”


FINDING PROTECTION Your lawyer sighs and continues,


“As an initial matter, the decision may have limited implications. Some of its conclusions – specifically, its preemp- tion analysis and the interplay between insurance procurement requirements and limits of liability – may not hold up in other jurisdictions, including Arkansas. Yet, the ruling cannot be ignored.” “Tell me this,” your lawyer says,


“When the broker sent your salesman that master services agreement for these 20 loads, did your salesman send it over to your risk management folks to review before he signed it?” You say, “I have no idea. I guess


you’re suggesting that the language of that master services agreement could be important?” Your lawyer replies “Yeah, send it


to me. I want to see if it’s the American Trucking Associations’ Model motor carrier/broker agreement.” “What if it is?” “Then you may have some protec-


tions that SRT didn’t have.” “What if it isn’t?” you ask. “Well, then I want to see if it has


an indemnity clause with a carve-out for cargo claims…or maybe a limitation of liability clause. Or maybe a provision requiring the broker to disclose cargo value in excess of the required insur- ance.” “What if it doesn’t?” Your lawyer responds “Then we


may need to get my colleague Charlie on the line. He knows far more about bankruptcy than I do.”


Greg Jones is a partner with Wright, Lindsey & Jennings LLP in Little Rock and serves as general counsel to the Arkansas Trucking Association, Inc. He can be reached at gjones@wlj.com


ARKANSAS TRUCKING REPORT | Issue 5 2014


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