Q&A: Fired Up Over Liability Limits

Q: We're a motor carrier who had an unfortunate problem a short time ago.

One of our trucks was caught up in a chain-reaction highway accident that involved about 20 or 30 vehicles, one hitting another and so on. Our truck was somewhere in the middle. Worst of all, one of the vehicles caught on fire after the wreck, the flames spread, and our unit was badly damaged.

Trouble was, our truck was loaded at the time, and of course the load was lost in the fire. Now we have a claim for $250,000 or so. Our insurer says we're liable, but our cargo policy is only for $100,000.

I question our insurer's statement. The accident was in no way our driver's fault, and the state police agree; in fact, they never charged anybody, so we can't turn to any other involved driver’s insurance either. It seems very unfair that we should wind up out of pocket $150,000 for an accident in which we weren’t to blame, on top of the damage to our truck. Is our insurer right?


A: I'm afraid so. There were possible steps you could have taken ahead of time to avoid this problem, but since you don’t mention them, I assume you didn’t take them.

The basic law of carrier liability dates back a very long time and may these days seem anachronistic, but it remains the law. It’s best summarized by a statement by a British jurist named Lord Holt in the 1703 legal case of Coggs v. Bernard, 2 Ld.Raym. 909:

“The law charges this person thus entrusted to carry goods (i.e., the carrier) against all events but acts of God and of the enemies of the King. For though the force be ever so great, as if an irresistible multitude of people should rob him, nevertheless he is chargeable (liable).”

Lord Holt went on to explain that “this is a politic establishment, contrived by the policy of the law for the safety of all persons, the necessity of whose affairs obliges them to trust these sorts of persons, that they may be safe in their ways of dealing.”

Now, you can almost hear Lord Holt holding his nose as he speaks of “these sorts of persons.” And indeed, carriers of that era tended to be a rather scrofulous lot, itinerants of dubious integrity who might indeed clandestinely “combin(e) with thieves, etc.,” and thereby “undo … all persons that had any dealings with them,” as he warned.

Modern law has added a few other exceptions to Lord Holt’s basic two. Not only are cargo losses or damage resulting from acts of God or of public enemies excluded from carrier liability, so are those resulting from acts of a public authority, acts or defaults of the shipper, and “inherent vice” (nature or characteristics) of the freight itself.

But that doesn’t help you, for an accordion highway accident doesn’t fall into any of these categories. And a further corollary of Lord Holt’s pronouncement is that his rule of liability is absolute, without regard to any question of fault. That’s what’s incorporated in modern U.S. law via the so-called Carmack Amendment, 49 U.S.C. Section 14706, and in American common law.

Absent some advance agreement between shipper and carrier to the contrary, this carrier liability is also full dollar. And the modifying phrase in the first sentence is where you might have avoided this problem had you properly planned ahead.

The idea is to reach an agreement — either in a written contract or on the bill of lading itself — with the shipper that your maximum liability would peak at $100,000, the amount of your cargo insurance. Had you done this and properly documented it, you’d have been off the hook; the shipper would have had to bear the rest of its loss on its own.

You might — and here I only say might — have unilaterally incorporated a provision limiting your liability to that $100,000 in your tariff. Whether such a provision would have been enforceable has been a matter of lively debate for years in the court system; some courts have said yea, others, nay, and there’s no real consistency as to whether such tariff rules will be upheld.

All of this, however, is neither here nor there as matters stand. As is said, if we had some ham, we could have some ham and eggs, if we had some eggs. From what you write, you have neither ham nor eggs, and you didn’t do either of these things. Accordingly, I’m afraid you owe the $150,000.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.

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