Q&A: Liability Up to Interpretation

Q: We do business with a number of motor carriers, mostly not under contract. We’ll put our shipments out for bid individually and accept whoever among our list of approved carriers offers us the best deal.   

I’ve been pretty satisfied with this setup and haven’t had any problems. But one of our summer interns came to me the other day with something that, the more I think about it, the more I’m concerned.   

She’d run across an item in one of our carriers’ rules tariffs that limited its liability to $100,000 unless we specifically made other arrangements. I initially told her not to worry about it, but on second thought, I had her check with some of our other carriers.  Some of them had similar flat liability ceilings, a couple had complicated provisions in which their liability varied according to the class rating of the goods, and there were other variations. The point was that almost all of them seem to restrict their liability in some way.   

As I say, to date we’ve had no problems — very few claims, all of them fairly minor, and all paid promptly. But some of our shipments are fairly high value; it’s not unusual for us to have $500,000, $600,000, even up to $1,000,000 tied up in a shipment. A $100,000 cap sure won’t cover that if there’s a bad wreck. I’ve always considered that carriers are liable for the full value of our loads under the law, but now I’m wondering whether these tariff limits are actually enforceable.   

Can you clarify this?

 

A: That’s a bright, alert young intern you’ve got. I’d seriously consider making her an offer when her internship is up.  

Now, can I clarify? No, I’m sorry to say I can’t. Neither can anyone else, including the courts. And anybody who tells you different — and there are lots of folks who will — is full of a substance you probably decline to haul.   

The Carmack Amendment — 49 U.S.C. 14706 as to motor carriers (11706 as to railroads) — provides that carriers are liable for “the actual loss or injury” to cargo lost, damaged or delayed while in their possession. That’s the basis for your previous understanding.  

It’s long been accepted, however, the shippers and carriers can negotiate this. That is, they can mutually agree on some other level of carrier liability, such as the ones you cite.   

In days of yore, such an agreement had to be pretty specifically spelled out in the bill of lading. Somewhere about the mid-1980s, however, some courts began taking a looser view of what constituted the requisite “agreement.” Some other courts jumped on that bandwagon, and thus were tariff limitations of liability born. Other courts, however, didn’t share in this approach.   

And so it continues to this day, with a real split among courts. Not infrequently, people write or call or something to tell me my view on this is archaic and I must be getting old, that by now it’s generally accepted in the law that carriers can restrict their liability by tariff fiat. Well, I admit to being old(er). But just about as often, yet another court will come down on the other side of the question, hewing to a strict application of Carmack and thus reinforcing my “archaic” interpretation.   

The latest court to jump into this fray was the U.S. Fourth Circuit Court of Appeals in a case entitled ABB, Inc. v. CSX Transportation, ___ F.3d ___ (slip opinion served June 7, 2013). In that case, the court negated a CSX tariff ceiling of $25,000 per shipment on the ground that, despite the B/L’s reference to application of carrier tariffs, the shipper’s agreement to the liability limitation wasn’t clearly enough shown to override Carmack’s full-value language.    

This is far from the only federal appellate court to take such a view. Yet other appeals courts, including some of the same ones, have on other occasions upheld the tariff limits. And I might note that even the ABB case was a split decision, with one judge (out of three on the panel) going with the tariff rule.   

Some day one might hope that a case of this nature will find its way to the Supreme Court, which is the only one in the country that can settle the question for good. Meantime, it remains up in the air.   

So I can only reiterate the advice I’ve long given. If you’re a carrier, don’t count on tariff limits of liability being enforceable; if you’re a shipper, don’t count on them being unenforceable. Negotiate the liability question, too; it’s the only sure way.

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.

 

For the full story: Log In, Register for Free or Subscribe