Weighing Liability Limits

Q: While researching via the Web, I ran across a question you answered a while ago on liability limits in Canada, and I was hoping you could expand on this.

You wrote then: “The Canadian model is favored by many carriers. It allows carriers to limit their liability unilaterally by tariff provision, and sets a fairly low ceiling — about $2 (in Canadian dollars) per pound — for motor carriers. In other regards, however, Canadian law (which is far less federalized than U.S. law) varies sharply from one province to the next, so it’s at best an incomplete model.”

I would like to clarify if the C$2 per pound is for weight of the entire shipment in question or if perhaps it would be for each piece of the shipment. For example, if only one carton of five were damaged, could we as a carrier base a claim payment on the weight of just that one damaged carton or would we be held to the weight of the entire shipment?

You also mentioned the Canadian provinces’ varied laws. Does each province have its own limit of liability for motor carriers, or is the C$2-a-pound a general rule for all carriers?

A: I was pretty sure I knew the answer to your first question off the top of my head, but just to be safe I did a little research — and I’m glad I did.

In the U.S., weight-based liability limitations of whatever type are typically stated in terms of so much money “per pound per article.” Which is to say, as you propound, that if only a portion of a shipment is lost or damaged, the carrier’s liability is capped at the stated sum multiplied by only the weight of the lost or damaged portion.

Under Canadian law, however, a shipment is treated for this purpose as an indivisible unit. That is, the ceiling of motor carrier liability is set (absent some shipper-carrier agreement to the contrary) at C$2 per pound multiplied by the weight of the entire shipment; and even if only a tiny bit of the shipment is lost or damaged, carrier liability is only capped by that whole sum.

And, yes, the limitation is nationwide throughout Canada. It’s stated in different ways in different provinces — for example, under Nova Scotia law, it’s set at $4.41 per kilogram (which, if you do the math, is exactly C$2 a pound) — but it applies uniformly.

Far from uniform, however, are the conditions under which it may be evoked. As a general rule, all the provinces void it for what’s called fundamental breach of contract by the carrier. The definition of that varies somewhat from province to province, but in general, it means the carrier’s failure to observe special conditions or instructions in the handling of the goods.

There’s also a sharp split regarding whether the carrier has or hasn’t issued a bill of lading. In British Columbia, for instance, no bill of lading equals no liability limit; even if the carrier issued one but didn’t give the shipper a copy, the limit is voided. In Alberta, however, the limit is viewed as a matter of law, and issuance of a B/L isn’t a prerequisite to its application.

Also somewhat varied — and differing from the U.S. — is application of so-called Himalaya clauses in ocean through bills of lading. These clauses (named after a vessel, not the mountain chain) extend to connecting inland carriers the same liability limits that apply to maritime carriers — which are many and much more restrictive than for overland transportation.

In the U.S., such clauses are given broad application; Norfolk Southern R. Co. v. James N. Kirby, 543 U.S. 14 (2004). Canadian courts, however, want to see very specific language in the B/L expressly extending maritime liability to the inland portion of the move; otherwise, the inland carriers are held to their own more stringent liability regime — though again the legal details vary provincially.

The foregoing applies only to common carriers, which in Canada, as in the U.S., are those that hold themselves out to the public in general as transportation providers. The only other class of carriers in Canada is those deemed private, which serve only certain shippers — a class that includes those who handle their own goods and what are here called contract carriers that haul for unrelated shippers.

That’s as broad as I can make it. I’m no expert in Canadian transport law, of course, and if you need more, you’ll have to find someone who is in the province with which you’re concerned. Hope this helps.

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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