Unilateral Limitation of Liability

Unilateral Limitation of Liability

Copyright 2002, Traffic World, Inc.

Q:

We made a shipment by motor carrier that was lost. The bill of lading had no declared value. But the carrier is pointing to a provision of its tariff limiting its liability to different amounts based on the class rating of the shipment, and says the limitation in our case - about $7 per pound - applies even though our shipment was valued at substantially more.

Is the carrier correct? How can we enforce our claim against this carrier?

A:

If the carrier is correct then the law is meaningless, and that I won't accept.

What the law - the Carmack Amendment - says is that a carrier is "liable to the person entitled to recover ... for the actual loss or injury to the property"; 49 U.S.C. ?? 11706(a) and 14706(a)(1), emphasis added. It further allows carriers and shippers, by "written (or electronic) declaration of the shipper or by (a) written agreement between" carrier and shipper, to establish value limitations for L&D claims liability. 11706(c)(3)(A) and 14706(c)(1)(A) (railroads, though not motor carriers, may also reach agreements with shippers for claims deductibles, per ? 11706(c)(3)(B)).

But that's the only exception, and it doesn't even approach the kind of unilateral tariff limitation you're describing. Indeed, the rail section of the law (although not the motor carrier section) expressly says that a "rail carrier may not limit or be exempt from (full-value) liability ... except as provided" by the provision allowing agreed or declared limitations, and that "

[a] limitation of liability or of the amount of recovery or representation or agreement in a receipt, bill of lading, contract or rule in violation of this section is void"; ? 11706(c)(1).

I don't think this language of the ICC Termination Act could be a lot clearer, but I have to tell you that Congress - admittedly trying to fast-track a technically complex piece of legislation dealing with an industry unfamiliar to most legislators - managed to muddy the waters more than a little. As to motor carriers, the House-Senate conference committee had this to say about the version of ? 14706 it adopted:

"This section preserves the current liability provisions, which makes (sic)carriers ... fully liable for loss or damage except to the extent that there is a prior agreement between the carrier and shipper limiting the carrier's liability or if the carrier maintains a schedule of rules and rates which is provided to the shipper on request; 104th Congress, H.R. 2539, Joint Explanatory Statement of the Committee of Conference, ? 14706, emphasis added. And yes, without more, that sure sounds like carriers can limit their liability by tariff provision instead of relying on the shipper-carrier agreement specified by the law itself.

As to railroads, which also are publishing such unilateral limitations widely (especially the major carriers), there's no such conference-report ambiguity but there is this provision in the law relating to administratively exempted rail service (a large proportion, these days, of all such service):

"Nothing in ... section 11706 ... shall prevent rail carriers from offering alternative terms ... for liability and claims"; 49 U.S.C. ? 10502(e). Again, arguably permission for carriers to limit their liability as they choose.

I don't buy it in either case. With respect to motor carriers (your situation), courts are allowed to look to legislative history for clarification only where the law itself is ambiguous, and I really don't see where there's any ambiguity to clarify in the uncompromising language of ? 14706. As for railroads, my dictionary defines the adjective "alternative" as "affording or implying a choice between two (or sometimes more) things," (OK, it's an older dictionary, but the word hasn't changed meaning since Shakespearean times), and where's the "alternative" if a railroad says flatly that its liability is limited to thus-and-such, period?

Further, Congress went to the extent of directing the Department of Transportation to "study" whether Carmack liability standards should be changed (? 14706(e)), got a don't- change-it recommendation, and accepted that. Why "study" the question if you're already changing the law? Q.E.D., the law didn't change.

I've seen no post-ICCTA litigation on this so I can point you to no contemporary judicial rulings, but it's my professional opinion that no rational court on these fragile bases would support unilateral tariff liability limitations by carriers of either mode. I say no rational court because of course judges, too, are only human and may be swayed by well-presented arguments; but I'd be shocked to see a decision of precedential value to the contrary in such a case, and I'd still want higher-court confirmation before I'd go along.

Which means, to me, your carrier's limitation is unenforceable, and in your shoes I'd either (a) set off the full amount of your claim against freight charges owing the carrier, if you can - see my "Manager's Guide to Freight Loss and Damage Claims" (Fort Valley, VA: Loft Press, 2nd ed., 2000), pp. 263 et seq. - or (b) if that's pragmatically unfeasible because you don't owe the carrier enough, sue it for the difference. And good luck, though I don't think you'll need luck - just knowledge should be enough.

-- Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at P.O. Box 76, Morganton, Ga. 30560; phone, (706) 374-7201; fax, (706) 374-7202; e-mail, BarrettTrn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.