INTRODUCTION TO CARGO SUBROGATION
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1 INTRODUCTION TO CARGO SUBROGATION Presented By: Matthiesen, Wickert & Lehrer, S.C. GoToWebinar Attendee Interface 1. Viewer Window 2. Control Panel INTRODUCTION TO CARGO SUBROGATION Presented By: Matthiesen, Wickert & Lehrer, S.C. 1
2 THE CARMACK AMENDMENT What is still largely referred to as the Carmack Amendment was originally enacted in It was named after Edward Carmack, the Senator responsible for the law. The ICC Termination Act (ICCTA) recodified the Carmack Amendment at 49 U.S.C There was no substantive changes following recodification. 4 SCOPE Carmack applies to interstate rail and motor commercial transportation of property. 5 PURPOSE The purpose underlying the enactment of the Carmack Amendment was to establish a uniform system of carrier liability that would provide certainty to both the carrier and shipper by enabling the carrier to assess its risk and predict its potential liability for damages. Pietro Culotta Grapes v. Southern Pacific Transp., 917 F.Supp 713, 716 (E. Dist. Cal. 1996). When applicable, Carmack preempts a shipper s state and common law claims against a carrier for loss or damage to goods during a shipment. Ward v. Allied Van Lines, Inc., 231 F.3d 135, 138 (4 th Cir. 2000). 6 2
3 IDENTIFY YOUR CARRIER Broker: Person, other than a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out as selling, providing or arranging for transportation by the motor carrier for compensation. U.S.C (2). Motor Carrier: Person providing commercial motor vehicle transportation for compensation. 49 U.S.C (14). 7 IDENTIFY YOUR CARRIER (PT.2) Freight Forwarder: Person holding itself out to the public to provide transportation of property for compensation and in theordinarycourseofbusiness: assembles or consolidates, or provides for consolidating shipments; assumes responsibility for transportation from place of receipt to destination; and uses for any part of the journey a carrier subject to Carmack. U.S.C (8) 8 NOTICE The shipper must provide written notice of the loss within nine months of the date of delivery, or the date that delivery should have been made. The notice must identify a specified or determinable damage figure. Subsequently, upon receipt of a denial, the shipper has two years to bring a lawsuit. 9 3
4 BURDEN OF PROOF To bring a claim under the Carmack Amendment, the plaintiff must establish a prima facie case.todothis, three elements must be proven: 1) Good Condition at Origin 2) Damaged Condition at Destination 3) Amount of Damages 10 CARRIER DEFENSES TO LIABILITY Act of God Public Enemy Act or Omission of the Shipper Authority of Law Inherent Vice Strikes and Riots 11 BILL OF LADING EXCEPTIONS The Uniform Straight Bill of Lading published in National Motor Freight Classification (NMFC) for use by motor carriers states: Sec. 1. (a) The carrier or party in possession of any of the property described in this bill of lading shall be liable as at common law for any loss thereof or damage thereto, except as hereinafter provided. (b) No carrier shall be liable for any loss or damage to a shipment or for any delay caused by an Act of God, the public enemy, the authority of law, or the act or default of shipper. Except in the case of negligence of the carrier or party in possession, the carrier or party in possession shall not be liable for loss, damage or delay which results: when the property is stopped and held in transit upon request of the shipper, owner or party entitled to make such requests; or from faulty or impassible highway, or by lack of capacity of a highway bridge or ferry; or from a defect or vice in the property, or from riots or strikes. The burden to prove freedom from negligence is on the carrier or the party in possession. 12 4
5 LIMITATIONS OF LIABILITY A fundamental principle of the Carmack Amendment is that a carrier cannot relieve itself of liability through contract. However, a carrier may limit its exposure for liability by including a limitation of liability provision in the bill of lading. It is generally accepted that to limit its liability, the carrier must: maintain approved tariff rates with the ICC; obtain the shipper s written declaration of its choice of liability; give the shipper a reasonable opportunity to choose between two or more levels of liability; and issue a receipt or bill of lading prior to moving the shipment. 13 CARRIAGE OF HOUSEHOLD GOODS The Carmack Amendment continues to regulate carriage of household goods. However, regulation of carriers moving household goods is subject to stricter scrutiny largely because of the consumer nature of household goods. 14 HOUSEHOLD GOODS CARRIER S LIABILITY OPTIONS Full Value Protection (FVP). The carrier is responsible for replacement cost value of the damaged goods, up to the declared value of the shipment. The released rate option, which values household goods at $0.60 per pound, thus offers a lower shipping rate. FVP must be waived in writing. 15 5
6 NOTICE A shipper of household goods must comply with Carmack notice requirements. Within nine months of loss, written notice of a claim must be provided. The notice must: be made in writing (electronic submission is acceptable); identify the shipment; allege that the carrier is liable for the loss or damage; and demand a specific damage amount. 16 ARTICLES OF EXTRAORDINARY VALUE If a shipper chooses FVP to cover a particular shipment, a carrier may include in its bill of lading a place for the shipper to list items exceeding $100 per pound in value. If a customer fails to list high-value items on the form, the carrier s liability may be reduced to $100 per pound for each item. 17 EXCLUSIONS FROM LIABILITY Act or Omission By the Shipper Defect or Inherent Vice of the Goods Hostile or Warlike Action Seizure or Destruction Made Under the Color of Law Strikes, Riots, or Civil Disturbance Acts of God Pre-Existing Infestation of Pests, Fumigation, or Decontamination Loss or Damage That Occurs Prior To Release To a Carrier While In the Possession of Another Carrier Under an Unrelated Shipment of Goods Intangible Property, Securities, Sentimental Value, and Pre-Existing Damage 18 6
7 CARRIAGE OF GOODS BY SEA ACT (COGSA) 19 CARRIAGE OF GOODS BY SEA ACT (COGSA) The U.S. currently is party to the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading (Brussels, 25 August 1924), commonly known as the Hague Rules. The Hague Rules were implemented by the U.S. with the passage of the Carriage of Goods by Sea Act ( COGSA ) (1936). 20 APPLICATION The general rule is that COGSA is intended to apply to international water shipments, i.e., thecarriageofgoods between any port of the U.S. and the port of any other country. However, an express statement in the bill of lading or similar document can subject domestic shipments to COGSA. As a practical matter, carriers often incorporate COGSA making the Harter Act largely obsolete. 21 7
8 SCOPE The general rule is that COGSA covers only from the time when the goods are loaded to the time when they are discharged from the ship, generally referred to as tackle to tackle. Carrier may still be liable under the Harter Act, for damage caused while not at sea. Lekas and Drivas v. Goulandris, 306 F.2d 426 (2 nd Cir. 1962). However, a contract of carriage may include a provision, commonly known as the Himalaya Clause, which extends the application of COGSA prior to loading or subsequent to discharge from the ship. Kirby, 543 U.S. 14, 25, 125 S. Ct. 385, 394, 160 L. Ed. 2d 283 (2004). 22 CARRIER S RESPONSIBILITIES Exercise due diligence to ensure the vessel is seaworthy, including the requirement to properly man, equip, and supply the ship. Properly, load, handle, stow, carry, keep, care for, and discharge goods. Issue a bill of lading showing: leading marks necessary for identification of goods; number of packages or pieces, or quantity or weight; and the apparent condition of the goods. 23 PROVING LIABILITY UNDER COGSA When goods are lost or damaged by the carrier, the shipper makes a prima facie case by demonstrating: receipt of the goods by the carrier; and carrier s failure to deliver goods in the same condition. Once a prima facie showing is made, the burden shifts to the carrier to assert a defense to liability. 24 8
9 TIME LIMITS Suit must be brought within one year after: delivery of the goods; or the date when the goods should have been delivered, if lost. 25 CARRIER S LIABILITY MAY BE LIMITED TO $500 PER PACKAGE Shipper may avoid limitation by declaring excess value. Exceptions To The Package Limitation Package: A class of cargo, irrespective of size, shape or weight, to which some packaging preparation for transportation has been made which facilitates handling, but which does not necessarily conceal or completely enclose the goods. 26 HIMALAYA CLAUSE The COGSA limitation-of-liability provision, generally, applies only to carriers and ships. However, a clause in the bill of lading, commonly known as the Himalaya Clause, extends COGSA defenses to non-carriers and carriers agents, servants, and independent contractors. To effectively limit liability, the clause must be drafted with language expressing a clear intent to extend benefits to a well-defined class of readily identifiable persons, and the clause will be enforceable only by members of that well-defined class. 27 9
10 FOREIGN JURISDICTION CLAUSE Through bills that provide venue rules in the foreseeable event that cargo is damaged during carriage, will be enforced unless it imposes a venue so gravely difficult and inconvenient that the plaintiff will, at least for practical purposes, be deprived of his day in court. 28 INTRODUCTION TO CARGO SUBROGATION Questions & Answers April K. Toy Matthiesen, Wickert & Lehrer, S.C. apriltoy@mwl-law.com
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