In a previous post of March 23, 2016, I suggested that many rail and motor carriers are perhaps improperly avoiding full liability for cargo claims by referring to “filed tariffs” and published “rules”, known only to them. I refer you to that post for a more thorough discussion of the history of such practice, but essentially it is a product of former law and a time when “constructive notice” of tariffs filed with the now-defunct Interstate Commerce Commission was sufficient notice of such limitations of liability (https://www.linkedin.com/pulse/motor-rail-carriers-routinely-avoid-full-value-payment-paul-stewart?trk=hp-feed-article-title-publish).
The ICC Termination Act of 1995 clearly eliminated the former practice of filing tariffs (by both rail and motor carriers), and commensurately eliminated “constructive notice” of limitations of liability, or “released rate” limitations. Courts have since gradually defined the carrier requirements for claiming sufficient notice to shippers of limitations on cargo claims.
In a 2013 case, the 4th Circuit summarized all modern requirements of the narrow exception to full liability, in ABB Inc. v CSX Transp., Inc., 721 F.3d 135, 140 (4th Cir. 2013):
“To determine whether a carrier has limited its liability consistent with the strictures of the Carmack Amendment, courts have applied a four-part test, under which carriers must:
(1) provide the Shipper, upon request, a copy of its rate schedule;
(2)give the Shipper a reasonable opportunity to choose between two or more levels of liability;
(3) obtain the Shipper’s agreement as to his choice of carrier liability limit; and
(4) issue a bill of lading prior to moving the shipment that reflects any such agreement.”
In actual practice, most carriers fail to meet this four-part test when contracting with shippers for carriage of their goods. They often believe it is sufficient for them to have published their own internal “rules” or “tariffs” for “released rates”, and many believe it is the shipper’s burden to inquire as to full value or released value rates. Unfortunately, too often many shippers do not challenge this mistaken belief, and allow their claims for lost or damaged goods to be settled on the basis of much reduced released value rates.
One of the seminal cases for a clear understanding of the intended scope of cargo liability against the claim of limited value is Toledo Ticket Co. v. Roadway Express, Inc., 133 F. 3d 439 (6th Cir. 1998). Therein, the Court made it clear that the “default posture” of the Carmack Amendment is full liability on the carrier, and the limited liability of subsection (c)(1)(A) “is a very narrow exception to the general rule.”
The Court in Toledo Ticket, at 442, went on to succinctly state the general requirements for a carrier seeking to limit their liability under the narrow exception to Carmack full liability,
” In other words, a carrier seeking to limit its liability must bring this fact to the attention of the shipper, and the shipper must be given the choice to contract either with the limitation or without it. And, since it is the carrier that is seeking to limit its statutory liability, any ambiguity in the language the carrier selects in an effort to satisfy this second requirement must be construed against it. Furthermore, the burden of establishing that this requirement (as well as the other three) has been satisfied rests with the carrier.”
Still, actual practice often allows a carrier to reject a full value claim submitted by the shipper, with reference to some “tariff” or “rule”, which goes uncontested by the shipper. Shippers are advised to look closely at such rationale and be guided by the observation of the Court in Temple Steel Corp. v. Landstar Inway, Inc. 211 F. 3d 1029 at 1030,
“The term “tariff,” even when still used by shippers and carriers “out of habit,” is now merely a contractual term with “no effect apart from [its] status as [a] contract[ ].”
Space here and the nature of this post does not allow for a full review and citation of more recent cases on this subject, but it is fair to state the majority view is that carriers must give shippers a “clear and meaningful choice” between full liability and released (or reduced) rate liability as a part of their contract of carriage. Moreover, that clear and meaningful choice will be determined by the courts to have included:
- Satisfaction of the four-part test as summarized by the Abb, Inc. Court and summarized above.
- Clear evidence that the shipper made a “deliberate and well-informed choice” from disclosed alternative choices of carrier cargo liability.
- Bills of lading which specifically reference any limitations, rather than vague or oblique references to “classifications”, “uniform terms” or other non-specific references which do not allow for a well-informed choice by the Shipper.
- A contract, whether by bill of lading or otherwise, which clearly demonstrates the shipper did “agree in the same sense that one agrees or assents to enter into a contractual obligation”.
Shippers who have a claim against a rail or motor carrier and receive notice their claim is to be settled based upon some “reduced rate” rationale should carefully examine their claim and understanding of their contract with the carrier with reference to all these requirements. Advice of experienced counsel should be sought in all instances wherein there is a clear disparity in the aforementioned criteria and their actual experience and nature of the pending claim.
https://www.linkedin.com/pulse/shippers-must-mindful-requirements-carriers-claiming-released-paul