As I stated in a prior article (https://www.linkedin.com/pulse/just-say-nmftas-new-uniform-straight-bill-lading-paul-stewart), NMFTA’s New Uniform Straight Bill of Lading (“USBOL”) is now allowed by the Surface Transportation Board (STB), and inevitably thousands of loads are moving under its terms and conditions. Many of those terms and conditions include changes in well established statutory and case law with regard to the motor carrier’s duty of care; burden of proof for loss and damage claims; liability of interline carriers; timeliness of transit; limitations periods for filing and litigating loss or damage claims; and, appropriate procedures within which a carrier is to limit its liability for less than the full value of lost or damaged loads (“released rate valuation”).
Space here does not allow a discussion of all of the many ways in which USBOL will drastically affect well established law and expectations of the shipping public with regard to risk management. However, please allow me to suggest one in particular which poses a major threat to traditional concepts of contract and tort liability for the 3PL and Brokers who serve shippers.
Assume the intermediary brokers a high value load (e.g., $500,000) on behalf of a shipper with a motor carrier who is now using the USBOL. Prior to the new terms of USBOL, the carrier would be liable for the full “actual loss or damage” of the load, as prescribed by the Carmack Amendment, 49 USC 14706(a), unless the shipper has stated a lower value,OR, a lower value “…has been agreed upon in writing as the released value“. 49 USC 14706(c)(1). The historical interpretation of this provision by the courts, as most recently stated in Exel, Inc. v. Southern Refrigerated Transport, has been that shippers cannot be held to have agreed to caps on cargo liability where they had no choice but to accept the carriers’ limitation of value.
However, by the terms of the new Section 5.(a) of the USBOL, instead of the language, “has been agreed upon in writing as the released value”, the new USBOL language provides, “…or is established in the carrier’s tariff upon which the rate is to be based, such value shall be the maximum amount recoverable for the loss or damage”. Assuming the intermediary has allowed the carrier to use the USBOL, the unwitting shipper, by the actions of their agent Broker/3PL, is now bound by the valuation provided somewhere in an anachronistic tariff (e.g., $100,000).
Such a result and difference in recovery of ($400,000) then becomes a nightmare, more perhaps for the Broker/3PL, than the shipper. This is so because of prior court rulings wherein courts have essentially held that a carrier may assume the Broker/3PL has the authority to negotiate and bind the shipper to such limitations.
When an intermediary contracts with a carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and carrier agreed. The intermediary is certainly not automatically empowered to be the cargo owner’s agent in every sense. That would be unsustainable. But when it comes to liability limitations for negligence resulting in damage, an intermediary can negotiate reliable and enforceable agreements with the carriers it engages. Norfolk Southern Ry. V. James N. Kirby, Pty Ltd ., 543, U.S. 14 (2004),
This issue becomes more the imposing problem for the Broker/3PL because of common law consideration of the role of the intermediary. In a more recent case from the Eleventh Circuit, Werner Enterprises v. Westwind Maritime, 554 F.3d 1319, 1325 (11th Cir. 2009), that Court gives critical guidance for all, after discussing the limited agency rule of Kirby,
Carriers do not need to investigate upstream contracts. They are entitled to assume that the party entrusted with goods may negotiate a limitation of liability. To hold otherwise would defeat the principle of efficiency that motivated the Kirby holding. Moreover, this again produces an equitable result. The cargo owner retains the option to sue the intermediary who failed to protect itself by negotiating a liability limitation.
So it is that Brokers/3PLs dare not fail to recognize the immediate significance of NMFTA’s unilateral shift of risk in the USBOL. But in recognizing these changes and their radical risk shifting nature, Brokers/3PLs must realize that they are managing a whole new level of potential risk to themselves. Again, as suggested in my prior article on this issue, just say… “NO!”… to NMFTA’s New USBOL, by appropriate means, with prejudice, and promptly.