Understanding Cargo Liability
Whether you ship thumb tacks, heavy machinery or high-end electronics, understanding cargo liability is the first step in a successful process when your goods are damaged in transit. In today’s logistics landscape, there is often more to be considered than the baseline liability standards provided by the law.
Under The Law
“A carrier providing transportation or service shall issue a receipt or bill of lading for property it receives for transportation. That carrier and any other carrier that delivers the property and is providing transportation are liable to the person entitled to recover under the receipt or bill of lading. The liability imposed is for the actual loss or injury to the property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) another carrier over whose line or route the property is transported. Failure to issue a receipt or bill of lading does not affect the liability of a carrier.” (49 U.S. Code § 14706 – Liability of carriers under receipts and bills of lading)
Simple, right? The carrier is responsible if something goes wrong. While this is generally the case, there are a few exceptions.
An Act of God
The Act of God defense applies when a carrier can prove that damage was caused by a physical phenomenon or natural disaster that they can’t control. A few examples: the wind blows over a trailer, there’s a tornado or a flood, or the driver has a heart attack.
The “Public Enemy” or the “Act of War”
If the damage is caused by hostile acts of military forces that are enemies of the government, the carrier can’t be held liable for freight claims. Acts during wartime fall under this exception, but things like organized crime do not.
Act or Default of Shipper
If the carrier can cite something that the shipper did that caused the damage and prove that they were not negligent, the motor carrier cannot be held liable. Examples include if the shipper loaded the product wrong or if the product was packaged poorly. Errors in the way the contents of the load were described by the shipper in the bill of lading also fit under this exception.
Public Authority
Another exception to the carrier’s liability under the Carmack Amendment is if the government (“the public authority”) is the source of cargo damage. Policy actions such as quarantines, road closures, product recalls, or trade embargoes apply under this exception.
The Inherent Vice or Nature of the Goods Transported
A good with an “inherent vice” is something that is naturally subject to defects, diseases, or decay which will cause it to deteriorate with the lapse of time. Examples of such goods include things like fruits and vegetables, cheese, and tobacco.
The carrier has the burden of proof to show that damage was caused solely by the “inherent vice” of the goods and not by their own negligence, for example, failing to follow the shipper’s instructions for handling.
Contracts and Tariffs
Many shippers have contracts in place with favored carriers that include clauses that cover liability limitations and all LTL carriers have Rules and Tariffs describing the same, but too often these documents were written by the carriers legal department, they are engineered to minimize the carrier’s risk and do not protect the shipper’s best interest.
It is critically important that agreements between shippers and carriers serve the interests of both parties and shippers must ensure that the liability limits and maximum values are at least equal to the actual value of the cargo to be shipped. Additionally, proper use of bills of lading, photographs and processes for receiving freight are key to a favorable result when a claim is filed for lost or damaged cargo.
If you think your carrier agreements may be out of line with the best interests of your organization and its customers or if you have ever received less than full value for a freight claim, contact us via email at jharris@freightcowboy.com
