A recent settlement in the U.S. should serve as a warning to carriers about the risks of accepting freight contracts with excessive liability clauses and not properly understanding certain agreements they sign, especially when it comes to high-value cargo.
As reported by Overdrive magazine, a federal judge in Ohio recently ruled that a carrier, Southern Refrigerated Transport, should pay a broker, Excel Inc, $5.9 million for a load of pharmaceuticals that was stolen.
Exel filed a claim with SRT on behalf of pharmaceutical maker Sandoz for $8.6 million (the alleged real-world value of the load) , which SRT denied. In court the carrier argued that its liability was limited under the Carmack Amendment to the value on the bill of lading, which was $56,766.36.
As Overdrive explains: “The Carmack Amendment to the Interstate Commerce Act is the federal law governing interstate carriers’ liability for property loss. Based on the bill of lading, a shipper can be confident that the carrier will be liable for any damage that occurs to its shipment. And a carrier can accurately gauge, and insure against, any liability it may face for hauling that load.”
However, Exel successfully argued that the Carmack Amendment did not preempt the language of the Master Transportation Services Agreement between the broker and the carrier. And, under the MTSA, SRT owed Exel the replacement value for the shipper’s freight.
Marc Blubaugh, Bensech partner and co-chair of the Ohio firm’s transportation and logistics practice group, told the magazine that carriers should be scrupulous about reviewing these contracts. He also warned that common misapprehension is that a carrier’s liability is capped by the limits of its insurance.
“It’s an interesting case and hopefully a good reminder to everyone in the marketplace – whether they’re a carrier, a broker or a shipper – that you need to take transportation contracts seriously,” he said. “Make sure that you understand what you’re agreeing to … Even some fairly sophisticated attorneys for carriers may not be attuned to the fact that contracting with a broker involves some different considerations than contracting directly with a shipper.”