Don’t Accept Another’s Risk
By Henry E. Seaton

April 2004
Reprinted from

Q As a carrier, we subcontracted another carrier to handle a load that was tendered to us. A cargo claim arose, and we submitted it to the subcontracting carrier’s insurer. That insurer has now denied the claim because the subcontractor was not named in the bill of lading contract as the carrier of record. What should we do?

A Your problem is not unusual. Quite often, cargo insurers attempt to escape paying claims when their insured is not named on the bill of lading contract. And it doesn’t help that a recent case held that a carrier is not liable for a cargo claim merely because of so-called “logo liability.” In other words, just because the carrier’s name is on the door at the time of loss does not mean it is liable for the claim.

Liability for cargo loss or damage is established as a matter of contract liability in accordance with federal statutes. The bill of lading is the primary contract of carriage and ordinarily the one named as the “carrier” is the party primarily liable for the cargo claim. That is one reason that a broker should never let its name appear as a carrier of record on a bill of lading.

To avoid this predicament in the future, insist that the subcontracting carrier conspicuously place its name on the bill of lading as the carrier of record at time of pickup. This way, there is no mistaking the identity of the actual carrier in possession and control of the goods for a whole variety of purposes, including cargo claims, accident liability and ultimate freight charge payment issues.

Yet, if the actual carrier’s name is not on the bill of lading, not all is lost. The typical bill of lading defines the term carrier as any person or incorporation in possession of the property under the contract. So you should be able to establish the subcontracting carrier’s liability for cargo loss or damage by demonstrating that it was (a) in possession and control of the shipment at the time of loss and (b) contractually obligated to transport the shipment.

Typically, a load confirmation sheet executed by the carrier plus proof that the carrier that signed the bill of lading was the employee or agent of the subcontracting carrier is sufficient to establish the subcontractor’s liability and trigger cargo coverage. Yet, confusion in insurance coverage issues in this area has led many to believe that best practice is to obtain Certificates of Insurance or additional insured status as a prerequisite for entering into brokerage or subcontracting relationships.

Finally, note that when you subcontract to another carrier and allow your name to be placed on the bill of lading as the carrier of record, you have clearly stepped into the liability loop as the origin carrier. The subcontracting carrier will most likely be considered your joint line partner. Under the Carmack Amendment you will be jointly and severally liable for the cargo claim. If you are required to pay the claim, you should have the right to be reimbursed from the carrier over whose route the loss occurred under the apportionment provisions. But you will ultimately be made whole only if the subcontracting carrier is solvent or its insurer pays the claim.

Technical changes made to mover regs
Federal Motor Carrier Safety Administration last month issued technical amendments to the June 11, 2003, interim final rule regarding consumer protection in the transportation of household goods. The technical amendments resulted from petitions for reconsideration submitted by the American Moving and Storage Association and by United Van Lines and Mayflower Transit. The revised interim rule adopts all the requested technical amendments.

The technical amendments cover a variety of subjects, including arbitration programs, credit, liability insurance coverage, notification options, pickup of shipments, collection of charges, presentation of freight bills and Appendix A to Part 375, which explains the consumer’s rights and responsibilities. The technical changes provide uniformity between the rule text and the appendix, clarify certain provisions, reflect current industry practice or correct typographical errors. In addition, the revised interim rule changes language in the original document that was contrary to the statutory intent of the ICC Termination Act of 1995, FMCSA said.

Substantive changes in the rule sought by the parties would have a more significant impact on the moving industry and its consumers and will be considered in a future rulemaking so that the public will have a full opportunity for comment, FMCSA said.
(703) 573-0700
Copyright© 2006 Law Office of Seaton & Husk, LP. All rights reserved.