Time Is On Your Side
By Henry E. Seaton
February 2006
Reprinted from etrucker.com

Q Must notice of a cargo claim be filed with the carrier within nine months in order to be pursued?

A Statute 49 C.F.R. §370 provides that a motor carrier may establish a period of time of not less than nine months for the filing of cargo claims. The uniform bill of lading and most standard bills of lading contain a nine-month limitation and satisfy this requirement. The failure of a shipper to file a formal written claim within this time limit can provide a carrier with an important legal defense to subsequent liability.

What constitutes a valid claim is subject to much litigation. The country is divided into 12 federal circuit courts, including one in the District of Columbia. Some circuits are more liberal than others in construing what items are necessary to make a claim. Yet, if you are a shipper, a broker or a carrier who subcontracts to other carriers, you should be diligent in complying with the nine-month rule by filing a timely and complete claim in accordance with the requirements of 49 C.F.R. §370.

The 3rd Circuit, which includes Pennsylvania, New Jersey, Delaware and the Virgin Islands, recently issued a decision in S&H Hardware v. Yellow Freight that provides a useful discussion of these issues. In that case, the shipper alleged that Yellow’s drivers conspired with a traffic manager to divert and sell more than $1.6 million worth of cargo. Although admitting it filed no formal claim, the shipper argued Yellow had actual knowledge of the potential claim and should be estopped from escaping liability.

The court held that a claimant must file a formal written claim in accordance with the federal claims rules that must (1) be communicated in writing, or where agreed to by the parties, electronically; (2) contain sufficient facts to identify the damaged or lost shipment; (3) assert liability for alleged loss, damage or delay; and (4) demand payment of a specified or determinable amount of money.

While noting that the written claim requirement was to be construed liberally to ensure that a carrier could investigate claims properly and “not to permit the carrier to escape liability,” the 3rd Circuit reaffirmed that oral or actual knowledge is not sufficient to satisfy the substantial compliance requirement. The court pointed out that the regulations expressly provide that notation of shortage or damage on delivery receipts is not sufficient to constitute notice of a claim.

The court rejected the shipper’s estoppel argument — that it was inequitable for Yellow to escape such a large claim when there was some evidence it knew of the potential claim before the notice period expired. The court noted that the doctrine of estoppel requires the reasonable reliance on a misrepresentation of fact that induces the injured party to change his position for the worse. In this case, the court found that Yellow made no misrepresentations to the shipper, and that by failing to file a timely written claim, the shipper deprived Yellow of the opportunity to fully investigate the claim as intended by the nine-month rule.

Clearly, the 3rd Circuit views the claims filing rule and the nine-month deadline as more than a mere technicality, even when the claim is substantial and the facts are egregious. Let the claimant beware.