IF They Broke It, They Pay For It
By Henry E. Seaton

July 2009
Reprinted from etrucker.com

Q- We have an interline agreement or concurrence with a connecting carrier that states that National Motor Freight Classification freight claims rules apply with no provisions for exceptions. As the origin carrier, our limit of liability is $25 per pound. The delivering carrier damaged the load and now claims their maximum liability is only $1 per pound, but this limitation is not incorporated in anything to which either we or our customer agreed. Their delivery receipt shows a limitation of liability, but the shipments were prepaid and we were the origin carrier. Is there any merit to their release rate argument?

A- No. An interline agreement or concurrence has its roots in the days of regulation when most carriers could not offer through service from origin to destination, but the law involving interline service has not been changed or modified. The origin carrier issues the through bill of lading, and its terms and conditions – as well as any limit of liability – apply to any carrier in possession and control of the goods under the bill of lading.

Congress has left the relevant statutes in place to permit interline service and the issuance of a through bill. It is part of the Carmack Amendment that provides that the delivering and origin carriers both are responsible for the full actual value of the loss sustained when a shipment is moving under a through bill. [See 49 U.S.C.§14706(a).]

The apportionment provision of Carmack provides that you as the issuing carrier are entitled to recover “from the carrier over whose line or route the loss or injury occurred” the full “amount required to be paid to the owners of the property” as a result of the loss. [See 49 U.S.C.§14706(b).] The delivering carrier in your case did nothing to properly or legally limit its liability to less than the agreed limitation between you and the shipper and should be happy that you had any release rate at all that inured to its benefit for the loss, damage or delay it caused. You have a clear cause of action for indemnity against the delivering carrier for the amount you legally are required to pay.

In the current day, in view of multimodality and the involvement of numerous unidentified upstream intermediaries, various participants in the supply chain take great care to limit their own liability for cargo loss or damage through contractual limitations, release rates and special agreements with the brokers, freight forwarders or other intermediaries that hire them.

Any carrier can limit its cargo liability, but it must be done carefully in a sophisticated way and with adequate notice. This is a particularly hot topic in through bill movements by motor or rail of international shipments under the Carriage of Goods by Sea Act (there is a split in the circuits, even though the U.S. Supreme Court has ruled in Kirby). For a more in-depth analysis, contact me at heseaton@aol.com.
Your case does not involve these issues, however. Your connecting line carrier accepted your concurrence, participated in the through bill and ultimately must indemnify you for the amount you were required to pay.

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