Carmack amendment

When it comes to carrier success, everything hinges on the Carmack Amendment (CA). Here is a case study that reveals that the details of terms should always be framed by the Carmack Amendment to ensure better success in limiting liability and resolving a claim favorably.

Excel, Inc. v Southern Refrigerated Transport, Inc. (6th Cir. 2015)

A broker arranged a shipment of pharmaceuticals, valued at more than $8 million, with the carrier. The broker and carrier entered into a Master Transportation Services Agreement (MTSA). The terms that the case would hinge upon when the freight was stolen were the ambiguous term “RVNX $2.40”, bills of lading that did not limit liability and whose signatures were on the documents.

The carrier argued that the term indicated a cargo replacement value not to exceed $2.40 per pound which would amount to about $50,000. The shipper, however, demanded that the entire $8 million loss be covered.

The broker and the shipper filed their own claims with the carrier firing back a defense citing the “RVNX $2.40” term of the MTSA. In the end, the court ruled strictly according to the CA against the carrier. Here’s what freight companies should learn from the decision:

The “RVNX $2.40” term of the MTSA did not limit liability. To limit liability under the CA, agreement must be made between the carrier and the shipper. The broker does not necessarily have the shipper’s assent to determine the carrier’s liability.

When preparing terms of shipping documents that involve third parties, it is important to understand the scope of a broker’s responsibility. The broker is not the shipper. Terms that limit a carrier’s liability must bear the shipper’s signature. Consult with risk management specialists to learn more about the nuances of the Carmack Amendment.