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The Carmack Amendment: The Law Governing Claims for Interstate Motor Truck Cargo Loss or Damage in the United States

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The Carmack Amendment: The Law Governing Claims for Interstate Motor Truck Cargo Loss or Damage in the United States

Law October 5, 2021 By Developer

The Carmack Amendment: The Law Governing Claims for Interstate Motor Truck Cargo Loss or Damage in the United States

a. The Scope of the Carmack Amendment

The Carmack Amendment to the Interstate Commerce Act [49 U.S. Code § 14706] (“Carmack”) sets forth the duties, rights and liabilities of shippers and carriers in the event of cargo damage or loss claims arising out of interstate (i.e., between two different U.S. states) transportation by motor truck. (A separate section of Carmack covers rail cargo claims, not addressed in this article.) Courts in the U.S. are divided about whether Carmack applies to motor truck cargo moving from the U.S. to a foreign nation, as well as whether it applies to motor truck cargo moving from a foreign nation to the U.S. It generally does not apply to loss or damage claims in transit wholly within one U.S. state. Individual state law usually governs such claims.

Carmack allows a shipper to recover damages from a carrier for the “actual loss or injury to the property” resulting from loss or damage of cargo in interstate commerce caused by (a) the receiving carrier, (b) the delivering carrier, or (c) another carrier over whose line or route the property is transported.” See 49 U.S.C. § 14706(a)(1). The statute is structured like a strict liability claim—that is, it allows a shipper to collect from a carrier regardless of fault. A “carrier” or “motor carrier” is “a person providing motor vehicle transportation for compensation.” See 49 U.S.C. § 13102(14).

As courts have noted, Carmack’s purpose is to provide a uniform system of carrier liability providing certainty to both carrier and shipper by enabling them to assess their risk and predict their potential liability for damages.

b. Liability under the Carmack Amendment

For the shipper to establish a prima facie case of liability under Carmack, the shipper must demonstrate: (1) delivery of the goods to the carrier in good condition; (2) non-delivery or receipt by the consignee of damaged goods; and (3) the amount of damages. A “clean” bill of lading (one that does not note any exceptions to the count or condition of the goods at the time of issuance) is prima facie evidence of delivery of goods to the carrier in good condition, but only as to those portions of the shipment that are visible and open to inspection. For any goods not available for inspection on delivery, the plaintiff bears the burden to submit other substantial and reliable evidence that the goods were tendered to the carrier in good condition. When the shipper thus establishes a prima facie case, it creates a rebuttable presumption of liability on the part of the carrier.

The carrier can rebut the presumption of liability by proving: (1) it was free from negligence, and (2) the damage to the loss or cargo was caused by (a) an Act of God, (b) the public enemy, (c) the act of the shipper itself, (d) public authority, or (e) the inherent vice or nature of the goods. These enumerated defenses can be understood as follows:

1. Act of God

The “Act of God” exclusion can defend the carrier when a natural disaster causes loss or damage. This defense is not applicable in situations where the naturally occurring event, for example a severe thunderstorm, is foreseen and could be predicted. Due to the carrier’s obligation to prove freedom from negligence, the defense may also be inapplicable where the carrier’s negligence contributed to the loss or damage, even in the occurrence of an unforeseen and severe natural disaster.

2. The “Public Enemy” or the “Act of War”

As the name of the exclusion implies, this defense is applicable when military forces that are enemies of the United States government cause cargo loss or damage. However, acts of criminals do not count as acts of the public enemy and carriers are generally liable for losses caused by theft, vandalism, or other such acts.

3. Fault of the Shipper

If the carrier can prove that the loss was caused by the act or fault of the shipper, the carrier has a defense. This could include improperly labeling or loading a shipment. However, if the fault of the shipper is patent, i.e. something the carrier should have seen or corrected prior to accepting the load, this defense will likely not apply.

4. Public Authority

Loss or damage caused by government actions such as road closures or trade embargoes can also be an exception to carrier liability. However, like the other defenses, if the carrier’s own negligence caused or contributed to the loss in combination with acts of the public authority, this defense may not apply, or may provide only a partial defense.

5. The Inherent Vice or Nature of Goods Transported

If the qualities or characteristics of the goods shipped cause the loss or damage, the carrier may have a defense. Commonly this arises with perishable products that are already in the process of deteriorating at the time the carrier receives them for transport.

c. A Carrier May Limit Its Liability under Carmack

Carmack allows a carrier to limit its liability to a value established by written declaration of the shipper or by a written agreement. 49 U.S.C. §14706 (c), (f). To effectively limit its liability, the carrier must give written notice of the limitation to the shipper, provide the shipper with an opportunity to choose higher or full liability (for which the carrier may charge more), and obtain the shipper’s consent to the limitation of liability. In essence, courts will enforce limitations of liability where a shipper is given a “reasonable opportunity” to accept or deny the carrier’s proposed limitation. A “reasonable opportunity” means that the shipper had both reasonable notice of the liability limitation and the opportunity to obtain information necessary to make a deliberate and informed choice.

Unlike other statutes, such as the U.S. Carriage of Goods by Sea Act or the Montreal Convention (governing international air cargo claims), Carmack does not set a default or presumptive limitation; rather, the establishment of a limitation of liability, if any, is left to the shipper and carrier as a matter of contract, subject to the notice and opportunity requirement.

d. Claims and Actions

A carrier may, by contract, require that a claim be made to it by a shipper within nine (9) months of the shipment and that a civil action be instituted within two (2) years after the denial of such a claim. 49 U.S.C. § 14706(e). Longer claim and suit time provisions may be agreed to, but not shorter periods. The nine month claim time and two year suit time requirements, when properly incorporated into the contract of carriage, will bar an action where the shipper did not meet these deadlines. However, if the claim time or suit time provisions are not included in the contract of carriage, they do not apply.

As a practical matter, it is safest for shippers and their subrogated underwriters to assume that a nine month claim time deadline exists, and to make claim on the carrier within that deadline. Such claim must be in writing, provide sufficient information for the carrier to identify the shipment, state a specific amount of damages claimed, and contain a clear statement that the shipper is holding the carrier liable. 49 C.F.R. 1005.2(b).

Similarly, it is best to assume that the two-year suit time limit applies, and to file suit on such claims within two years of the shipment regardless of when the carrier declines the claim. This avoids the risk of any unknown claim denial having been issued shortly after delivery or loss of the shipment.

e. Broker Liability

Much motor truck litigation in the U.S. centers around the question of whether the party the shipper is claiming against is a carrier or a broker. A broker sells or arranges for transportation by motor carrier, as opposed to itself standing as the motor carrier. However, an entity that holds itself out as a carrier can still be liable as a carrier even if it does not physically carry the cargo, and subcontracts its carrier obligations to others. Thus, the distinction between a carrier and broker is often a difficult and much-contested issue. Carmack does not provide for claims against a broker, and thus if an entity is held to be a broker, it will be subject to liability under state law claims, which are typically much narrower and less favorable to shippers vis-à-vis brokers.

f. Carmack Amendment Waivers

Under relatively recent changes to the law, shippers and carriers are now able to waive out of Carmack by express written agreement. In such cases, the written contracts between shippers and carriers, as well as state law, govern liability. However, the large majority of motor truck cargo cases remain under the Carmack regime. Nonetheless, it is critical to determine whether a U.S. motor truck cargo claim is subject to a contract containing a Carmack waiver, as the waiver may provide for shorter claim and suit time deadlines than Carmack allows.

Joshua Kirsch

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