Breaking Down the Carmack Amendment for Transportation Carriers

Transportation carriers have plenty to worry about when they are shipping goods for their customers. They must follow a myriad of federal and state laws when doing so. In addition, they must deal with common law rules of negligence when one of their drivers is involved in an accident. Many of these rules can vary between states. One area where transportation carriers have uniformity and a degree of predictability is in their relationship with the owners of the goods they are transporting. However, the provisions of the Carmack Amendment can add to their worries.

The Carmack Amendment Applies to Interstate Shipments

Truckers and transportation companies traverse through many states from the time they pick up their cargo until they deliver it to its destination. Over this time, truckers can travel thousands of miles. The Carmack Amendment applies when a transportation company is crossing state lines to ship cargo. Otherwise, state law would apply to a shipment that is solely intrastate.

THE TERMS OF THE CARMACK AMENDMENT APPLY TO:

  • Motor carriers
  • Freight forwarders

Transportation Companies are Strictly Liabile for Damages to Goods

The Carmack Amendment changes the traditional rules of negligence in a lawsuit for damages. Usually, a lawsuit requires the plaintiff to prove the defendant was negligent. Once the plaintiff proves negligence, the defendant can put forth defenses that could shift the blame for the accident to the plaintiff. For example, the defendant could allege defenses such as contributory negligence or assumption of risk.

When a company is shipping goods, the fact that the goods were damaged or destroyed during transit is sufficient evidence to meet the shipper’s burden of proof when they are seeking damages. If the shipper suffers a loss, the burden of proof shifts to the transportation company to show it was not negligent. The company would need to demonstrate what it did to exercise reasonable care and prove its own defense. This is another way of saying a transportation company is strictly liable for losses to goods that it is shipping.

A Transportation Company’s Defenses to a Carmack Lawsuit

A transportation company can use the following defenses, claiming that the goods were damaged by:

  • An act of God;
  • The actions of the shipper themselves;
  • The nature of the goods being shipped; or
  • An “inherent vice” in the goods themselves.

The shipper has nine months from the time the goods are damaged to file a claim with the transportation company. The transportation company would then review the claim and decide whether to pay it and how much to pay. If the transportation company denies the claim, or offers to pay less than the value of damages, the shipper has the legal right to file a lawsuit. Before the shipper files a lawsuit, it must give notice of the claim to the transportation company.

Damages in a Carmack Amendment Case

The law holds the transportation company liable to pay for the actual loss or injury to property damaged in transit. The shipper can recover the following damages:

  • The actual loss (measured by the difference in market value between the goods when shipped and the damaged goods);
  • The cost to repair the goods;
  • Delay damages;
  • The cost of transportation;
  • Special and consequential damages; and
  • Attorney’s fees, but only in certain limited instances.

Transportation Companies Can Limit Their Liability

However, transportation companies do not have to write a blank check every time they transport goods, paying the shipper for every penny that is lost. Transportation companies have the ability to insert provisions into their contracts that limit their liability to a certain amount.

A transportation company cannot limit liability without restriction. There are several requirements a transportation company must meet in order to limit its liability:

  • Maintain a tariff of rates that complies with Interstate Commerce Commission rules;
  • Offer the shipper two or more choices of liability levels;
  • Agree with the shipper as to the liability limit; and
  • Incorporate the agreement into the bill of lading issued before the shipment.

Liability limits are a matter of agreement between the shipper and transportation company. Presumably, the shipper can choose between companies based on the terms that are the friendliest and provide for more liability coverage. A transportation company is not allowed to simply dictate the terms to the shipper.

Many cases will come down to the transportation company’s ability to limit its liability. If the transportation company did not follow the law in its attempt to limit liability, then its attempt to do so will not be enforceable. This issue is the subject of many Carmack Amendment lawsuits.

The Shipper Cannot File State Law Claims

The Carmack Amendment preempts all state law claims regarding the interstate transportation of goods. Even if a transportation company may be liable to other motorists on the road under state law, only federal law applies if the shipper is seeking damages for goods that are lost or destroyed in transit across state lines. The shipper also cannot sue the transportation company for the following:

  • Breach of contract;
  • Misrepresentation; or
  • Common law negligence.

When federal law expressly attempts to preempt state law, it generally becomes the final word on the topic; however, a shipper has the ability to file its lawsuit in either state or federal court, even if only federal law applies.

Even though there is more uniformity, transportation companies assume risk every time they accept goods for transportation. It is part of their cost of doing business, and the risk should be reflected in the rates that they charge.

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