CYPwww.cyp-law.com

PRESENTATION OF CARGO CLAIMS AND DEFENSES –

A PRIMER

JASON ORLEANS

CHILTON YAMBERT PORTER, LLP – CHICAGO

(847) 625-8200

EMAIL: JORLEANS@CYP-LAW.COM

October 15, 2015

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Chicago

Geneva

Waukegan

Madison

AGENDA

1. Understanding the Basics of a Cargo Loss and Claim.

2. Knowing the Law – Carmack Amendment 49 USC 14706

3. Gathering Facts, Investigating a Claim, Determining Damages.

4. Circumstances and Trends.

Sealed Loads/FDA – Food Safety

No mitigation effort

Imposter Loads/Theft

Carmack Waiver

Broadening of Damages

COGSA and Carmack

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1) Understanding the Basics

The Carmack Amendment governs any loss or damage to cargo being transported by motor carrier in interstate commerce.

� load shift

� accident

� theft

� broken seal

� off temperature

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1) Understanding the Basics

Decision to reject typically made by a consignee/shipper.

Insurer typically pays its insured/shipper and subrogates.

or

Broker/intermediary pays shipper under provision of Shipper/Broker Contract and brings claim/action pursuant to an assignment.

Cargo Claims under The Carmack Amendment apply to motor carrier or freight forwarder. Not broker.

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2) Knowing the Law – Carmack Amendment 49 USC 14706

Carmack Amendment preempts State Common Law over claims for damages for cargo loss.

Also, “FAAAA Preemption” – provides that no state may “enact or enforce a law, regulation or other provision having the force and effect of law related to a price, route, or service of any motor carrier....” 49 U.S.C. 14501(c)(1).

Claims for negligence, breach of bailment, breach of contract, theft/conversion should be dismissed - Why? Limits damages.

Carmack Amendment provides for exclusive basis for claim.

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2) Knowing the Law – Carmack Amendment 49 USC 14706

REMOVAL TO FEDERAL COURT

Claims should be removed to Federal Court – Carmack Amendment Claim triggers Federal Question Jurisdiction.

$10,000 Minimum Claim.

Removal Must be Filed to Federal District Court within 30 days of service (but to be safe within 30 days of notice of lawsuit).

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2) Knowing the Law – Carmcack Amendment 49 USC 14706

THE ELEMENTS OF CARMACK CLAIM AND CASE.

1. Good condition at origin (when the motor carrier receives the cargo from the shipper/consignor as shown by signature on Bill of Lading).

Uniform Straight Bill of Lading provides:

Received, subject to individually determined rates or contracts that have been agreed upon in writing between carrier and shipper, if applicable, otherwise to the rates, classifications and rule that have been established by the carrier and are available to the shipper, on request;...the property described below, in apparent good order, except as noted...

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2. Damage at Destination (arrival of the goods at theconsignee).

� Cargo is signed for as short or damages.

� Concealed damage – Must overcome presumptionof receipt signed on Bill of Lading “in good orderand condition except otherwise noted.”

� Shipper/Plaintiff can do this with “substantialreliable circumstantial evidence.”

� Actual knowledge of damage exists – for e.g., thedriver hears the load shift.

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3. Damages (loss, damage, or delay).

� Under the Carmack Amendment – must be “actual lossor injury to the property.”

� Damages – measured by: market value at destination orreduction in market value.

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2) Knowing the Law – Carmack Amendment 49 USC 14706

Damages do not Include Attorneys Fees, liquidated

amounts under a contract, or punitive damages.

Damages in some jurisdictions may include lost

profits – if documented and foreseeable/not pure

speculation.

Damages – Issues: Broken Seal cases; Food

Products; breach of trailer lock but no inspection

of cargo.

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2) Knowing the Law – Carmack Amendment 49 USC 14706

MOTOR CARIER DEFENSES

Motor carrier must prove that it was “not negligent” and one of the five

defenses:

1. Act of God;

2. Public Enemy;

3. Act of Shipper;

4. Public Authority;

5. Inherent vice or nature of the goods.

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2) Knowing the Law – Carmack Amendment 49 USC 14706

ACT OF SHIPPER

Improper Loading, packaging, bracing, securement, etc.

Where shipper has complete responsibility for loading it becomes liable

for defects which are latent and concealed and cannot be discerned by

“ordinary observation.”

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2) Knowing the Law – Carmack Amendement 49 USC 14706

LIMITATION OF DAMAGES

Historical “Four Point Test” to limit damages:

1. Carrier maintained an approved tariff with Interstate Commerce

Commission (N/A no filed rates/tariffs since ICC Termination

Act of 1995).

2. Shipper given written declaration of choice of liability.

3. Shipper given reasonable opportunity to choose between two or

more rates and corresponding levels of liability; and

Lower freight rate – lower limit of liability; higher freight rate

greater the liability.

4. Bill of Lading Issued.

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2) Knowing the Law – Carmack Amendment 49 USC 14706

LIMITATION OF DAMAGES

Trend is now for Courts look to whether shipper was given a “fair

opportunity” to choose between shipping rates and corresponding limits

of liability.

Carriers should err on side of offering rates/limits as opposed to arguing

that Shippers must ask even though letter of law is that carrier only

needs to have rates available on request.

Rates and limitations may be “offered” on rules published on

line/carrier website.

Hold shippers to “constructive knowledge” of rates/limit.

Issue: What if there are multiple Bills of Lading – can subcontracted

motor carrier claim benefit of limitation?

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2) Knowing the Law – Carmack Amendment 49 USC 14706

CLAIM/RESPONSE AND MITIGATION OF DAMAGES

Governed by Code of Federal Regulations – 49 CFR 370, et. seq.

� Keys:� To make a Claim:

� Must be filed with the motor carrier – the time period cannot shorter

than 9 months from loss.

� Claimant must provide facts sufficient to indentify the

property, assert liability of the motor carrier, and make a

claim for a specified and determinable amount.

� (rejection reports/notations/appraisal reports alone are

insufficient to set forth a claim)

� Acknowledgment and Review of Claim

� Motor Carrier (or insurer) must acknowledge claim in

writing within 30 days of receipt.

� Request any additional information.

� Perform prompt investigation.

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2) Knowing the Law – Carmack Amendment 49 USC 14706

CLAIM/RESPONSE AND MITIGATION OF DAMAGES

- Disposition of Claims

Motor Carrier (or insurer) must pay, decline, or make settlement

offer within 120 days of receipt of claim, or, advise the Claimant of

ongoing investigation and need to extend period 60 days. Notify of

extensions - in subsequent 60 day intervals.

- Lawsuit must be filed within 2 years of rejection of claim.

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2) Knowing the Law – Carmack Amendment 49 USC 14706

CLAIM/RESPONSE AND MITIGATION OF DAMAGES

- Mitigation and Salvage

Motor Carrier, after notice to all those with an interest in the property, shall

sell or dispose of the property. May use salvage agent.

However, shipper/consignee or broker may agree to salvage instead

and reduce cargo claim by salvage amount.

Keep records of salvage, receipt of payment, and record of payment of money

paid to parties with interest in salvage to mitigate cargo claim.

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3) Gathering Facts, Investigating a Claim, Determining Damages.

Assemble all load documents.

Where did load originate? If international shipment – is there an Ocean Bill of

Lading with a per package limitation under Carriage of Goods By Sea Act (COGSA)

that may apply to Motor Carrier.

Bills of Lading

Delivery Receipts

Rate/Load Confirmations

Contracts – Shipper/Broker; Broker/Motor Carrier; Shipper/Freight Forwarder.

On line rules/rate schedules

National Motor Carrier Freight Classification (NMFC) – Limitations.

Purchase Orders

Emails/Correspondence

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3) Gathering Facts, Investigating a Claim, Determining Damages.

Assemble all documents regarding claim for damages.

Standard Form for Presentation of Loss and Damage Claim Form

Invoices/Purchase Orders

Inspection Reports

Photographs

Temperature Control Readouts

Rejection Forms

Estimates

Salvage offers/bids

Statement of Driver

Other Statements

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4) Evolving Issues under the Carmack Amendment:

(each issue is the subject of its own presentation – just issue spotting).

Sealed Loads/FDA – Food Safety

No mitigation effort – “branded product”

Imposter Loads/Theft

Carmack Waiver

Interplay between COGSA and Carmack

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Questions/Discussion.....?