Recent Questions & Answers

Freight Claims – Broker Liability and Right to Reimbursement

Question: 

We have a third party warehouse/transportation company hire and ship out our products to customers.  We have a contract with the 3rd party for these services.  The 3rd party apparently does not have contracts with their carriers.  We file all claims directly to the 3rd party.  The 3rd party paid us for the claims and is now coming back stating that the carriers are refusing to pay.  Can the 3rd party deduct from their carrier on a different/future invoice other than the originating shipment?  Or should I advise the 3rd party to pursue collections?  Am I correct that the 3rd party is a broker (they do not have their own fleet) so is not governed by Carmack either?

Answer: 

There are really two parts to your question - the liability of the “third party warehouse/transportation company” (broker) to pay your loss or damage claims, and the rights of the broker to collect reimbursement from the responsible carriers.

As to the first part, you indicate that you have a contract with the broker, and that the broker has been paying your claims.  Without seeing your contract I don’t know if this is a contractual requirement (that the broker has assumed liability for loss or damage) or whether the broker is just voluntarily paying your claims (for good customer relations).  I would note that we often include provisions in our shipper-broker contracts to the effect that the broker assumes the same liability as a common carrier for any loss or damage.

As to the second part, I assume that the broker is filing claims on your behalf with the responsible carriers. 

Depending on the broker’s contracts with its carriers, a broker may have the right to setoff unpaid claims against freight charges - there is nothing “illegal” about doing this - although the carrier may bring a lawsuit against the broker to collect its charges. 

If the broker has paid the shipper’s claims, the broker can have a right of indemnification, or it can obtain an assignment of the shipper’s rights, and can bring legal action or assert a counterclaim against the responsible carrier.  Although the court decisions are not entirely in accord, as a general rule, if the broker has obtained an assignment of the shipper’s rights, the claim would be governed by the Carmack Amendment (49 U.S.C 14706) since the broker stands “in the shoes” of the shipper.


Freight Claims – Deduction of Trade or Cash Discounts

Question: 

Is there a ruling where transportation companies can take any discounts listed on an invoice and deduct from total on a freight claim?

For example, a truck is involved in an accident resulting in a total loss of product.  Company asked for a copy of customer’s invoice to prove cost of product.  Customer received a 2% Net 30 discount.

The transportation company deducted 2% from total amount of freight claim stating “Any discount allowed to your customer, such as, terms or trade discounts and promotional allowances, would also apply to the claim.”

Is this correct and where is the statute that gives them this right?

Answer: 

First, there is no statute or regulation that would specifically apply to this situation.

The real question is what your “actual loss” is?  You are entitled to be put in the same position that you would have been in if the goods had been delivered in good order and condition to your customer, i.e., the amount that you would have received in payment of your invoice to the customer.

In this regard, there is a distinction between “trade discounts” and “cash discounts” that are contingent on payment within a certain credit period, as explained in Freight Claims in Plain English (4th ed. 2009) at Section 7.4.8:

7.4.8       DISCOUNTS - TRADE VS. CASH

   Controversies frequently develop, once liability has been admitted, over the amount of loss suffered when an invoice contains a discount provision, i.e., a reduction in the invoice price depending on volume or payment within a specified time. Carriers often offer to pay the invoice value less such discounts on the theory that the reduced price is the “full actual loss”.

   There is no dispute over the propriety of carriers deducting “trade discounts”; discounts offered indiscriminately to buyers of large volumes on a sliding scale (10 gross $100, 50 gross $500 less 10%, etc.) irrespective of time of payment. Advertising (or promotional) allowances are also generally deducted from invoice values when paying claims where the seller has received the benefit of the advertising. However, where the advertising has not been performed due to non-delivery, or if there were no benefits derived from the advertising due to the carrier’s non-delivery, damage or delay to the goods, the carrier may not properly deduct such allowance.

   Purchasers generally regard “cash discounts” as money earned apart from the value of the goods, by reason of payment of the invoice within the specified time. Therefore, in case of a non-delivery or destruction of goods in transit, a consignee’s full actual loss is the total amount of the invoice because it lost the value of the goods and the right to earn the income that would have been earned if it had paid the invoice within the cash discount time limit. This position is based on normal accounting practices whereby the amount saved by prompt payment is entered in ledgers under “other” or “miscellaneous” income. As a matter of fact, some firms borrow money to take advantage of cash discounts.

   Cash discounts are offered to most all customers and may vary in amount. The propriety of their being deemed true “cash discounts” depends on their characteristics rather than size. For example, most commodities have a 2%-10 days cash discount, but it may be 5% for shoes and as high as 8% for ready-to-wear garments.

   Therefore, when a claimant establishes that a discount is a bona fide “cash discount”, it should not be unilaterally deducted by carriers from the invoice value.


Freight Charges – Time Limits to Change Invoice

Question: 

I received the original invoice via email from the company on 10/20/11.  I paid the invoice in full on 11/9/2011.  We recently had a little falling out in December with our third party freight company and today I checked to make sure that all balances had been paid in full.  I noticed an outstanding balance and checked into it.  It was the same invoice that had been paid 11/9/2011; it was revised 1/3/2012 and made higher resulting in an unpaid balance now of almost $140.00.  Is it even legal to go back and change a shipment 60 days after it was paid in full and almost 80 days after the invoice date?  I need some advice as how to handle this freight company.

Answer: 

There is the so-called “180-day rule” set forth in a federal statute (49 U.S.C. 13710) that applies to “charges in addition to those originally billed”:

 (3) BILLING DISPUTES-

    (A) INITIATED BY MOTOR CARRIERS- In those cases where a motor carrier (other than a motor carrier providing transportation of household goods or in noncontiguous domestic trade) seeks to collect charges in addition to those billed and collected which are contested by the payor, the carrier may request that the Board determine whether any additional charges over those billed and collected must be paid. A carrier must issue any bill for charges in addition to those originally billed within 180 days of the receipt of the original bill in order to have the right to collect such charges.

    (B) INITIATED BY SHIPPERS- If a shipper seeks to contest the charges originally billed or additional charges subsequently billed, the shipper may request that the Board determine whether the charges billed must be paid. A shipper must contest the original bill or subsequent bill within 180 days of receipt of the bill in order to have the right to contest such charges.

What this means is that if the carrier does not submit its “balance due” bill within 180 days, you have a legal right to refuse payment.  However, in your case it appears that the additional charges were submitted within the time limit.

You haven’t indicated why the carrier sent you a “balance due” invoice for the shipment, or whether you had any kind of written contract or rate quotation that documents the amount of freight charges that had been agreed upon.  I would think you should start there if you want to contest the additional charges.


Freight Charges – How Terms Determine Payment Responsibility

Question: 

If the bill of lading is marked Prepaid or Collect, but there is a “Bill to” name and address provided on the bill of lading, whose responsibility is it to pay the freight charges, the bill to party or the party that’s marked in the terms?

If my customer is the shipper, the bill of lading was marked collect, and the bill to party is the shipper, who is responsible for paying the freight charges?

What if bill of lading is marked collect, but the “bill to” party is the shipper and not the payment agent?  Is the consignee responsible for payment?

Answer: 

As a general rule, for the purposes of billing by the carrier, if the bill of lading is “prepaid” the shipper is considered to have primary responsibility for the freight charges, and if there is a “bill to” party designated it would be considered to be an agent of the shipper (freight audit/payment company, etc.).  Likewise, if it is “collect” the consignee has primary responsibility, and any “bill to” party would normally be considered to be an agent of the consignee.

If there is a conflict or ambiguity, I would think the designation of “prepaid” or “collect” should govern.

This does not, however, determine the ultimate legal liability of either party for the freight charges, and in many cases both the shipper and the consignee could be liable to the carrier for payment of the freight charges.

Most likely the carrier will invoice the consignee based on the bill of lading.  And if “Section 7” (the non-recourse provision on the Uniform Straight Bill of Lading) is signed, the carrier will not be able to collect from the shipper.


Carriers – Carrier Holding Load 

Question: 

We are a broker who hired a carrier to pick up and deliver a load.  

The carrier picked up the load but has not delivered it yet and it’s been almost 30 days.  The truck and trailer are on their property.  They claim someone vandalized the truck and it will not run.  However, I just discovered their insurance and authority have been revoked and they cannot legally operate in the state the load is consigned to.  The carrier refuses to speak with us or our customer.  They have spoken to the consignee, their cargo insurance company and our contingent insurance company.  All have advised them to deliver or release the load.  How do we force them to deliver the load or let us send another truck after it?  Local police have verified it’s still there. 

They have made no claims for payment but we have reason to believe they may be trying to sell it.

Answer: 

Unless the trucker is claiming a valid carrier’s lien for freight charges it must deliver or release the shipment.  Failure to do so would give the owner of the goods a cause of action for “conversion”, with the right to get a court order requiring the carrier to deliver or release the shipment, and also to recover any damages it may have sustained as a result of the carrier's tortious actions.

Unfortunately, it is not clear whether your company, as a broker, has the same legal rights as the owner of the goods.  In any event, I would suggest that you discuss this matter with a transportation attorney located in the city where the carrier is holding the shipment.  If you need to find a local transportation attorney, check the “TLA Lawyer Locater” on the Transportation Lawyers Association website at http://www.translaw.org/Pages/home.aspx.


Freight Claims – “Duty to Mitigate” and Carrier Time Limits

Question: 

I am a new member and am trying to locate an answer to my question. My question is, we have a $20,000 claim with a less-than-truckload (“LTL”) carrier.  This is very sensitive wire and we offered, during a slow time, to run the damaged wire though our system with additional labor and time so as to reduce the amount of the claim.  By the end of our time window (2 weeks), we still had no response from the carrier and we no longer had the opportunity to attempt to run this product.

Now we are requesting an answer from the carrier as to what they want us to do with the product.  We either need the carrier to pick up the damaged product; allow us to destroy it; or send it to a salvage company and attempt to get something for it.

Could you provide the time frame for a response from this carrier?

Answer: 

The Federal Motor Carrier Safety Administration (“FMCSA”) regulations governing time limits for acknowledging and processing claims are found at 49 C.F.R. Part 370.  The relevant sections state:

49 C.F.R. 370.5  Acknowledgment of claims.

      (a) Each carrier shall, upon receipt in writing or by electronic transmission of a proper claim in the manner and form described in the regulations in the past, acknowledge the receipt of such claim in writing or electronically to the claimant within 30 days after the date of its receipt by the carrier unless the carrier shall have paid or declined such claim in writing or electronically within 30 days of the receipt thereof. The carrier shall indicate in its acknowledgment to the claimant what, if any, additional documentary evidence or other pertinent information may be required by it further to process the claim as its preliminary examination of the claim, as filed, may have revealed...

49 C.F.R. 370.7  Investigation of claims.

      (a)  Prompt investigation required.  Each claim filed against a carrier in the manner prescribed in this part shall be promptly and thoroughly investigated if investigation has not already been made prior to receipt of the claim…

49 C.F.R. 370.9  Disposition of claims.

      (a) Each carrier subject to 49 U.S.C. subtitle IV, part B which receives a written or electronically transmitted claim for loss or damage to baggage or for loss, damage, injury, or delay to property transported shall pay, decline, or make a firm compromise settlement offer in writing or electronically to the claimant within 120 days after receipt of the claim by the carrier;  Provided, however, That, if the claim cannot be processed and disposed of within 120 days after the receipt thereof, the carrier shall at that time and at the expiration of each succeeding 60 day period while the claim remains pending, advise the claimant in writing or electronically of the status of the claim and the reason for the delay in making final disposition thereof and it shall retain a copy of such advice to the claimant in its claim file thereon...

Clearly the carrier is not in compliance with the federal regulations, and you may want to remind them of this. 

However, I would suggest that you notify them IN WRITING that you are holding the damaged freight, that you are awaiting an answer as to disposition, and advising them that you will either destroy or attempt to salvage the damaged wire with a specified period of time - say 30 days.  I would note that there is a “duty to mitigate damage”, so if the damaged wire can be salvaged or sold, you should do so, otherwise the carrier will argue that you failed to mitigate the loss.


Motor Carrier Cargo Insurance

Question: 

I am shipper that moves high value items ($1 to $2 million) between plants and purchased from vendors for use in our power plants.  I need help understanding the motor carrier insurance policy as to what section covers what liabilities.  How do I do that and what part of the insurance policy will ensure liability for high value items in transit?  I do not want to accept exorbitant increased costs which will limit my carrier choices.

For instance, most of my flatbed carriers offer $250,000 per occurrence in Motor Cargo insurance; however, they have $2 million in General Liability insurance.  Will General Liability cover my equipment?

My company’s law group is asking me to require $1,000,000 Motor Cargo insurance as part of our drafting of a transportation contract.  My carriers are balking at the idea of this.  Many carriers, I am learning, cannot go above $350,000 per occurrence Motor Cargo insurance without authorization from their president and only done on a one time basis.  How do I resolve this for my understanding and help me explain to our legal & risk departments what our contract insurance requirements should be?

Answer: 

First, there is no longer any federal requirement for motor carriers to carry cargo insurance.  Most carriers do have cargo legal liability coverage, and typically these policies have limits of $100,000.  Some flatbed carriers have higher limits, but not usually more than $250,000. The carrier may be able to obtain additional coverage for specific movements, at an additional cost.

Commercial General Liability policies will NOT cover loss or damage to your cargo.

I would suggest that you obtain “inland marine” coverage that will cover your high value shipments while they are in transit.  If your insurance agent does not provide this type of coverage, you may wish to contact Mark Yunker at R.J. Ahmann Company (Phone: (952) 947-9708; Email: myunker@rja.com) to provide some advice.


Freight Charges – Shipper Fails to Pay Broker

Question: 

We are a broker and one of our customers went bankrupt.  There are three invoices that they did not pay us on, and we have found out that we will not get any money from them.  The 3 loads were delivered on: 05/10/12, 05/11/12 & 06/05/12.  My employer says that we can collect from the consignees.  I need to know where to find the statutes that cover consignees paying unpaid freight.

Answer: 

You can try to send a freight bill to the consignee, but my guess is that they will not pay, since they paid the shipper, and the shipper was supposed to pay for the freight.

On a “prepaid” shipment, a consignee may be liable for freight charges on the theory that it has received the benefit of the transportation services.  However, there is a well-established line of court decisions in which the principle of “estoppel” has been applied.  Where goods are shipped on a “prepaid” bill of lading, and the consignee-purchaser has paid the shipper-seller for the goods (including the transportation charges), this principle protects the consignee against “double payment" liability for the freight charges.”

I would note that the cases specifically turn on the bill of lading - whether it actually says “prepaid” or the appropriate box has been checked, so I would probably want to see your bills of lading before giving a firm opinion.


Freight Claims – Liability for Load When Seal Broken

Question: 

Can the truckload carrier be held liable for the entire load of product if the seal is not intact upon arrival due to unknown exposure, yet there is only minor to no damage or minor to no loss?

Answer: 

This kind of question comes up quite often in connection with foods and food-related products, as well as drugs and pharmaceuticals.  Products that are intended for human consumption are subject to federal regulations that cover food and drug items, and essentially state that a product is deemed “adulterated” if it is damaged and may have been contaminated.  For example, there are provisions governing contaminated food under the Federal Food, Drug and Cosmetic Act - 21 U.S.C. 342(a)(4) and 342(i). 

It is quite common for receivers of food products to refuse or reject product if there is a broken seal or the packaging itself shows signs of damage or tampering.  Shippers often will take the position that it would be an unacceptable risk to allow the product to enter the market for human consumption, or that it would be impossible to adequately sample and test all of the food product to ensure that the quality had not been compromised.

On the other hand, carriers will usually take the position that a broken or missing seal is not enough to reject a shipment or to destroy the product in the absence of proof of actual damage.  Depending on the facts and the type of packaging, it may be possible to inspect the product and segregate the good product from that which is actually damaged.  Thus, the carriers argue that there is a duty, under the common law, to “mitigate the loss” and to salvage any undamaged product. 

Since I assume that you would be shipping tobacco products, the issues would be somewhat different than for food or drug items, and could involve other federal or state regulations.  In other words, there really is no “black and white” answer to your question.

In any event, I would note that many shippers now include provisions in their transportation contracts dealing with this problem, and providing that a broken or missing seal will be grounds for rejecting a shipment or for destroying suspect product.  Such provisions, if properly drafted and acknowledged by the carrier, should be enforceable in the event of a seal problem upon delivery


Freight Claims – Carrier Liability on SL&C Load

Question: 

I was told that if a shipper ships under the Shipper Load & Count (“SL&C”) notation that the carrier has no liability regarding damage to the product.

We shipped a truckload of product and the carrier admitted that he was cut off and had to slam on his brakes to avoid an accident, and all of the product shifted to the nose of the trailer and was severely damaged.

The carrier claims that since the bill stated SL&C he has no liability.  I know this is not true but could you please explain?

Answer

The fact that a shipment is loaded and counted by the shipper (“SL&C”) does not relieve the carrier of liability if is in fact responsible for the damage to the goods. 

In the situation you describe, since the carrier did not observe the loading and how the goods were stowed and secured against movement during transit, you would have the burden to show that this was done properly and adequately for the normal truck transportation environment.  You might also want to show evidence of similar shipments that were delivered without damage.

Assuming that you can do this, and in view of the driver’s admissions about having to “slam on the brakes”, the carrier should be liable for the damage.


Freight Claims – Proving Shortage When Documents Missing

Question: 

We arranged for transportation of a shipment of resin weighing 43,500 lbs. for our customer.  Both parties (carrier & consignee) seem to have misplaced their copy of the delivery receipt therefore, the carrier cannot provide a Proof of Delivery (“POD”) establishing the delivery and the consignee cannot provide a POD establishing a shortage.

The consignee acknowledges receipt of the total number of cartons shipped, but claims a shortage of nearly 10,000 lbs. of resin.  They (consignee) have deducted the value of the missing product from the invoice to our customer who then filed a claim.  Who has the burden of proof?

Answer

Obviously there is a factual question as to what was actually shipped and delivered. 

The burden of proof for a claim against a carrier for loss or damage is on the shipper (or consignee) to establish that the goods were tendered to the carrier in good order and condition at origin, that they arrived damaged or short at destination, and the amount of the damages. 

Ordinarily the bill of lading should be prima facie evidence of the quantity received by the carrier.  However, you need to have some reliable proof that there was a shortage upon delivery.  If there is no delivery receipt with an exception noted to establish a shortage, then you should get a written statement from an employee at the consignee’s facility with personal knowledge of the facts and circumstances to prove there was a shortage at the time of delivery. 

It would seem to me that if the purchaser is deducting the shortage from the vendor’s invoice it does have a duty to provide proof that there actually was a shortage on delivery, so that the vendor can proceed with its claim against the carrier.


Forwarders – Establishing Customer Terms and Conditions

Question: 

As a freight forwarder, this is a question that comes up often: what is the importance of printing the terms and conditions on the back of the waybill/bill of lading versus having them on the customer agreement?  

Does online acceptance of terms and conditions hold up in court for shipments entered via the web?

Answer: 

The best practice is to have a formal transportation agreement with each of your customers that contains all of the relevant terms and conditions. 

In many cases this isn’t possible, so if you want to bind the customer to your terms and conditions of service, some other method must be used.

If you are using a typical bill of lading, it will probably contain language on the face of the bill of lading that “incorporates by reference” the carrier’s tariffs.  Of course, you will need to have an appropriate rules tariff or service guide that can be made available to the customer on request.

Another way is to include a notice on the face of any rate quotation, rate confirmation or sales material that clearly states that your services are subject to the rules tariff or service guide, and that it is available to the shipper on request, or on your website.

As for “online acceptance”, I would think that the same basic rules would apply: there must be clear notice that all shipments and services are subject to your terms and conditions, and that they must be easily available on the website. 

It is particularly important to make sure that your customers are on notice that you may have limitations of liability for freight loss or damage, since this is always a controversial issue.  And note that if you have liability limitations there must be a “choice of rates” - a way to declare a value and pay an excess valuation charge (or purchase insurance).


Freight Charges – Defending Against Bankruptcy “Preference” Claims

Question: 

I have a question regarding bankruptcy.  We are a carrier, and our customer was one of many companies that were part of a huge corporation that went bankrupt. The bankruptcy court is looking to us to return “preferred payment”, freight that was paid to us within 90 days prior to the filing of the bankruptcy.  Do we have a defense against this?  We have heard stories of carriers that have defended against this due to the way the bill of lading was worded regarding payment of freight; something to do with if it was marked “Prepaid” or “COD”.  We did not collect anything from the consignee.  We billed our customer for the freight charges, but they would have collected the freight directly from the consignee and sent it to us.

Answer: 

Under the bankruptcy code the trustee for a bankrupt company (a/k/a the Debtor) has the right to seek recovery of all payments that are considered to be “preferential” payments or transfers made by the Debtor to its creditors.  The reasoning behind this rule is to make sure that all creditors of a bankrupt company are treated equally.  To achieve this equality, the Debtor is prohibited from picking and choosing or “preferring” certain creditors over others. 

Under the bankruptcy code the Debtor is “presumed” to be insolvent during the period of time shortly before it filed for bankruptcy which is called the preference period.  Further, all payments made by the Debtor during the preference period are presumed to be preferential payments to creditors.  Therefore, to put all creditors on equal footing, the bankruptcy code allows the Debtor to recover all payments made during the preference period. The preference period is 90 days prior to the bankruptcy filing date for most payments/transfers made by the Debtor (it is 1 year for payments to creditors considered to be “insiders” such as corporate officers).

There are defenses to preference claims/lawsuits.  The most commonly asserted defenses are that the payments were made in the “ordinary course of business” and/or where the creditor gives the debtor “new value” after receiving the preference payment.  There are several elements that are necessary to prove either defense.

For example, in order to establish the “ordinary course of business defense” it is necessary to show that: (1) the payments were received for a debt incurred in the ordinary course of business and either (2) the payments were either made in the ordinary course of business between the parties or (3) the payments were made according to ordinary business terms.  To prove this defense you would look at the credit terms between the parties to see if the terms were the same during and prior to the preference period.  Then, you would look at the how long it took the Debtor to make payments both during and prior to the preference period.  If the payment history shows that the time to pay was generally the same both during and prior to the preference period, you have a good case to establish ordinary course of business.  If, however, the payments were dramatically different between the preference period and prior to the preference period, then it will be more difficult to establish this defense.

I do not fully understand your question regarding the impact of the freight payment terms of “Prepaid” or “COD”.  I’m assuming your customer was the shipper and the freight charges were billed on a “Prepaid” basis. 

It sounds like you are describing a “Prepaid and Add” situation, where the shipper paid the carrier’s freight charges but added the freight bill to its customer’s invoice and recovered the freight charges from its customer (the consignee).  If this is the case, you may have additional defenses available to you.  But, I would need to know more information such as what was actually invoiced to the consignee (i.e., the shipper’s customer), the timing of the payments from the shipper to you, the timing of the payments from the consignee to the shipper, etc.


Freight Claims – Measure of Damages for Scrap Shipment Shortage

Question

I have a claim where a logistics company was brokered by the shipper to move used computer parts to a consignee where they were sold to be melted down for the precious metals.  The logistics company had a carrier pick up the goods and it was tendered to another carrier for delivery, where it was partial short.  The contract between the logistics company and the origin carrier is full actual loss.  However, the terms and conditions entered into by the shipper with the logistics company is $0.10 per pound for this commodity. 

Is the carrier liable to the shipper for invoice value, shipper’s cost, or would full actual loss be the amount which the logistics company was liable to the shipper?  If not the latter, how can they profit from the carrier’s misfortune? The difference is between $10,500.00 or $93.00. There has to be something illegal about the logistics company being able to collect so much from the carrier but only have to pay their customer so little.

I understand Carmack applies and also allows for limited liability.  I’m thinking that the shipper agreed to the logistics company’s limited liability due to the logistics company’s terms and conditions.  Therefore carrier liability would be limited to that.  I even emailed the logistics company and asked about moving a like shipment and was told I could only be covered at $0.10 per pound due to their terms and conditions.  It was absolute unless I purchased additional insurance on the goods.  That being said, how can the carrier be liable for more? Please offer your advice.

Answer: 

First of all, it seems to me that the contracts (1) between the shipper and the logistics company, and (2) between the logistics company and the carrier are irrelevant. 

Carrier liability is governed by the “Carmack Amendment”, 49 U.S.C. 14706, which provides the exclusive remedy for loss or damage to goods in interstate commerce.  The cases applying Carmack basically say that the “contract of carriage” is between the shipper and the carrier, normally the bill of lading (and any applicable tariffs that may be incorporated by reference).  Carmack applies to the legal relationship between a shipper and a carrier; it does not apply to brokers or intermediaries such as “logistics companies”.

While the logistics company may have filed a claim with the carrier, as an accommodation to its customer, it is not the owner of the goods nor a party to the bill of lading.  The carrier’s liability to the shipper is determined by that contract of carriage, and not some other agreements. 

It is possible that the logistics company may have assumed liability for loss or damage in its contract with the shipper, and that its liability vis-à-vis the shipper may be limited in that contract.  However, that does not affect the carrier’s liability to the shipper.  If the carrier should make payment of the claim to the logistics company (instead of the shipper), that money belongs to the shipper, not the logistics company that merely acted as an agent of the shipper.

The logistics company can limit its liability for whatever liability it may have as a broker, or has assumed by contract.  That doesn’t change the liability of the actual carrier that transported the shipment.

After viewing the two different “bills of lading” that you sent, it appears the first one was prepared by the shipper using an obsolete version of the Uniform Straight Bill of Lading form.  Although Company A is shown as the “Delivering Carrier”, it is clear that that the actual carrier that received the shipment was Company B, and both its driver and a shipper employee signed the bill of lading.  It contains the usual language incorporating the “applicable motor carrier classifications or tariff”.

 The second one is a Logistics Company form that has some of the same information, also contains different terms, conditions and references.  It shows the “Carrier Name” as “Company B”, was also signed by the same driver, has a Company B “pro” sticker attached, and says “Bill To: Logistics Company”. 

 It contains some interesting language in a box:

“The complete terms and conditions applicable to this shipment can be obtained at (illegible website) and should be requested prior to shipping. Shipments are not subject to any oral agreements. In the event of any conflicts, the [Logistics Company] terms and conditions shall govern.”  

There is also the following language in the same box:

“Shipper recognizes that this is the required bill of lading and its conditions for transportation of these goods.”

The same shipper employee signed on the line that says “Shipper Signature”.

 It would be my opinion that the first document, the bill of lading, should be considered the bill of lading that the carrier (Company B) is required by law to “issue” under 49 U.S.C. 14706, and governs the relationship between the shipper and the carrier.  Thus, the carrier’s liability is governed by that bill of lading and any applicable tariffs.

 The second document is not really the bill of lading for the transportation of the shipment.  It was created by the Logistics Company, the broker, and it was not the carrier that received and transported the goods.  To the extent that this document has any relevance, it could be argued that it governs the relationship between the shipper and the Logistics Company, but it does not affect the liability of the carrier, Company B.


Freight Claims – Liability When No Value Stated

Question: 

I am a broker and have two questions.  First, broker tenders load to a carrier and the carrier breaks the seal without broker’s or customer’s knowledge or authority.  Freight was moved about and possibly cross-docked. What actions can a broker or customer take against the carrier?  Can we withhold partial payment to the carrier?

Second, a claims question.  Broker has contract with customer to maintain minimum of $50k contingent cargo insurance and to insure any cargo.  The customer is an established customer of broker’s and a lot of load tenders are verbal or via e-mail.  Customer contacts broker via e-mail states to pick up equipment and transport to another one of their plants.  Neither the bill of lading (even though there is a spot for released value of goods) or e-mail states value of the equipment.  Carrier is hired to haul it.  Carrier wrecks the load and part of the equipment is damaged.  Customer files a claim for $250,000 for the repair of the “used” equipment.  Carrier states on their insurance certificate that they insure used equipment for 10 cents a pound.

Carrier in writing says they will settle the claim for $3,500.00 based on a load weight of 35,000 lbs.  Customer turns over the claim to their insurance company to collect.  Customer’s insurance contacts me. I am sure they are seeking full compensation for they had to make repairs which cost $250,000.  Does the shipper have a “valid claim” even though there is not a released value of the equipment stated on the Customer issued bill of lading nor on the e-mail load tender from the customer.  How does a broker know how much to insure a load if no load value is stated?  Typically, this customer’s load values are about $40,000.

Answer: 

Let me try to answer your questions.

As to the first question, unless there is a formal transportation agreement that covers sealed trailers and prohibits the carrier from breaking the seal during transit, and there is language providing for a penalty, or deduction from the freight charges, etc., the carrier would probably have the right to break the seal and transfer the lading to another vehicle. 

As to your second question, I believe you are “mixing apples and oranges”. 

The carrier’s liability for the loss has nothing to do with whether or not it has cargo insurance.  Carrier liability is determined by the contract of carriage between the shipper and the carrier, normally the bill of lading and the carrier’s rules tariff that is incorporated by reference in the bill of lading.  If the bill of lading has the usual language referring to the classifications and tariffs in effect at the time of shipment, and the carrier has an applicable tariff with a valid limitation of liability, then the liability limitation is probably enforceable. 

As for the carrier’s cargo liability insurer, its obligations under the cargo insurance policy are to indemnify the carrier for covered loss.  In other words, the carrier’s insurance does not have to pay more than the carrier is legally obligated to pay.

If you are concerned about any liability you may have as a broker, I would point out that brokers are not carriers, and generally don’t have any liability for loss or damage in transit (unless they assume liability, hold themselves out as carriers, or their negligence caused the loss).  Unless you had specific instructions from the shipper to declare a value on the bill of lading or obtain shipper’s insurance coverage for this shipment, you probably have no liability to your customer.  You should make it clear to your customer that you only acted as a broker, and did not assume liability as a carrier.


Freight Claims – Including Freight Charges

Question: 

Our carrier is declining to pay the freight charges as part of a damage claim, asserting that we received the value of their services.  Are we entitled to recover the freight charges?

Answer

The short answer is yes you are entitled to recover the freight charges your company paid to the carrier.  The answer is based upon my understanding as follows:

The claims involve inbound shipments to your company from its vendors/suppliers.  The product is shipped from the vendors/suppliers, FOB Origin, Freight Collect.  Your company receives the product, pays its vendor/supplier for the product and pays the carrier its freight charges.

If the product arrives in damaged condition, your company files a claim for the value of the damaged product (based on the invoice price that it paid to its vendor/supplier) plus the amount of the freight charges it paid to the carrier (if a partial loss, then the claim includes a pro rata share of the freight charges paid).

The answer to your question, which I am summarizing below, can be found at pp. 120-121 of Freight Claims in Plain English, 4th Edition.  More specifically there is a reference to a court decision from the 9th Circuit Court of Appeals called Contempo Metal v. East Texas Motor Freight Lines, Inc., 661 F.2d 161 (9th Cir. 1981) which is directly on point.

The carrier believes you are not entitled to recover the freight charges because the carrier asserts that the freight charges are included in the cost of the product and/or your company received the benefit of the transportation services.  This is incorrect.  As you point out, your company is not paying a delivered cost.  Rather, it is paying for the product plus the freight charges separately.  Also, since the carrier failed to perform its service, it is not entitled to be paid.

The only way the carrier’s argument could stand up is if (1) the vendor/supplier paid the freight charges and you were paying a true delivered cost; or (2) if your company’s claim was filed at the invoice value that it charges its customers, which probably includes an element covering the value of the freight charges.

Also, look at it this way, if you pay the carrier $200 to deliver product costing $5,000 and the carrier only pays you $5,000, then you have recovered the “cost” of the product, but you do not have the product to sell.  Therefore, you need to order another shipment of product costing $5,000 and must pay the carrier another $200 for that shipment.  If that shipment is damaged, then you again have no product to sell and you would be out another $200.  If this process repeats itself, then you will continually be paying the carrier, but not receiving any product and you will have nothing to sell.  In other words, you will not be made whole.


FREIGHT CHARGES – TERMS OF CREDIT
Question:
 
Can freight bills be paid at any term of days? Interstate Commerce Commission (“ICC”) regulations used to require that they be paid in 15 days. Some shippers now state that they pay freight bills to a carrier at 90 days. Can this be done?
 
Answer:
 
As you know, the ICC was “sunsetted” effective December 31, 1995. However, some of the old ICC regulations were transferred to the FMCSA’s jurisdiction and still exist. 49 CFR Part 377 governs the extension of credit to shippers by motor carriers and provides:

(a) Authorization to extend credit.
(1) A carrier that meets the requirements in paragraph (a)(2) of this section may
(i) Relinquish possession of freight in advance of the payment of the tariff charges, and
(ii) Extend credit in the amount of such charges to those who undertake to pay them (such persons are called "shippers" in this part).
(2) For such authorization, the carrier shall take reasonable actions to assure payment of the tariff charges within the credit periods specified
(i) In this part, or
(ii) In tariff provisions published pursuant to the regulations in paragraph (d) of this section.
(b) When the credit period begins. The credit period shall begin on the day following presentation of the freight bill.
(c) Length of credit period. Unless a different credit period has been established by tariff publication pursuant to paragraph (d) of this section, the credit period is 15 days. It includes Saturdays, Sundays, and legal holidays.
(d) Carriers may establish different credit periods in tariff rules. Carriers may publish tariff rules establishing credit periods different from those in paragraph (c) of this section. Such credit periods shall not be longer than 30 calendar days.
It should be noted that this regulation only governs CARRIERS. It doesn’t apply to SHIPPERS. Also, under 49 USC 14101(B), carriers and shippers are free to enter into contracts that contain other provisions for freight payment.


FREIGHT CLAIMS – LIABILITY FOR IMPROPER SECUREMENT
Question: 
 
 A live load (full truckload) was shipped on a standard bill of lading (“B/L”). The load was not blocked and braced and during transit it shifts, falls over and is damaged. Who bears the responsibility, the shipper or the carrier? The shipper loaded the truck and the carrier was on hand during the loading. There were no loading or unloading agreements with the carrier.
 
Answer:
 
Carriers are presumed to have the knowledge and expertise on the proper loading of freight. Therefore, even though a shipper loads or assists in the loading of a trailer, the primary responsibility for safe loading (blocking, bracing and load securement) is on the carrier. This is reflected in the federal safety regulations, e.g., 49 CFR 392.9, 49 CFR 393.100, etc.
As with any rule, there are exceptions and one is that the improper loading or defect be “patent” and not “latent”. What this means is that the improper loading condition has to be apparent and visible to the carrier, and not hidden so that it can’t be seen. From your description, however, the carrier’s driver was present and observed the loading of the freight, so I don’t think this exception would apply.
Lastly, under the “Carmack Amendment”, a carrier is liable for loss or damage to goods in its possession unless it can prove that the sole cause was one of the basic exceptions such as an act of God, act or default of the shipper, etc. AND that it was free from any negligence. In this case, the carrier would not be able to show freedom from negligence if the driver witnessed the loading and still accepted the shipment.

FREIGHT CLAIMS – COLLECTING COSTS INCIDENTAL TO REPAIR
Question:
 
Under Carmack, can you point to case law regarding the recovery of costs which are incidental to the repair? It’s clear that a shipper can recover the cost of materials and labor for the repairs. Do you have a case citation where travel, lodging, rental cars, meals, etc. were recovered for the engineers and the work crew who did the repairs?
Answer:
 
Carriers will usually argue that most of these expenses are “special damages” that are not recoverable because they were not “foreseeable” at the time the carrier received the shipment. However, at least one court considered similar expenses to be “general damages” and awarded the damages to the claimant. This is the Vacco Industries case that is discussed in Freight Claims in Plain English (4th ed. 2009) as follows:
. . . . Vacco was the consignor of goods allegedly damaged in transit on an interstate move by Navajo Freight Lines. The bill of lading showed a declared value for a piece of machinery to be $130,000. At trial, Vacco sought damages in the nature of its itemized repair costs, as well as overhead and administrative costs for the repair work, inspection costs, freight, packaging, the evaluation trip and lab fees.
The California appeals court upheld the finding of liability by Navajo and went on to discuss the appropriate measure of damages, most specifically the overhead, administrative and general costs and profit element sought by Vacco in connection with the repair. The court noted the testimony of various experts on behalf of the plaintiff as to usual and customary overhead, general and administrative costs in the industry. The court specifically held that the consignor could recover a profit element for the repair work it performed and that the profit element, like normal costs of repair, was a recoverable item of general damage.
As to the question of when similar types of “special damages” are recoverable, the case of Marjan International, also discussed in the book, is instructive:
In Marjan International Corp. v. V.K. Putman, Inc., 1993 WL 541204 (S.D. N.Y. 1993), a shipment of oriental rugs was intended for an auction in Tacoma, Washington. The shipment was delayed, missed the auction, and the rugs ultimately returned to the shipper in New York, with two valuable rugs missing. The plaintiff claimed for the value of the missing rugs, plus the expenses of sending its employees to Tacoma for the auction (wages, air fare and hotel accommodations), and also sued for the return of the freight charges, which the carrier had demanded before releasing the shipment upon its return to New York, see Section 7.4.9.
In awarding the plaintiff's expenses in connection with the auction, the court stated:
The court is fully satisfied that the prerequisite to recovery of special damages has been established in this case. Major repeatedly and emphatically advised Putman’s driver on the date of loading in New York that Marjan required delivery of the rugs to their destination no later than Friday, November 29 at 2:00 p.m., Pacific time. Major specifically informed Westfall: that the rugs were to be sold at an auction in Tacoma, and that failure to deliver on time would prevent the auction sale; that three or four Marjan employees would be flying to Tacoma with Major to receive and unload the cargo and to assist in the sale; and finally, that considerable advertising and other expenses would be incurred by Marjan in connection with the auction. Furthermore, Westfall acknowledged the urgency of prompt delivery before leaving Marjan’s store in New York.

FREIGHT CLAIM – WHICH LIABILITY REGIME APPLIES ON MULTI MODAL MOVE
Question:
 
“X Logistics” is acting as an international freight forwarder when it brings a container in from China to a warehouse in the US. It then destuffs the container and ships the product to a construction site. At what point does X move from being a freight forwarder to a broker, or does it? If it does not move to a broker status, would it be liable for cargo claims as a domestic freight forwarder, international ocean forwarder? Which liability regime would apply if the freight were damaged moving between the warehouse and the final destination?
Answer:
 
The answer will depend on the bill of lading, i.e., did X issue its own house multimodal bill of lading from origin to destination, etc. If you have a copy of the bill of lading, maybe you could send it to me (both sides).
1. From your description of the facts, multimodal bill of lading issued by X Logistics as a freight forwarder or NVOCC would show a foreign inland location or port as the origin, and X Logistics as the consignee, with the final destination as the X Logistics warehouse. Thus, the first “leg” of the movement from origin to the inland warehouse is governed by the multimodal bill of lading and its terms and conditions. Under this bill of lading, liability for loss or damage during the ocean portion would be governed by the Carriage of Goods by Sea Act (“COGSA”). On the inland portion, the bill of lading allows suit against the inland carrier responsible for loss or damage; it is not clear to me whether its liability would be governed by COGSA or by its own bill of lading and tariffs.
2. Assuming that X is not acting as a motor carrier or freight forwarder, the second “leg” of the movement, from X’s warehouse to the job site would be governed by your transportation contract with the inland carrier, or if there is none, a separate bill of lading issued by the inland carrier, and subject to Carmack liability.

FREIGHT CHARGES – BROKER OBLIGATIONS
Question:
 
As a licensed, bonded broker, I need to know what our legal financial responsibility is with regards to a customer who doesn’t pay their freight bills.
1. Are we obligated to pay the carriers in full if the customer doesn't pay us?
2. Are we obligated to act on behalf of the carriers (i.e. initiate collections or a lawsuit) in pursuing unpaid freight bills?
3. Is the type of freight (regulated vs. non-regulated) an issue?
Morally, I know what our responsibility is. However, practically speaking, our company could go belly-up if we had to absorb the loss of revenue from even one major customer.
Answer:
 
Let me try to answer your questions.
1. Are we obligated to pay the carriers in full if the customer doesn’t pay us?
The broker has two separate contractual relationships, one with the shipper and one with the carrier. You are an independent contractor, not merely an “agent” of the shipper.
Unless you have specifically provided in your contract with the carrier that payment is contingent on collecting from the shipper, your obligations with respect to the carrier are not dependent on your agreement with the shipper, i.e., your price, credit terms, etc. Thus, if the carrier provides the agreed services it is entitled to look to you as the broker for payment.
That said, if you have a situation where the shipper has gone bankrupt or out of business, you may be able to negotiate with the carrier and the carrier might agree to share part of the loss, but it does not have to do so.
2. Are we obligated to act on behalf of the carriers (i.e. initiate collections or a lawsuit) in pursuing unpaid freight bills?
Unless you have contractually agreed to do so, or want to “volunteer”, the answer is NO. And, I would NOT recommend that you do so.
3. Is the type of freight (regulated vs. non-regulated) an issue?
The obligation to pay freight charges is contractual, and is not governed by any federal or state laws or regulations, so it doesn't matter whether the freight was “regulated” or “exempt”.

FREIGHT CLAIMS – SHORTAGE ON SL&C SHIPMENT
Question:
 
We are a broker; our customer filed a claim with us stating the load was delivered 32 cases short. I called the shipper; they confirmed 2313 pieces were shipped, 38 pallets. I contacted the receiver who confirmed they received 2,281 pieces; they did not have a pallet count because they were broken down. The driver signed the bill of lading without exceptions. The consignee noted 32 cases short on the bill of lading. I filed the claim with the carrier, but it was denied due to the trailer being sealed, no evidence of tampering or damage, and the driver was not allowed on the dock at the shipper or receiver.
Does the carrier have a right to deny this claim? How should I respond to our customer? Thank you.
Answer:
 
This sounds like a simple factual question -- how many cases were tendered to the carrier at origin and how many were delivered at destination. If you can get an written statement or affidavit from a shipper employee with personal knowledge of the facts that confirms what was loaded into the truck, and one from a consignee’s employee that confirms what was delivered, the carrier should pay the claim.
You do mention a “seal”. If the trailer was loaded by the shipper without the driver being present or able to count during the loading, and the shipper sealed the trailer, this would be a shipper load & count (“SL&C”) shipment. And if the trailer arrived with the original seal intact, and there was no sign of tampering with the seal, the locks, hinges, etc., there would be a strong presumption that the shortage did not occur in transit. This may require further investigation.

LIABILITY – BROKER OBLIGATIONS UNDER RECENT CHANGES
Question:
 
1. How can freight brokerage companies protect themselves from liability due to their agents’ liability, considering the new Federal Motor Carrier Safety Administration (“FMCSA”) safety qualifications and the elimination of the BCM-32 coverage, removing a carrier’s requirement to carry cargo insurance?
2. Does paying the salaries of our agent’s employees make the agent our employee rather than an independent contractor? Would this open us, a freight brokerage company, (we hire agents, pay the carriers and invoice the customer) to liability due to an agent’s negligence?
Answer:
 
First, let me mention that some of the same questions you are asking (CSA 2010, BMC-32, etc.) were the subject of extensive discussion at the Council’s Annual Conference in St. Louis - too bad you couldn’t attend.
As to the new issues involving “due diligence” in selecting and qualifying carriers, obviously these recent changes make it more difficult to protect yourself as a broker. The best way a broker can effectively protect itself is through a good broker-carrier contract. I would strongly recommend that you consult a knowledgeable transportation attorney to prepare a contract if you do not already have one. (I would note that our firm specializes in transportation law and provides contracts to many of our broker clients.)
As to your second question, any time you exercise significant control over an otherwise “independent” contractor, it may be treated as your agent and/or employee. As such, you increase your exposure in the event the party is negligent and that negligence results in liability and/or damages. Payment of salaries (as opposed to commissions) is more likely to establish an employer-employee relationship.

FREIGHT CLAIMS – DO LIMITATIONS APPLY WHEN TRAILER CATCHES FIRE?

Question:
 
Our company has recently become a member of the Transportation & Logistics Council, Inc. I recently filed a claim against a less-than-truckload carrier for an entire shipment because the trailer the load was shipped in caught on fire during transit. The carrier is relying on their tariff which states “in the event of loss or damage to any shipment, carrier’s maximum liability for loss or damage shall not exceed $5.00 per pound for the actual weight of the damaged or lost portion of the shipment, subject to a maximum liability of $100,000 per shipment, and $250,000 per incident and in no instance shall liability be greater than the actual value of lost or damaged articles less salvage.”
Interestingly enough, the carrier stated that based on the above item they would only pay their maximum liability of $10.00 per pound.
I received a copy of the police report on file and it stated that the cause of the fire was “mechanical malfunction”.
My question is, can we legally hold the carrier liable to pay the claim in its entirety due to the fact that the damage incurred was not the act of a cargo handling situation but due to mechanical malfunction?
Answer:
 
I’m assuming that the bill of lading in this case had the usual language incorporating the carrier’s tariffs, and that the carrier did have a tariff and has provided a copy to you.
The court decisions say that a liability limitation is enforceable if certain criteria are met: a notice of a tariff limitation (usually on the face of the bill of lading), a tariff that is applicable to the rate charged for the shipment, and a choice of higher or lower rates commensurate with the liability assumed by the carrier. If all of these criteria are met, courts will usually enforce the liability limitation -- and it makes no difference what caused the loss or damage.
I do find it interesting that the carrier has offered $10 per pound instead of $5 per pound (if that is what the tariff actually states).

BILLS OF LADING – DO IT RIGHT
Question:
 
I have a couple of shipping locations that give work orders or pick tickets to carriers instead of bills of lading. What can I tell them to make them realize that this is not a smart thing to do?
Answer:
 
The Carmack Amendment, 49 USC §14706, and the Federal Motor Carrier Safety Administration (“FMCSA”) regulations require that a motor carrier issue a “receipt or bill of lading” for property that it receives.
Most shippers prepare some form of a bill of lading which is provided to the carrier’s driver for signature to acknowledge receipt of the goods by the carrier. Some accept the carrier’s bill of lading, and some use other documents such as shipping orders or delivery orders to document that the carrier has received the goods.
The federal regulations at 49 CFR Part 373 specify the minimum requirements for a bill of lading:
Every motor common carrier shall issue a receipt or bill of lading for property tendered for transportation in interstate or foreign commerce containing the following information:
(a) Names of consignor and consignee.
(b) Origin and destination points.
(c) Number of packages.
(d) Description of freight.
(e) Weight, volume, or measurement of freight (if applicable to the rating of the freight).
Bills of lading usually contain additional information: freight payment terms (prepaid, collect, bill to third party), special instructions (protective service, delivery appointments, COD collection), agreed or declared value (liability limitations), carrier information (SCAC code, trailer number, seal number), etc.
Formal bills of lading, such as the Uniform Straight Bill of Lading published in the National Motor Freight Classification, are considered by the courts as “contracts of carriage” because they usually contain terms and conditions that are either printed on the bill of lading or incorporated by reference (such as classifications, tariffs, service guides, etc.)
Obviously, a shipper needs to obtain a receipt for any goods that it tenders to a carrier for a number of reasons: to prove to its customer that it shipped the goods so it can get paid, to establish receipt by the carrier in good order and condition in the event of any loss or damage in transit, etc. - AND it should contain the basic required information.
This does not necessarily mean that shippers must use a “standard” form bill of lading such as the Uniform Straight Bill of Lading. Many shippers do not want to use a carrier’s form bill of lading because they don’t want to be subject to the terms and conditions, liability limitations, and other tariff provisions that are incorporated in such bills of lading. We often recommend that shippers develop their own bill of lading forms, with appropriate provisions that are more “shipper-friendly”.
In conclusion, I would not recommend using “work orders or pick tickets” instead of a bill of lading since it is very unlikely that they would contain basic essential information.

FMC FILING REGULATIONS FOR NVOCC'S
Question:
 
I would like to check with you from the FMC filing regulation perspective, is the MQC (minimum quantity commitment) a must-have in the service contract with NVOCC - same as the service contract with Carriers? I've heard from one NVOCC that we don't have to worry about MQC when contracting with them. So I would like to make sure if their statement is correct. If yes, then we should take out the MQC verbiage from NVOCC contract. Thanks.
Answer:
 
For an NVOCC Service Arrangement (similar to a VOCC Service Contract) there is still a requirement for a minimum quantity commitment ("MQC"). 46 CFR Part 531 governs Service Arrangements and 46 CFR 531.3(p) defines a NVOCC Service Arrangement as:
(p) NVOCC Service Arrangement (“NSA”) means a written contract, other than a bill of lading or receipt, between one or more NSA shippers and an individual NVOCC or two or more affiliated NVOCCs, in which the NSA shipper makes a commitment to provide a certain minimum quantity or portion of its cargo or freight revenue over a fixed time period, and the NVOCC commits to a certain rate or rate schedule and a defined service level. The NSA may also specify provisions in the event of nonperformance on the part of any party.
For NSA's there is still a requirement to publish a tariff and a statement of "essential terms". NSA's can be amended by the parties, provided that any changes to rates must be published in the NVOCC's tariff and any changes to the "essential terms" must be filed with the FMC.
There is a new kind of NVOCC contract called a "Negotiated Rate Arrangement", effective April 18, 2011. NRA's are governed by 46 CFR Part 532. They are principally used for shorter periods and to lock in rates for specific shipments. There is no requirement for an MQC or filing of a rate tariff, however the NVOCC must make its Rules Tariff available at no cost. The requirements for an NRA are set forth in 46 CFR 532.5:
§ 532.5 Requirements for NVOCC negotiated rate arrangements.
In order to qualify for the exemptions to the general rate publication requirement as set forth in section 532.2, an NRA must:
(a) Be in writing;
(b) Contain the legal name and address of the parties and any affiliates; and contain the names, title and addresses of the representatives of the parties agreeing to the NRA;
(c) Be agreed to by both NRA shipper and NVOCC, prior to receipt of cargo by the common carrier or its agent (including originating carriers in the case of through transportation);
(d) Clearly specify the rate and the shipment or shipments to which such rate will apply; and
(e) May not be modified after the time the initial shipment is received by the carrier or its agent (including originating carriers in the case of through transportation).
[76 FR 11360, Mar. 2, 2011; 76 FR 19707, Apr. 8, 2011]

 


Liability – Driver Injured While Loading Truck

Question:

I am the claims mitigator for a 3rd party logistics company. We are a TLC member. We purchase your books each year and they are a great help to me. I have a couple of questions I would appreciate your help with.

We had a situation where a shipper was loading his product into a trailer of an LTL carrier. The one piece was a little top heavy and started to fall. The driver of the carrier reached up to prevent it from falling and helped load it into the trailer. He left without any problems.

Later, the shipper died and now the driver is suing the company that the shipper worked for saying he hurt his back and can’t work anymore.

First, who assumes liability for a driver who gets hurt while helping to load a truck? Do we as the 3rd party have any exposure there? Does the shipper have liability to the driver? As a broker, is there something we should include in our contracts with the carriers to protect us and the shippers from having this happen to them?

We appreciate your input in this matter and look forward to your response.

Answer:

If the driver was injured in the course of his employment he would be covered by Worker’s Compensation (which means he can’t sue his employer).

However, in the “loading/unloading” situation, he could have a separate cause of action in negligence against the shipper, if the shipper was in some way negligent and that negligence caused or contributed to his injury. That, of course, is a factual issue to be determined at trial. Typically these cases involve unsafe loading docks, faulty equipment such as forklifts, and large items falling over during loading or unloading.

In the situation that you describe, I don't see how a 3rd party or broker could be considered negligent. The recent cases holding brokers liable generally involve highway accidents and claims of “negligent hiring”, e.g., where the broker fails to exercise due diligence in selecting and checking out the carrier’s safety record.


Freight Claims – Waiver of Right for 3rd Party to Track Shipments

Question:

We have a customer that has waived their right to allow a 3rd party to track their shipments by contract. They have also waived their rights to refunds for late deliveries.

Below is the exact language in their contract.

9. Customer agrees to waive the Money Back Guarantee (Guaranteed Service Refund) provision as outlined in the UPS Service Guide for all UPS Ground services during the life of the Agreement.
10. Guaranteed Service Refunds (GSR): Customer agrees to the tracking limitations described in the current UPS Rate and Service Guide and Tariff/Terms and Conditions of Service in effect at the time of shipping. Customer also agrees that the use of a Third Party to track UPS shipments in strictly prohibited and constitutes a breach of the agreement.
This language would appear to prevent us (a third party) from tracking shipments under the Guaranteed Service Refunds (“GSR”) clause (wherein the company waived the right to refunds for late deliveries). I am not sure if they can say this language, even though it is under the GSR clause, also prevents a third party from tracking any shipments period, no matter the reason.

Can the language the carrier included in their contract regarding guaranteed service refunds prevent us from tracking the shipments so we know which ones need to be filed for a loss or damage claim? Under the Carmack Amendment, does our customer have the right to allow us to track their shipments just for their lost or damaged shipments?

Answer:

I can’t see any reason why the “waivers” that you describe would prevent filing a claim for loss or damage to shipments (other than delay claims)

I would take the position that the restriction is limited to use for the purposes of a “Guaranteed Service Refund”.


Brokers – Surety Bonds

Question:

Our company has experienced difficulties with transportation brokers filing bankruptcy, resulting in our dealing with the resulting legalities of the bankruptcy estate in addition to subcontracted carriers looking for payment. As we continue to grow our business, our percent of managed transportation is growing and we are looking at ways to protect ourselves against financial risk. Part of this surrounds expanding our business with asset only agreements. However, based on our growth, and current system limitations, the need for brokerages will still exist.

In support of this, our CFO has requested that we insert into our transportation agreement the requirement of a “letter of credit” (“LOC”), up to an agreed upon amount (around roughly 30 days agreed upon business - ie. $50K - $100K). I anticipate a less than favorable response to this. However as an alternative, I have had some general conversations with various brokers specific to the concept of requesting them to issue a “performance bond” in our company’s name (again, around the amounts listed above)

The feedback has been lukewarm. However, the bond concept seems to provide for more of a negotiating opportunity than the LOC. My questions are - (A) does the concept of a “performance bond” in our company’s name seem like a reasonable strategy to protect our company’s risk; and (B) are there any other strategies, or contractual language that may accomplish the same?

Answer:

As you know, the Federal Motor Carrier Safety Administration (“FMCSA”) requires brokers to have on file a surety bond in the amount of $10,000. Unfortunately, this is usually insufficient when a broker goes out of business or otherwise fails to pay the carriers.

We often recommend to our clients that they require in their contracts that the broker obtain a supplementary surety bond - at least $50,000 or $100,000. These are available from various sources including:

Avalon Risk Management, Inc.
84 Wharf Street
Salem, MA 01970
Phone: (978)740-5677
FAX: (978)740-6627
www.avalonrisk.com

Transportation Intermediaries Association (TIA)
3601 Eisenhower Ave., Ste. 110
Alexandria, VA 22304
www.tianet.org


Brokers – Operating as a Dispatcher

Question:

I am a driver for a local precast concrete company, as the company has only 3 drivers of its own, and the rest of the work is subbed out to owner-operators. It has recently been brought to our attention that our dispatcher, who is a salaried employee of the company, may have obtained a broker’s license, and is still acting as dispatcher. The other drivers and myself feel this is a severe conflict of interest and need to know is there any law against such practice, and if so, how may we proceed to improve our situation?

Answer:

From your description of the facts is quite possible that this might be a conflict of interest, and it may actually be illegal. Federal Motor Carrier Safety Administration (“FMCSA”) regulations governing brokers at 49 CFR Part 371 contain the following language:

Sec. 371.9 Rebating and compensation.
(a) A broker shall not charge or receive compensation from a motor carrier for brokerage service where:
(1) The broker owns or has a material beneficial interest in the shipment or
(2) The broker is able to exercise control over the shipment because the broker owns the shipper, the shipper owns the broker, or there is common ownership of the two.
(b) A broker shall not give or offer to give anything of value to any shipper, consignor or consignee (or their officers or employees) except inexpensive advertising items given for promotional purposes.


Freight Claims – When Does 9-Month Limit to File Apply?

Question:

I am a member of your organization and tried to find an answer to this question from your previous Q&As and publications, but I could not.

We are handling an interstate cargo claim for our insured, a carrier who transported three used automobiles. They damaged one of the autos resulting in $7,000 in repairs. We denied the claim because the claim was not made and received by our insured within 9 months of delivery. The claimant’s lawyers are threatening to sue.

The autos were delivered to one consignee. There was no bill of lading issued and though each auto had a condition page showing the condition of each auto at pick up and then at delivery, there were no contract terms of any sort on any of these three pages. In addition, our insured has no tariff.

We believe our position in denying this claim is correct concerning our application of the 9-month filing limitation. It is our position that the 9-month filing limit for cargo claims is the “standard” in the industry and has been for some time. Barring a written and agreed upon time limit greater than nine months, this 9-month period is the standard time limit accepted in the industry by all involved in the movement of freight ... whether they be carriers or shippers. We further believe this time limitation to be the acceptable standard whether or not a bill of lading is issued by the carrier or if the bill of lading is silent about the time period in which to file a cargo claim. We further believe our position is supported by L&S Bearing Company v. Randex International, 913 F.Supp. 1544 (S.D. Fla. 1995). Here, as we understand it, the judge accepted the 9-month time limitation as the industry standard for filing a cargo claim even though there were no bill of lading terms.

Of course, the claimant’s lawyers do not believe our position to be adequate enough to win in a court of law.

Please advise of your thoughts.

Answer:

Time limits for filing claims and bringing lawsuits are contractual, i.e. there must be a contract (bill of lading, etc.) for them to be enforceable. The Carmack Amendment, 49 U.S.C. 14706 only says that a carrier may not by contract or otherwise provide for LESS than 9 months for the filing of a claim or 2 years for the commencement of a lawsuit.

To the extent that there may be some authority for a court to apply a 9-month time limit that is not explicitly set forth in a contract of carriage or bill of lading, there would have to be other factors involved such as a course of dealing over a period of time during which the claimant had received numerous bills of lading with the time limit.

The L&S Bearing case that you cite is distinguishable on its facts and does not support your position.