Navigating Cargo Claims - Part 1



The term "cargo claim" is a broad one. Such claims are ancient with a long history of laws written and re-written to address them. Cargo claims can invoke "maritime law," another broad and sometimes elusive term. Claims for cargo lost or damaged on land, never touching a drop of water, are often called marine cargo claims nonetheless. And cargo claims can also invoke "air law" – laws governing air travel.

Most cargo claims are covered by marine insurance. Marine insurance covers, among other things, the transportation of cargo on land, sea or air. Claims for loss and damage to cargo under a marine insurance policy, when paid, give rise to subrogation, by which the insurer gets an opportunity to try to collect back from the party(ies) responsible for the loss or damage. Through subrogation, the insurer gets to "stand in the shoes" of the insured, who is most often the owner of the cargo.

When the cargo owner (usually the insured) entrusts the goods to someone for storage or transportation, a bailment is created. If the goods move from or to the United States, internationally by ocean, that bailment relationship is controlled by the Carriage of Goods by Sea Act (COGSA), a statute of the United States. International shipments, not touching a U.S. port, may be controlled by other treaties, such as Hague-Visby or Hamburg Rules.

Interstate and transportation of cargo by rail, truck and barges are generally covered by the Pomerene Act and Carmack Amendment to the Interstate Commerce Act.

International air shipments are governed by the Montreal Convention, MP-4, or the Warsaw Convention.

Some personal injury claims are governed by the Jones Act and the Longshoremen and Harbor Workers' Compensation Act (LHWCA), which are left for another day.


Cargo claims involve terms unfamiliar to the uninitiated, but which are key to understanding the claims under what is called the Carmack Amendment and COGSA. Such terms include:

"BILL OF LADING": This is a key document for cargo claims. A bill of lading generally serves three purposes: (1) document of title; (2) a contract of carriage and (3) a receipt for goods. Ocean bills can be negotiable instruments and control possession of the goods. "MANIFEST" is similar to a packing list. It identifes what was packed and/or stuffed into a container "SHIPPER" has been defined as "one who ships goods to another" and "one who tenders goods to a carrier for transportation." Black's Law Dictionary, 7th Ed. 1983. "CARRIER" has been defined as "an individual or organization (such as a railroad, ocean vessel or an airline) that transports passengers or goods for a fee." Id. The term "PRIVATE CARRIER" refers to a carrier that transports or delivers goods or services for a single entity, often a corporation. Usually that entity's primary business is not transportation but rather something else. For example, a grocery store chain may own and operate its own private fleet to deliver produce and goods to their stores. That grocery store chain's primary business is not transportation but grocery retail. Its fleet is a a private carrier. The term "COMMON CARRIER" refers to a carrier whose primary business is the transport of goods and which serve any customers that hire them, such as buses, railroads, trucking companies, airlines and taxis. Private carriers may refuse to sell their services at their own discretion, whereas common carriers must treat all customers equally. Examples of a common carrier are Federal Express and United Parcel Service. The term "INDEPENDENT CARRIER" refers to an individual owner-operator or trucker who may make deals with private carriers, common carriers, contract carriers, or others as he or she wishes. The term "CONSOLIDATOR" applies to a company that organizes and often loads into a single container, different cargoes, to obtain lower freight charges. Consolidators can be found to be carriers if they issue a bill of lading, such as Non Vessel Ower Common Carriers (NVOCC's) or Indirect Air Carriers. "BROKER": "The term 'broker' means a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation." 49 U.S.C. §13102(2). MARINE CLAIMS


What was traditionally known as the Carmack Amendment is codified at 49 U.S.C. Section 14706 et seq. It is now known as the ICC Termination Act. It provides the sole and exclusive remedy to shippers for loss or damage in interstate transit. Hughes Aircraft v. North American Van Lines, 970 F.2d 609, 613 (9th Cir. 1992).


The Carmack Amendment was enacted by Congress in 1906 as an amendment to the Interstate Commerce Act of 1887 to provide for national consistency for goods damaged or lost during interstate shipment by a common carrier. Ward v. Allied Van Line, Inc., 231 F.3d 135, 138 (4th Cir. 2000). The Interstate Commerce Commission was abolished by Congress in 1995 with the ICC Termination Act, "but the old ICC regulations remain in effect until the new regulations are promulgated." John Deere Insurance Co. v. Nueva, 229 F.3d 853, 855 n. 3 (9th Cir.2000). The ICC Termination Act also recodified the Carmack Amendment at 49 U.S.C. § 14706 from 49 U.S.C. § 11707 (1995). "This recodification worked no substantive change on the Carmack Amendment." Project Hope v. M/V Ibn Sina, 250 F.3d 67, 73 n.4 (2d Cir. 2001).


The Carmack Amendment applies to transportation of goods between states, unless the shipment is within a commercial free trade zone, which is usually about a 50 mile radius from a specified point. Trucks delivering within such a zone are virtually unregulated and can set forth, for example, a $50 per shipment limitation of liability.


The purpose of the Carmack Amendment was to provide "a uniform system of carrier liability that would provide certainty to both carrier and shipper by enabling the carrier to asses its risk and predict its potential liability for damages." Pietro Culotta Grapes v. Southern Pacific Transportation, 917 F.Supp. 713, 716 (E. Dist. Cal. 1996).


If applicable, Carmack "preempts a shipper's state and common law claims against a carrier for loss or damage to goods during shipment. Ward v. Allied Van Lines, Inc., 231 F.3d 135, 138 (4th Cir.2000)(citing Shao v. Link Cargo) (Taiwan) Ltd., 986 F.2d 700, 704 (4th Cir.1993)). It makes carriers liable "for the full actual loss, damage, or injury caused by them to property they transport, and declares unlawful and void any contract, regulation, tariff, or other attempted means of limiting this liability." Missouri Pacific Railroad Co. v. Elmore & Stahl, 377 U.S. 134, 137, 84 S.Ct. 1142, 1144 (1964). The broad reach of Carmack preempts plaintiff's state law claims, which includes claims for: 1) the tort of outrage; 2) intentional and negligent infliction of emotional distress; 3) breach of contract; 4) breach of implied warranty; 5) breach of express warranty; 6) violation of the state's deceptive trade practices or consumer protection statutes; 7) slander; 8) misrepresentation; 9) fraud; 10) negligence and gross negligence; and 11) violation of the common carrier's statutory duties as a common carrier under state law. Hoskins v. Bekins Van Lines, 343 F.3d 769, 777 (5th Cir. 2003). Carmack also preempts federal common law that increases the carrier's liability.

The Elements

To make a prima facie case under the Carmack amendment, "a plaintiff must show 1) delivery to the carrier in good condition; 2) arrival in damaged condition; and 3) the amount of damages caused by the loss." Project Hope v. M/V Ibn Sina, 250 F.3d 67, 73 (2d Cir. 2001) "Once the prima facie case is established, liability attaches unless the carrier can establish one of several affirmative defenses." Id. These available affirmative defenses are that the damage was caused by (a) the act of God; (b) the public enemy; (c) the act of the shipper himself; (d) public authority; or (e) the inherent vice or nature of the goods." Missouri Pacific Railroad Co. v. Elmore & Stahl, 377 U.S. 134, 137, 84 S.Ct. 1142, 1144 (1964). "The burden of proof is upon the carrier to show both that it was free from negligence and that the damage to the cargo was due to one of the excepted causes relieving the carrier of liability." Id. at 138, 84 S.Ct. at 1145.

Recoverable Damages

What The Statute Provides

A plaintiff suing under the Carmack Amendment is entitled to the "actual loss or injury to the property caused by... the carrier." 49 U.S.C. § 14706(a)(1).

What The Case Law Says

"The Carmack amendment incorporates common law principles for damages." Project Hope v. M/V Ibn Sina, 250 F.3d 67, 76 (2d cir. 2001). Carmack makes carriers liable "for the full actual loss, damage, or injury caused by them to property they transport, and declares unlawful and void any contract, regulation, tariff, or other attempted means of limiting this liability." Mo. Pac. R.R. Co. v. Elmore & Stahl, 377 U.S. 134, 137 (1964). If the loss is a complete loss, the general measure of damages under Carmack is the fair market value at the place of destination. Illinois Cent. R.R. Co. v. Caril, 281 U.S. 57, 50 S.Ct. 180 (1930).

Market Value Is Prevailing Measure Of Damage

The goal in an action for cargo damage is to restore the innocent party to the position the party would have been in if the contract had been fully performed. Hector Martinez & Co. v. Southern Pac. Transp. Co., 606 F.2d 106, 108 (5th Cir. 1979). Where goods are damaged, the general rule for damages is the difference between the market value of the shipment at its destination and the market value of the shipment as damaged. Fujitsu Ltd. v. Federal Express Corp., 247 F.3d 423, 435 (2d cir. 2001). Where the...

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