• The Carmack Amendment establishes the obligations of both carriers and shippers during claims investigations.
• A bill of lading normally governs limiting liability; without one, it’s difficult for a carrier to limit liability in the event of loss or damage.
• Claimants must present the original bill of lading within nine months of delivery.

The Carmack Amendment

The beginning point for any discussion regarding claims in the United States is the Carmack Amendment to the Interstate Commerce Act, stated at 14706. Originally passed by Congress in 1906, the Carmack Amendment defines the conditions under which the common carrier is obligated to deliver the property and when the carrier might be excused from this duty.

Failure to issue a bill of lading does not affect the liability of a carrier under the Carmack Amendment. In other words, even if there is no bill of lading, the carrier is still liable for freight loss and damage.

This amendment states that a carrier is liable for loss or damage to a shipment upon proof by a claimant of:

1. Delivery to the carrier in good condition,
2. Arrival at destination in damaged condition, and
3. The amount of damages.

The carrier’s defense to this is very difficult. The carrier would first have to prove freedom from negligence, and then that the loss or damage was caused by one or more of the following specific exceptions:

• An act of God
• An inherent nature or vice of the goods
• An act of the shipper
• An act of the public enemy
• The authority of law

The claimant will win any litigation of this nature unless the carrier is able to prove freedom from negligence and any one of these exceptions to liability. The claimant is not required to prove that the carrier is negligent. As long as the claimant is able to prove that the shipment was tendered to the carrier in good condition, the shipment arrived in damaged condition, and the number of damages, the burden shifts to the carrier to prove itself free from negligence and one of the above-mentioned exceptions.

The Carmack Amendment allows a carrier to limit liability if that limit would be reasonable under circumstances surrounding the transportation. This limited liability is called a “released rate.”

A released rate value of the goods is an artificial, declared value unrelated to the actual value of the goods. For a released rate to be legal, there must be a written agreement, which is usually a notation executed by the shipper on the bill of lading. It must also provide the shipper with some benefit in exchange for the released rate valuation, usually a lower transportation rate. A released rate agreement has no effect on a carrier’s liability. However, it does limit the dollar amount of the carrier’s liability by fixing a maximum claim value.

Liability under a bill of lading

Lack of a bill of lading of a properly executed and signed bill of lading restricts a carrier’s ability to limit liability for loss and damage to less than the full actual value called for by law.

For a shipper, the bill of lading is the place to specify and enforce special shipping or handling instructions. In the case of non-delivery, proving the goods were turned over to the carrier can be problematic without bill of lading documentation. The original bill of lading is usually required by the carrier before processing either a loss or damage claim.

Responsibility for issuing a bill of lading belongs to the carrier under the law. (14706 (a)(1)) While it is the statutory responsibility of the carrier, it is often the shipper that issues the bill of lading in reality. Regardless of who issues the bill of lading, both parties should be aware of what the contract provisions are before signing.

The extent of liability for freight damage or loss is governed by the bill of lading when a contract that specifically addresses cargo liability does not exist between a carrier and the shipper. Under a bill of lading, the law holds that a carrier is liable for the actual loss or damage to the property.

However, there are provisions that allow a carrier to limit cargo liability. The bill of lading states the following: “Note: Liability limitations for loss or damage in this shipment may be applicable. See 49 USC 14706(c)(1)(A) and (B).” The limitation of carrier liability, often called a “released rate” is explained in Section 1 of the terms and conditions on the back of the bill of lading. Rather than being liable for the full, or actual, value of the goods, the carrier may limit their liability, usually in exchange for a lower freight rate for the shipper.

A released rate is usually documented on the bill of lading as follows:

Where the rate is dependent on value, shippers are required to state specifically in writing the agreed or declared value of the property. The agreed or declared value of the property is hereby specifically stated by the shipper to be not exceeding $____ per_____. A released rate agreement or declaration has no effect on carrier liability, but it does limit the dollar amount of the carrier’s liability by fixing a maximum claim value.

A released rate value of the goods is an artificial, declared value unrelated to the actual value of the goods. For a released rate to be legal there must be some form of written agreement, usually the notation executed by the shipper on the bill of lading. It must also provide the shipper with some benefit in exchange for the released rate valuation, usually a lower transportation rate. Carriers should note that the released rate claim protection will not be valid if the loss, damage, or delay is caused by the carrier’s gross negligence or criminal act.

Filing a claim

By law (14706), carriers are liable to the person entitled to recover under the bill of lading. The person entitled to recover is the owner or beneficial owner of the goods. The claimant will have to provide evidence of their right to file the claim. The original copy of the bill of lading or the original paid freight bill generally establishes that right.

The law limits the right to file a claim to within nine months after delivery of the freight. In the case of lost freight, the claim must be filed within nine months after the date the freight would have reasonably been delivered.

Section 2 of the bill of lading terms and conditions outlines the legal time limits for filing claims. Carriers may choose to set a longer time period in their tariff; however, a time period of less than nine months may not be included in the tariff or enforced.

The claim must be filed in writing. The carrier must handle the claim according to the procedures and notification time frames outlined in Part 370.

The law also provides a time limit of two years to bring a civil action against the carrier. This period is computed from the date the carrier gives a person written notice that the carrier has disallowed any part of the claim specified in the notice.