Background
National Railway Equipment shipped four locomotives via rail carriers to North Carolina, but the locomotives derailed en route during Hurricane Florence. NRE’s insurer, Certain Underwriters at Lloyd’s, paid NRE under the terms of its insurance policy and sued the rail carriers to recoup its payment as NRE’s subrogee. The carriers argued that their liability was capped by the liability limitations in their shipping contracts. The district court granted summary judgment for one carrier and denied a motion for judgment as a matter of law for the other, limiting recovery to the maximum liability amounts specified in the contracts.
The court’s reasoning
The court reviewed the grant of summary judgment and the denial of a motion for judgment as a matter of law de novo. Under the Carmack Amendment, a carrier may limit liability if it gives the shipper a reasonable opportunity to choose between liability levels, obtains the shipper’s agreement, and issues a receipt or bill of lading. The court distinguished the case from ABB Inc. v. CSX Transportation, Inc., noting that the shipper here was aware of the published rates and affirmatively chose lower rates with limited liability coverage. The court found the Standard Transportation Commodity Code ambiguous but resolved the ambiguity using extrinsic evidence, including the shipper’s prior course of dealing and testimony that he understood the code selected the lower rate with the accompanying liability cap.
What it means going forward
The decision clarifies that a shipper’s selection of a specific commodity code, when supported by a course of dealing and knowledge of published rates, can effectively bind the shipper to a carrier’s liability caps under the Carmack Amendment.