Beware of Potential Limitations of Liability and All Carrier Bills of Lading

By Daniel W. Raab, Esq.

June 18th 2018
Introduction

Essex Insurance Company v. Barrett Moving & Storage, Inc. 885 F.3d 1292 (March 2018) is a case that went in front of the 11 th Circuit Court of Appeals relating to the liability of carriers and surface transportation broker status as well as limitations of liability. The lawsuit involved a magnetic resonance imaging machine that was damaged during transportation from Illinois to Texas. The MRI machine was sent in two separate shipments. Barrett Moving & Storage, Inc. transported one of the shipments with its own truck and arranged for another party, Landstar Transportation Logistics, Inc., d.b.a. Landstar Carrier to transport the components for the rest of the machine.

The parts being shipped by Landstar were damaged in transit while the components shipped directly with Barrett Moving & Storage, Inc. did not have a problem. The machine was found to be a total loss.

Litigation

This case was brought by the owner/shipper of the equipment, Nationwide Imaging Services, Inc. and Essex Insurance Company, its insurer under the Carmack Amendment, 49 U.S.C. 14706. The loss to the equipment exceeded the amount of coverage.

This case was originally heard by a Federal Magistrate. There were summary judgments entered against Barrett Moving & Storage, Inc. and Landstar Transportation which were reversed by the 11 th Circuit Court of Appeals.

The facts showed that there were some negotiations between Barrett Moving & Storage, Inc. and Nationwide Imaging Services, Inc. regarding the transportation of the shipment. Eventually there were quotes that were issued for the shipments. Barrett was involved with coordinating some of the specifics including the number of drivers for both shipments. The Landstar drivers did present a uniform straight bill of lading which was signed. The MRI had ice buildup. Representatives of the shipper said they were not familiar with shipping an MRI. It was determined that there was severe shock during transportation resulting in a thermal short to a magnet. This resulted in a total loss of the entire MRI unit. Essex paid the policy limit of $346,000.00 to Nationwide who had paid $420,000.00 to purchase the unit.

On January 2011, Nationwide sent Barrett a letter stating that it intended to file a claim for the loss. Barrett responded that it merely arranged the transportation and was not a carrier. Nationwide and Essex then brought this lawsuit in the Middle District of Florida, under the Carmack Amendment, 49 U.S.C. 14706. Barrett argued that it was a broker and not a carrier with regard to the part of the shipment that was moved by Landstar. Landstar tried to limit its damages under the terms of its bill of lading, although it did not contest strict liability. Nationwide also contended that Barrett held itself out as the sole party moving the MRI machine. There were Summary Judgment Motions filed by Barrett and Landstar as well as by Nationwide. The Court denied Barrett and Landstar’s motions finding as a matter of law that Barrett acted as a carrier with regard to the shipment. The Judge also agreed that the terms of the shipment were contained solely within a chain of emails between Nationwide and Barrett and therefore the liability limitation between Barrett and Landstar was not applicable to Nationwide. Barrett and Landstar were held jointly and severally liable in the amount of $560,000.00 with regard to the destruction of the MRI machine. The case was taken on appeal to the Eleventh Court.

Appellate Court

The Eleventh Circuit held that the granting of a Summary Judgment against Nationwide and against Landstar including denying Landstar’s limitation of liability defense was incorrect.

The public policy is to promote uniformity. A broker is merely an intermediary. See 49 U.S.C. 13102.

The Appellate Court stated that although the District Court reached a reasonable interpretation with regard to the legal responsibility, Barrett presented information that could create a fact issue as to its status as a broker. Barrett’s website actually stated that it could handle sensitive and specialized medical equipment and had an emergency contact. The website also discussed its affiliation as an agent and that some of the conversations indicated that this was going through a third party logistics department. The Court held that the Magistrate’s conclusion should not have been reached by a Summary Judgment.

The Court next considered whether or not the grant of the Summary Judgment was appropriate against Landstar for the full amount of the assessed damages. Landstar was asserting the $1.00 per pound limitation of liability. The Magistrate Judge held that the emails were what made the contract and not the actual bill of lading. The Appellate Courts said that this was incorrect and that Landstar’s limitation of liability had generic terms.

The Court ruled that there could be a limitation of liability on a bill of lading issued by Landstar. There was a blank line left of the bill of lading that could have been filled in by the shipper. There was a $1.00 per pound limitation. Landstar did issue a bill of lading, although it was not given to the shipper. The Court stated that Landstar was entitled to the $1.00 per pound liability limitation.

Conclusion

This case illustrates the ongoing battles over limitations of liability and who is a carrier. This author recommends if possible for brokers to get liability insurance so that they are protected in these situations. This case also demonstrates the importance of the carrier having its own bill of lading. Some liability insurance carriers are making this a requirement. It is interesting that the Appellate Court applied the terms of a bill of lading that were not actually seen by the shipper. This illustrates why the shipper should purchase an adequate amount of insurance to cover losses and avoid carrier limitations of liability.

Daniel W. Raab, Esq. is an attorney with offices in Miami who practices transportation, business, insurance and commercial law