The short answer is: it depends. This is surprising to many shippers who believe that all damage during transport is covered by the carrier. This is true in law, however; there are some exceptions to liability which, can be pretty far reaching and often surprise shippers that damage to their goods is not covered by the carrier. Most bills of lading contain the the following statements:
1. Liability of the Carrier
The intermediary of the the goods herein described is liable for any loss of or damage or injury to the goods accepted by the intermediary or the intermediary’s agent except as hereinafter provided.
2. Exemptions from Liability
The intermediary is not liable for loss, damage, injury or delay to any goods described in the bill of lading caused by and act of God, the Queen’s or public enemies, riots, strikes, defect in the goods, an act or default by the consignor, owner or consignee, authority of law, quarantine or difference in weights of grain, seed or other commodities caused by natural shrinkage.
The carrier’s defenses:
Acts of God
This is where the carrier can show that the damage was caused by extraordinary weather conditions during which the carrier’s reasonable actions could not avoid the damage. The onus of proof lies with the carrier for this defense and it is seldom used during a damage claim.
The Queen’s or Public Enemies, Riots and Strikes
The definition of this one is fairly straightforward. Again, this is a defense seldom used by carriers. It would be a pretty rare set of circumstances where this exemption would apply.
Defects or Inherent Vice in the Goods
This is where it gets interesting. The carrier generally only has to show that by the balance of probabilities, something in the nature of the goods led to the damage. This could be insufficient packaging, boxes that collapse under humidity, a box with a leaky item that damages the shipment, etc. For example, if you shipped steel and it rusted during transport (assuming that the carrier did not negligently expose it to moisture) the carrier could assert that rust is an inherent vice of steel and is not liable for the rust damage.
This can be a very wide exception to the strict liability of the carrier. As a shipper, you have the duty to ensure you take all the necessary steps to protect your goods against the normal rigors of transport.
Acts or defaults by the Owner or Shipper
a) Packing, Loading and Securing
The owner or shipper has a duty to provide a shipment that is fit for transport. This includes providing the necessary instructions for care and to load and secure the shipment to withstand the normal and expected rigors of transport. The carrier does not generally have a duty to second guess the shipper about whether or not the shipper has properly packed and secured the cargo for transport. The carrier is employed, not because of his expertise in packing cargo, but to provide a facility to transport goods from one place to another.
An example of this situation is where a shipment has “shifted” during transport. The driver may have had to apply his brakes extra hard to avoid an accident and this caused the shipment to shift, skids fall over, etc. Most shippers think this is a pretty clear case that the carrier is at fault….wrong! If the load shifted, then it was not packed properly by the shipper. In addition, having to stop short on the highway is something that should have been reasonably expected by the shipper when loading the goods.
This particular exemption from liability is pretty far reaching and can apply to many situations where damage occurs during transport.
b) Instructing the Carrier
This is where a claim for loss or damage can be attributed to a delay in transport caused by an error or omission of the shipper. In this case, the carrier is not liable. For example, the shipper provides the wrong customs paperwork, and the goods get held up at the border and subsequently miss a delivery and a fine is incurred by the shipper for a missed delivery. The carrier would not be liable because the shipper has a duty to provide adequate shipment and delivery information.
Statutory Defenses
Most bills of lading contain the following statement:
12. Notice of Claim
(a) No carrier is liable for loss, damage or delay to any goods carried under the bill of lading unless notice thereof setting out particulars of the origin, destination and date of shipment of the goods and the estimated amount claimed in respect of such loss, damage or delay is given in writing to the originating carrier or the delivering carrier in sixty (60) days after delivery of the goods, or in the case of failure to make delivery, within nine (9) months from the date of shipment.
(b) The final statement of claim must be filed within nine months from the date of shipment together with a copy of the paid freight bill.
These defenses are a “no brainer” for the carrier. Even if the carrier is at fault and you have not:
1)filed a written notice of claim within 60 days
2)filed a final statement of claim with a value within 9 months.
3)Paid the freight bill
your claim will be denied based on this point of law. As a shipper you have no defense to these statutory assertions by the carrier. Many shippers are surprised by the fact that if they do not pay the freight bill, their claim is null and void. The reasoning behind this is that if the shipper refused to pay the freight bill, they have effectively become judge and jury in the dispute. Many a shipper have erroneously decided to withhold payment on a shipment because of a claim. Here’s what happens… the carrier will file suit for non-payment of the freight bill. The shipper will file a counter claim for the damaged shipment. When this goes to court, the judge will grant the carrier payment of the freight bill and dismiss the counter claim based on non-payment of the freight bill. At this point, the shipper has to start the claim all over again from the start, assuming that the 9 months have not passed by and the claim is still eligible. Pay your freight bills during a claim!
There is one other statutory defense that shippers should be aware of this is the defense of Maximum Liability. In Canada, a carrier is limited to $4.41 per kilogram based on the total weight of the shipments unless otherwise declared on the bill of lading. So, unless you have noted the total value of the goods on the bill of lading, you will be limited to this amount. There are some factors to consider about noting the value on the bill. If you declare a value greater than $4.41 per kilogram, then the carrier will most likely charge you a premium for the excess value of the shipment. This is a business decision each shipper must make based on value and risk.
Conclusion:
Understand what is covered by the carrier and what is not. As a shipper you need to take steps to minimize your risk of loss and damage through extra insurance, cargo securement, etc.
An excellent source for information regarding claims is “Motor Carrier Cargo Claims,” Third Edition, by John S. McNeil, Q.C., published by Carswell Thompson Professional Publishing. I would highly recommend getting a copy for your shipping office.
Disclaimer: The writer of this article is not a lawyer and the content of this article is for information purposes only and should not be considered legal advice.