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Industry Express Group, Inc.
Industry Express, Inc.
Datanalysis, Inc.
Tel 713-977-6877
Fax 713-977-2215

The Carmack Amendment

Cargo Liability And The Carmack Amendment

The Carmack Amendment is codified at 49 U.S.C. Section 14706 et seq. Carmack controls the application of value to property loss and damage claims against motor carriers, regardless of the character or modality of the transportation. "The legislation supersedes all the regulations and policies of a particular state . . . Almost every detail of the subject is covered so completely that there can be no rational doubt that (the United States) Congress intended to take possession of the subject, and supersede all state regulation with reference to it." In these few words, we are informed that actions of claimants to recover the value of their property lost or damaged in transit are entirely and wholly subject to federal law, i.e., the Carmack Amendment to the Interstate Commerce Act. Carmack chisels into granite that motor carriers are responsible – as to loss or damage - for the full value of property they transport. However, there is a caveat: Having met specific criteria, carriers may limit the amount they are willing to be responsible for in any shipment. To satisfy that specific criteria, carriers must:

** Please take note that the contract issued by Industry Express, Inc. on each shipment it handles supersedes and replaces carriers' tariffs and their bills of lading, and any and all other documents relevant to shipment that are routinely or otherwise passed between shippers, payers of freight, consignors and consignees. This ensures that only one document… available to all the parties… governs shipments. The IEX contract requires carriers to provide service at the full value of shipper's property. Hopefully, you fully understand, and are able to communicate to carriers, that their tariffs and their bills of lading are utterly useless documents when they elect to operate for IEX under our standard contract. It is our experience that most carriers notify the shipping public of reduced liability via their insurance certificates. In oilfield freight, these are commonly noted at values from $100K to $250K, with a few carriers showing limits of $1M. It is also our experience that shippers and payers of freight, as well as most motor carrier personnel, have little or no knowledge of reduced liability, or how it affects claims for loss and damage. There are no hard and fast rules that demonstrate how carriers are to advise shippers and payers of freight that they operate under limited cargo liability. The most reliable ways would appear to be via their proof of insurance – which may or may not show their released liability, or via their bill of lading, which refers to their tariff – both of which the contract renders irrelevant and useless for that purpose. Additionally, a vendor (carrier) is under no duty to communicate the existence even of latent defects in their services unless by act or implication they represent such defects not to exist" A carrier choosing to limit cargo liability represents neither latent defect, nor defect at all. Ergo, it becomes IEX's responsibility to advise every carrier we use, on every job we accord them, that they are operating at unlimited cargo liability. Co-insurance becomes a factor when (i) carriers are not liable for the full value of the property they are transporting, (ii) carry insurance limited to values less than the actual value of cargo. It is incumbent upon shippers to determine whether they desire transportation at full value of their property, or whether they are willing to settle for transportation at some fractional value of their property. Having made the determination, they are free to demand transportation under either scenario, and carriers are required under law to provide the carriage desired. In the event of damage to property under limited liability, the claim amount to be paid by the carrier is determined by dividing the full value of the property (a) by the amount of carrier's liability (b). That result (c) may be expressed as a percentage. (b) is then multiplied by (c), which produces the result (d)… the amount carrier's insurance is carrier is required to pay to shipper for damage to, or loss of, property. The difference between the full value of the cargo and the limited value the carrier is required to pay is termed "co-insurance". Co-insurance means, precisely, that a shipper, given the opportunity to purchase full value protection, opted to not do so and became a co-insurer for the difference between what the carrier will pay, and the actual amount to repair or replace property. By way of example: Carrier's limited liability equals $100K, load value equals $1M. Load Value divided by Carrier's limited Liability equals 10 (percent). The ratio of carrier's liability to load value (10%) precisely and unequivocally determines the percentage amount of carrier's liability that carrier will pay to repair or replace property, or $10,000. Some final notes: Carriers are liable to loss payees for damage to property. Insurance companies are liable to the carriers that purchased their insurance. We require that carriers purchase and carry insurance equivalent to the value of our clients' property, and that such insurance policies include clients as "additional insureds". It is extremely important – especially in this industry - that carrier insurance be verified. A very few "oilfield" haulers might be able to stand one large cash hit if a policy were flawed, or had been represented as issued, but had not, in fact, been issued. Most would not be able to take such a hit. Shipper could win a judgment but it probably wouldn't be worth much. As for the argument that a relatively small amount of insurance would cover repairs, if not total loss: one need only re-visit co-insurance to debunk that notion entirely. Inadequate insurance is no better than zero insurance… only more expensive.

1 The Carmack Amendment: A Uniform System Of Liability For Interstate Transportation Carriers; Janet E. Humphrey, Songstad & Randall

2 Principles of the Law of Contract 245; William R. Anson, Arthur L. Corbin ed., 3d Am. Ed. 1919