A Carmack Amendment Refresher: Understanding How It Applies to Freight Loss Claims
In 1935, Congress passed legislation to help prevent carriers from being subject to unqualified cases of fraud and freight loss claims. Previously, carriers were held liable for any damage that occurred to a shipment while in their possession. However, this meant that carriers were on the financial hook even when damage was not their fault. Over time, the Carmack Amendment has been interpreted to provide additional protections to carriers through the Federal Motor Carrier Safety Administration (FMCSA). But, the age of the Carmack Amendment has led many to wonder how it applies to modern shipping practices. So, let’s take a moment for a brief refresher.
Why Are Carriers Not Automatically Responsible?
Carriers cannot automatically be held responsible for damage that occurs outside of their control. Now, this is not to say that carriers employing unsafe drivers or other possible sources of negligence get a free pass on damage claims. Carriers also have a duty to actively reduce their level of negligence as defined by the Carmack Amendment, reports Lisa Terry of Inbound Logistics. Yet, carriers are held liable for damage without proof of negligence unless it can prove otherwise. In other words, carriers and shippers alike must understand more about the Amendment and when it applies.
When Is a Carrier Not Responsible For Freight Damage?
Carriers have one path to avoiding freight loss liability under the terms of the Carmack Amendment. If the carrier can provide proof that it was not negligent and that one of five exceptions caused damage, it can avoid being responsible for freight damage. These exceptions include the following:
- A carrier cannot be held liable for “An Act of God.” This defense includes natural disasters or physical phenomenon that a carrier cannot control. For example, severe weather or a medical emergency on the part of the driver, such as a heart attack or stroke, would fall under this defense. However, any act under this defense that damages freight must be of extreme unanticipated force and unable to be avoided. In other words, driving into area under a hurricane warning would not qualify under this defense if water occurs.
- A Public Enemy of the U.S. Government or Act of War also exempts carriers from damage liability. Since a war has not been fought on American soil in decades, the closest thing U.S. shippers can fathom is an act of terrorism. However, few cases have been brought before the courts using terrorism as an exception under this defense, so it may be open to interpretation in the future.
- If shippers did something that could result in damage, the carrier is not liable. This defense might not seem justified, but if a carrier can prove a shipper’s negligence contributed to damage during transit, the carrier is not responsible for freight claims. In other words, improper packaging, labeling or packing of a shipment could be cited under this defense to defer the liability of damage that occurred.
- Government actions fall under the Carmack Amendment Exceptions. If the government takes action that results in the damage to freight, such as a road closure or trade embargo, the carrier is not liable. Essentially, this defense goes back to not being able to control the government’s policy actions, so the carrier is not responsible for delays or guarantees of delivery.
- Inherent vice of goods can also be used to avoid damage liability. Some products may have an inherent propensity to spoil or be defective as time passes. Fruits and vegetables, tobacco or medical supplies can spoil quickly even when kept at proper temperatures. If the carrier can prove these goods were susceptible to inherent damage or spoilage without causing unnecessary delays during transit, the carrier is not responsible for damage and loss.
What Does the Carmack Amendment Mean to You?
The exceptions laid out by the Carmack Amendment protect carriers from the burden of liability when they are not able to control events that may contribute to spoilage or damage of freight. More importantly, damaged freight is not a valid reason for withholding payment to freight forwarders or carriers under the terms of the Carmack Amendment. In other words, you should never withhold payment while a freight loss claim is being filed or processed. If the carrier is unable to prove its lack of negligence or defense under one of the exceptions, you may be reimbursed for the freight loss costs minus the value of the damaged goods.
By taking the time to understand what the law says with respect to holding carriers liable, you can help ensure your customers receive their packages appropriately and file claims when necessary. Next, we will take a closer look at how the Carmack Amendment impacts the claims’ filing process and third-party logistics providers.