Carmack 101 and Onerous Shipper Contracts

While most insurance personnel have heard of Carmack, they have no idea of what it means. I thought the communication from Big Truck TV that legal pro Henry Seaton discussed is pretty succinct and helpful.( Note the questions and answers are all by Henry and not from this author.)

1. What is the Carmack Amendment and when was it adopted?

Since 1910 we’ve had a statute called the Carmack Amendment which provided a fairly level playing field on cargo claims; it provided that the motor carrier was the virtual insurer of the goods being delivered, but he was only liable for the destination market value. And most importantly, for claims mitigation, that the consignee was required to accept the shipment and mitigate the damages unless the shipment was “practically worthless”.

2.Why has the Carmack Amendment lost some of its relevancy?

As a result of deregulation and the contract venue, shippers are changing those rules of the game in their contracts. I call it, “Reject It, Crush It and Dump It.” They are placing additional onerous burdens on motor carriers and here’s basically how it works. They put in the contract that the shipper will not have the duty to mitigate and that whether or not they are going to mitigate the loss is at their sole discretion and not subject to any standard or “reasonableness”.
That type of language in a contract means that if you arrive at a shippers loading dock and the refrigerated shipment is 1 degree warmer than the shipper thinks it should be, they can reject that shipment, crush it and dump it and you have no say. So that perfectly good food stuffs shipment that could be mitigated, that could be a $300 claim, is now a $40,000 claim, and the carrier has no right of inspection, no right of salvage, no right to mitigate the damages. It’s those kinds of provisions in contracts that shapes the battlefield and creates a lot of the damage.

3. How can I protect my company from “Reject It, Crush It and Dump It”?

The first thing that I do in reviewing contracts is to redline out the “sole discretion” and put in the Carmack Amendment with a duty to mitigate so we can address any claims as a contract issue. Part of the shippers’ problem is they have been delayed in terms of claims adjustment; it’s remained as open unresolved issues; the last thing they want to do is call a lawyer in and make a big deal out of it. What you should do is go to them business to business and say, “Look, if we have a cargo claim, we will agree to mediation to resolve the issue. We don’t want you to crush it, but at the same token we’re not going to just deny the claim. We’re going to find a business relationship to resolve the claim, to get the good product into the commerce stream and to pay you the legitimate claim.” And I think if you explain the whole Carmack regime, a shipper can understand that it is a fair way to resolve claims.