Truck with Mountain
Shipper and Consignee Liability for Freight Charges

By John Anderson


John Anderson
John Anderson

Question:   When is a shipper and/or consignee liable for freight charges and when are they relieved from liability?

 

Answer:   The recent case of Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co., 513 F.3d 949 (9th Cir. 2008), provides a guide for when a shipper and consignee are liable for the payment of freight charges and when they are relieved from liability.

 

In Oak Harbor, Sears was required to pay freight charges twice. Sears initially paid freight charges to its broker, NLC. However, NLC did not pay Oak Harbor and went out of business. Oak Harbor sued Sears. The court held that Sears was required to pay Oak Harbor $227,202.50 even though it already had paid that amount to NLC.

 

In reaching its decision, the court outlined the default liability rules. As one court stated, under the default liability rules, "the bedrock rule of carriage cases is that, absence malfeasance, the carrier gets paid." Excel Transportation Services, Inc. v CSX Lines LLC, 280 F.Supp.2d, 617, 619 (S.D. Texas 2003).   Those rules are as follows:

  1. The shipper/consignor is primarily liable unless the "nonrecourse" provision, also referred to as "Section 7," is executed;
  2. The consignee is liable unless the bill of lading is marked "prepaid" and the consignee already has paid the shipper/consignor;
  3. The consignee is liable if the bill of lading is marked "collect";
  4.  The shipper/consignor and the consignee are jointly liable unless the provisions of 1, 2 or 3 apply;
  5.  The default rules can be modified by contract and only apply if the parties have not agreed to an alternative arrangement.

The court did not excuse Sears from paying twice, in part, because Sears was the party that chose to use and pay NLC and, as such, should bear the risk of NLC not paying Oak Harbor.

 

A major concern these days is that there is no uniform or standard form of bill of lading used throughout the industry. Every carrier, shipper, broker, freight forwarder and other party involved in transportation seems to have their own form of bill of lading. Many of these bills of lading are deficient because they do not contain a nonrecourse provision (or any terms and conditions for that matter), a Section 7 box, or places to mark if the shipment is "prepaid" or "collect." Transportation contracts generally avoid these problems by demoting bills of lading to receipts. Parties also must take care in preparing their own form of bill of lading and using it whenever there is no contract. Finally, parties must know how to protect themselves if a different deficient bill of lading is used. 

 

Please do not hesitate to contact us if we can assist you in reviewing, revising or preparing your contracts and bills of lading. We also can explain methods you can use to protect your business from unanticipated liabilities.

 

John Anderson -  Email John 

Prepare Your Rules Tariff Today

 

Every carrier needs a Rules Tariff. If you do not have a Rules Tariff, you need to prepare one. We can help you prepare a Rules Tariff. Please contact John or Kevin to discuss our flat fee program for preparing your Rules Tariff.  

TIA Releases New Carrier Selection Framework

By Kevin Anderson


Kevin Anderson
Kevin Anderson

The Transportation Intermediaries Association (TIA) released its new Carrier Selection Framework at its Convention on April 8, 2011.  The Framework is designed to assist third-party logistics firms in developing and implementing their own individual carrier selection policies and procedures in light of the launch of CSA.

 

The Framework does not provide a checklist or an industry standard for what should or should not be done, as there are no right or wrong answers.  Rather, the Framework continues to stress TIA's position that the FMCSA is the sole determinant of a motor carrier's safety rating, not shippers or brokers. However, the Framework does suggest that brokers and shippers still check a carrier's SafeStat safety rating and not use carriers with an "unsatisfactory" safety rating.

 

At the heart of the framework is a list of possible considerations for selecting or reviewing motor carriers.  The suggested considerations include:

 

  • Verify that the carrier's DOT and MC numbers are active;
  • Verify the carrier's BOC-3 filing;
  • Verify that the carrier's licensing and insurance filings are current;
  • Verify the carrier's Safety Rating;
    • Not knowingly using carriers with an "Unsatisfactory" Safety Rating;
    • For carrier's with a "Conditional" Safety Rating asking for a copy of the carrier's plan submitted to the FMCSA for improving their rating and asking the carrier if it has filed a formal request for a safety rating upgrade;
  • Obtain copies of the carrier's insurance certificates directly from the insurance agent;
  • Check for reports of unethical, fraudulent, or other incidents against a carrier by reviewing www.tiawatchdog.net, or through other online services; and
  • Review the carrier's operating authority history on FMCSA's website.

The key takeaways from the Framework are that the only motor carrier safety "authority" is the FMCSA and that a carrier's safety rating should always take precedence over, and clearly outweigh any single score, or collection of scores, or data set, including CSA's Safety Measurement System (SMS) or BASIC scores.

 

Members of TIA may download a complete copy of the Carrier Selection Framework from the TIA website located at www.tianet.org.  

 

Kevin Anderson - Email Kevin  

Carrier Liability - Being "Legal" Isn't Enough to Protect Yourself

By Andrew Schlegel

Andrew Schlegel
Andrew Schlegel


The California Supreme Court recently upheld a jury verdict which found that a legally parked Safeway trailer was 35% responsible for an injury accident.  The truck, which was legally parked on the side of Highway 101, was found to have created an obstructed view for a vehicle entering into an intersection, subsequently colliding with a motorcycle and injuring its riders. In Lawson v. Safeway, the jury awarded $828,000 to the motorcyclist, finding that Safeway was 35% at fault, CalTrans 35% at fault, and the pickup truck driver only 30% at fault.  The California Court of Appeals, First Appellate District upheld the verdict, saying that the driver breached his "duty to use ordinary care to prevent others from being injured as the result of their conduct" because he should have made a sight line analysis to determine whether his truck would create an obstructed view where it was parked.


As easy as it would be to write this off as a product of California's increasingly plaintiff friendly courts, the Appellate Court decision relied on case law from other states, as it was the first time the California Courts had ruled on the issue.  What the Appellate Court found were eight cases (3 in New York, 2 in Missouri, and 1 each in Connecticut, Maryland and Ohio) that found that being "legally parked" was not enough to protect a carrier from being liable for negligence when an accident occurs in the vicinity of the parked vehicle.  Against this, the Court found only two cases where legal parking was accepted as a defense where views were blocked at an intersection.  


The lesson from this story: being legal isn't necessarily good enough to protect yourself from being found liable by a jury when an accident occurs.  Accident liability can arise for trucking companies any time a driver fails to "use ordinary care to prevent others from being injured as the result of their conduct."  To protect your company, make sure drivers are thinking about more than just following the law.   Encourage drivers to make their decisions based on all information they have at their disposal, including the law, weather conditions, traffic conditions, and general public safety. 

 

Andrew Schlegel - Email Andy

The information presented in this communication should not be construed to be formal legal advice
nor the formation of a lawyer/client relationship.