8 ways your bill of lading can fail to limit liability

Alan S. Cofman

Most provinces have enacted their own versions of the “Uniform Bill of Lading”, a model law for truck transportation in Canada.

The Uniform Bill of Lading includes a provision that the carrier is presumed liable for any cargo loss or damage, but that those losses will generally be limited to $2 per pound ($4.41 per kilogram) or the actual value of the goods, whichever is less.

Carriers do have some absolute defences. These include, for example, so-called “acts of God” (situations that can’t be controlled or avoided through ordinary foresight, such as earthquakes or freak winds or waves), inherent defects in the cargo itself, and defaults of the owner or shipper, such as insufficient packaging or improper instructions.

Bill of Lading
(Photo: iStock)

However, in most cargo-loss situations, the carrier will be found liable if a claim is pushed to trial.

The following are situations where carriers might find themselves exposed to liability in excess of the $2-per-pound limitation, perhaps blindly so:

  1. Declared value – the Uniform Bill of Lading requires a space for the shipper to declare a value for which it will be compensated in the case of a loss, usually in exchange for more expensive freight charges. Of course, inserting a value in that space will expose the carrier to greater liability. In some jurisdictions, the failure to include a “declared value” space will also be significant. It could deprive the carrier of the right to limit its liability altogether. Lawyers will look for that blank white box right away.
  2. Non-compliant bills – As alluded above, in some jurisdictions, the failure to issue a compliant bill of lading will deprive the carrier of the right to rely on the $2-per-pound liability limit. In those jurisdictions, it is particularly dangerous for a carrier to accept or rely on a shipper-issued bill of lading without having it pre-approved. Notably, this is not the case in Ontario, where deficient bills — called “contracts of carriage” under provincial legislation — are deemed by law to have the proper, required terms. For example, the lack of a space for a declared value on an Ontario bill will likely have no ill consequences, even though it is a technical violation of the carrier’s obligation.
  3. Certain goods – Some cargo classes are treated differently than others. Excluded goods might include fresh fruit and vegetables, farm products, raw materials, or goods specifically regulated under their own legislation. In Ontario, livestock are covered, but their limitation value is $3.31 per kilogram rather than $4.41 per kilogram.
  4. Carriage within a municipality – In Ontario, a relatively unknown “carve out” involves carriage that is solely within a single municipality. There is no statutory limitation of liability for carriage from the Port of Toronto to Downsview Airport, because it is all within the municipal boundaries Toronto. But there will be a limitation if someone circles around Pearson Airport, likely hitting Brampton, Mississauga and Toronto. The written terms on the bill of lading will matter significantly here.
  5. Stoppage in transit – As long as the carrier is fulfilling a carriage mandate, to move cargo from Point A to Point B, it will generally be considered to be in transit. This includes, for example, points for deconsolidation and re-stuffing. It might even include longer stops for customs clearance or other reasons. However, should the goods be considered to be warehoused for a period of time, they could fall outside of the law governing truck transportation. Generally speaking – unlike a truck carrier – the warehouser is subject to unlimited liability, unless it has specific contract protections in place. Stoppage can be a dangerous issue if the goods might have been put in temporary storage at any point.
  6. Collateral agreements – Despite the legislative framework, parties remain largely free to contract on any commercial terms that make sense to them. So a truck carrier can become liable for loss or damage due to promises made by contract. This often includes the right of a customer to set-off unpaid freight charges against cargo damages from unrelated loads.
  7. “Busting limits” and “inside jobs” – In days gone by, lawyers tried to “bust” limitation amounts by arguing that it would be inappropriate for the carrier to rely on a limitation of liability because it had “fundamentally breached” the contract. In other words, the contract was breached so badly that the customer effectively did not get what it had bargained for. Perhaps the carrier had failed to provide the level of security that was promised, or a theft was orchestrated by the carriers’ own employees at the yard. More recently, outside of the trucking landscape, the Supreme Court of Canada has made it much more difficult to defeat limitations of liability.
  8. Point of origin in outlier jurisdiction – Under federal legislation, the law that applies to any bill of lading is anchored in the law for the place of origin. For example, there will be no automatic $2-per-pound limitation of liability for a shipment moving from Charlottetown to Hamilton, because P.E.I. has not adopted the $2 limitation, but there will be a limitation amount if the same cargo was going the other direction.

— Alan S. Cofman is a partner with Fernandes Hearn LLP in Toronto, and can be reached at 416-203-9500. This article is intended for information purposes only and does not constitute legal advice.

 

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