Insurer may sue, but liability limited

Insurer may sue, but liability limited    Professional Products Inc. (PPI) purchased three pallets of computer wafers from Omneon Video Graphics and requested Omneon ship the wafers directly to the end purchaser of the goods.
   The wafers were shipped FOB, meaning ownership passed from Omneon to PPI when the shipment left Omneon's dock. Instead of arranging for its own carrier, PPI authorized Omneon to contract with Haas.
   When the shipment arrived, one of the pallets of wafers was missing.
   The conditions of contract carriage on Haas' preprinted bill of lading said shipper and consignee are jointly and severally liable for any unpaid shipping charges, and defined the shipper as 'the party from whom the shipment is received, the party who requested the shipment be transported by Haas Industries, and party having an interest in the shipment, and any party who acts as an agent for any of the above.'
   PPI filed a claim with Haas for the lost wafers, but Haas replied that only Omneon was entitled to file a claim. Omneon then filed a claim with Haas, and Haas issued a check for $88 to Omneon, asserting this amount fulfilled Haas's obligation because the bill of lading limited Haas's liability to 50 cents per pound.
   OneBeacon, PPI's insurer, compensated PPI for the value of the lost goods, and stepped in for PPI as subrogee and sued Haas.
   Following a bench trial, the district court entered judgment in favor of Haas, saying OneBeacon-PPI lacked standing to sue under the Carmack Amendment and, alternatively, that Haas had limited its liability.
   OneBeacon appealed (OneBeacon Insurance Co. v. Haas Industries Inc. 9th Cir. No. 08-16826. March 9.), and the appeals court said the case 'presents the question of whether an owner of goods who was not referenced by name in the bill of lading has standing under the current text of the Carmack Amendment.'
   As a 'party having an interest in the shipment,' PPI fell within the bill of lading's definition of 'shipper,' and had standing to sue, said the 9th Circuit, as did OneBeacon as subrogee.
   But the 9th Circuit agreed with the district court that Haas limited its liability through the same bill of lading because under Carmack, while a carrier is generally liable 'for the actual loss or injury to the property,' it may establish rates under which the liability is limited to a value established by written or electronic declaration of the shipper or written agreement between the carrier and shipper if the value would be reasonable under the circumstances surrounding the transportation.
   Here the bill of lading expressly limited Haas's liability in the absence of a higher declared value. By signing the bill of lading without listing a declared value, the parties agreed to the limitation of liability.
   So the court reversed the holding that OneBeacon lacked standing, affirmed the holding that Haas limited its liability, and remanded the case for an entry of judgment consistent with the limitation of liability.

Decision 'evens playing field' for forwarders
   A recent 9th Circuit Court of appeals decision over an air cargo shipment 'has evened the playing field for air freight forwarders when it comes to third party indemnity claims,' said Peter D. Clark, a partner at Clark, Atcheson & Reisert. (Chubb Insurance Co. of Europe S.A. vs. Menlo Worldwide Forwarding Inc., 9th Cir. 06-07267. Feb. 10)
   Clark, in an article posted on his firm's Web site, said the decision could have important implications across the United States and beyond the U.S. borders.
   The case grows out of the shipment of a turbine aircraft engine by Air New Zealand Engineering. On Nov. 14, 2004, the company hired Menlo (which was acquired by UPS one month later) to arrange the shipment. Menlo, in turn, contracted with Qantas Airways to move the engine from New Zealand to Los Angeles.
   The engine was damaged when it arrived in Los Angeles and the owner filed a claim with its insurer, Chubb, which paid the owner $119,666.62.
   On Nov. 14, 2006, Chubb brought a lawsuit against UPS seeking to recover the money it had paid to the engine's owner. Chubb argued UPS was liable for the damage to the engine under the Montreal Convention, a treaty that governs international air carriage of cargo as well as passengers and baggage.
   UPS in a settlement agreed to pay Chubb $80,000.Then UPS sued Qantas in U.S. District Court, seeking indemnification and contribution for what it paid Chubb. UPS said it was 'in no way responsible for the damage.'
   But the district court dismissed UPS's suit, reasoning it was not brought within two years of the damaged engine's arrival in Los Angeles ' even though UPS itself was not sued until two years after the delivery.
   Chubb's suit against UPS was asserted under a provision that gives it the right to sue for 'damage sustained in the event of the destruction or loss of, or damage to, cargo.' And under Article 35 of the treaty that 'right to damages' is extinguished after two years.
   But UPS's action was predicated on a different right, the 9th Circuit found.
   'UPS does not seek compensation for damage sustained to the engine; rather UPS as a contracting carrier, seeks indemnification (and contribution) from Qantas, as an actual carrier, for compensation it has already paid Chubb,' the court said.
   And while the Montreal Convention does not create a cause for indemnification or contribution among carriers, neither does it preclude local law actions, which the convention refers to as 'right of recourse,' the appellate court said. It pointed out that Article 37 of the convention said nothing in it 'shall prejudice the question whether a person liable for damage in accordance with its provisions has a right of recourse against any other person.'
   Since UPS's action against Qantas was premised on that 'right of recourse' and not the 'right of damages,' the 9th Circuit found the two-year bar did not apply, and it overturned the lower court and remanded the case for trial.
   Clark said one of the arguments UPS advanced 'against the inequity accepted by the lower federal district court was to apply admiralty law concepts to the Montreal Convention.'
   While the Carriage of Goods of Sea Act has a one-year, instead of two-year limitation period for bringing suits, 'admiralty law decisions interpreting COGSA consistently do not apply its one-year statute of limitation provision to third party actions. In admiralty law, indemnity does not arise until the indemnitee has to make payment for loss,' Clark noted.
   Clark said the 9th Circuit's opinion does not mention admiralty law, but as a result of the decision, he said, 'aviation law is now on an even keel with admiralty law in this area.'