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COGSA package liability
Interested Underwriters v. SeaFreight Line, Ltd., et al.
In November 2007, Florida’s Third District Appeals Court overturned a lower trial court in
Interested Underwriters v. SeaFreight Line, Ltd., et al. and found that cartons
on pallets, not pallets of cartons, were considered packages under the Carriage of Goods By Sea Act’s (COGSA) $500 per package limitation.
After a container with 1,175 cartons of perfume were shipped from Venezuela and never reached the consignee, the consignee’s cargo underwriter paid the claim for about $570,000, or nearly $486 per carton, and then sought subrogation against SeaFreight as the ocean carrier and a Florida ground transportation company. During transit, the shipping container carried eight pallets of 140 cartons each and 55 loose cartons. The trial court decided the shipment contained 63 “packages” for COGSA purposes, adding the pallets and loose cartons, but the appeals court ruled that each carton was a package, for a total of 1,175 packages.
Three bills of lading were used for shipment, each containing SeaFreight’s logo and name. On the original bill of lading, under “NO. OF PKGS.,” the number “1” was listed and both parties agreed the number was a reference to the single 20-foot container and not the number of COGSA “packages” shipped. The description of the container’s contents under the heading “DESCRIPTION OF PACKAGES AND GOODS” when translated into English was “8 pallets with 1,120 cartons, 55 loose cartons, perfume.”
The second bill of lading had a similar description and the third bill of lading, dated four days after the original, described the packages and goods as “TOILET PREPARATIONS 1175 PCS.” The parties did not use the term “package” in the description of goods on any of the bills of lading to distinguish if the cartons, pallets or both were considered “packages” for COGSA purposes.
The appeals court found that “In a case such as this, the bill of lading refers to both the container and other units susceptible of being COGSA packages and is therefore inherently ambiguous,” and used the dictionary to define “package,” “pallet” and “carton.”
“The cartons are the ‘packages’ placed on pallets, which are in turn placed in a container for shipping. Had the parties described the goods simply as eight pallets of perfume and 55 loose cartons, SeaFreight likely would have prevailed. But on the original bill of lading and the later, unsigned bill of lading on SeaFreight’s form, the parties apparently thought it important to specify the total number of cartons being shipped,” the court said, ruling in favor of
Interested Underwriters.
To read the case in full,
click here.
Under the terms of COGSA, if goods in transit are damaged, the most a company could recover from shipping lines or an NVOCC in the event they are proven negligent is $500 per package. As demonstrated by the above case, measurement of a package is widely defined and can vary from one container to one pallet. In many cases of COGSA liability, courts determine the party at fault and it’s up to the logistics specialist to protect their business from lawsuits.
Underwriters v. SeaFreight Line, Ltd., et al showed how an NVOCC must be proactive to limit exposure, since liability can be increased by improperly listing the “package count” on a house bill of lading.
To protect NVOCCs from such liability, Avalon Risk Management’s Combined Transit Liability (CTL) program offers Cargo Legal Liability, which provides coverage for loss and damage to cargo shipped under a house bill of lading, air waybill, freight receipt or even while acting as an agent. If sued by customers or their subrogating insurers, coverage includes defense costs and settlement amounts you are legally obligated to pay under your bill of lading and contract terms. The CTL program would also pay out full settlement amounts as awarded by the courts, even if the $500 package limitation is broken and/or extended beyond customary package count as this case demonstrates.
To find out more, please view our
CTL Brochure or
Application.
For further information, contact Andriana Davis, Product Manager at Avalon’s corporate headquarters. Andriana Davis can be reached at (847) 700-8087 or at
adavis@avalonrisk.com. Please do not hesitate to contact one of our ten regional offices throughout the United States. To view a directory of Avalon's office locations, please visit our Web site at
www.avalonrisk.com.
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