CHAPTER 6
The Carriage of Goods and the
Liability of Air and Sea Carriers
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Liability of International Carriers
• Liability of international carriers is governed by
many international treaties and laws.
• Issues of jurisdiction turn on whether:
– The passenger was ticketed as domestic or
international,
– The accident occurred over land or sea,
– The accident occurred within 12 miles of the U.S.
shoreline,
– The accident occurred over the “high seas.”
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Warsaw Convention &
Montreal Convention
• Warsaw Convention (Protocol 4 of 1999).
• Montreal Convention 1999 (US ratified in
2003).
• Represents a movement from protection of
the airlines to protection of travelers.
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Warsaw Convention
• Note -There is a limitation on liability.
– Damage to cargo at about $10 per pound.
– $75,000 death, personal injury limit.
– May be exceeded if airline “reckless.”
• So if shipper wants protection must declare
and pay higher value.
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Montreal Convention
• Replaces the Warsaw Convention where ratified
(not adopted in United States).
• Only applies to passengers ticketed for
international travel, if approved by all countries
involved in the ‘legs’ of the journey.
• Will not have to prove airline at fault in case of
personal injury or death.
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Montreal Convention – Application
to International Carriage
• Strictly liable for all damages up to $146,000
approximately
• Carrier is liable for damages above that
UNLESS not due to its negligence or was the
sole result of negligence or wrongful acts of third
parties
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El Al Israel Airlines Ltd. V. Tseng
• Tseng was subjected to a search before
boarding an EL Al plane in NYC. She sued for
assault and false imprisonment. The District
Court dismissed based on the Warsaw
Convention that no “accident” had occurred. The
Court of Appeals ruled that national law could
provide a remedy where the Convention did not
apply.
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El Al Israel Airlines Ltd. V. Tseng
• Issue: Did the Warsaw Convention preclude an
action under local law for the alleged torts?
• Holding: Yes. The Supreme Court ruled that a
passenger is precluded from bringing this action
under local law because the Convention was
intended to provide uniformity.
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El Al Israel Airlines Ltd. V. Tseng
• Compare this case with Olympic Airways v.
Husain (a 2004 Supreme Court decision). Why
was failure to move an asthmatic doctor to a non
smoking area an “accident”?
• An “unusual and unexpected event external to
the passenger”
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Air Carrier’s Liability for
Death or Bodily Injury
• Article 17 of the Montreal Convention gives three
elements for liability:
– Death or bodily injury,
– Resulting from an Accident,
– On board the aircraft or while embarking or
disembarking.
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What is an “Accident”?
• Generally requires the injury be caused by some
event peculiar to air travel and “external” to the
passenger. Sometimes it is not clear:
– In Air France v. Saks (1985) a passenger’s ear injury
was held to not be an accident.
– But see Olympic Airways v. Husain (2004) in which
an asthmatic patient died from allergic reaction to
secondhand smoke aboard an aircraft.
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Embarking or Disembarking
• A carrier is only responsible for accidents that
occur “on board” the aircraft.
• Whether a passenger is embarking or
disembarking is a factual question, whether the
passenger is “under the control” of airline
employees.
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Limitations on Liability
for Death or Bodily Injury
• Damages now measured in Special Drawing
Rights (SDR), a mix of different currencies.
• Montreal Convention sets up a two-tiered liability
system:
– Airline is strictly liable for up to 100,000 SDR’s.
– Also, airline is presumed negligently liable for damages
over 100,000 SDR’s, unless it can prove it was not
negligent.
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Limitations on Liability
for Death or Bodily Injury
• Comparative Negligence (of the Passenger or
Shipper) is a valid defense under the convention.
• Compensable Damages.
– The convention does not specify what damages can be
collected by plaintiff.
– See Zicherman v. Korean Air Lines Co..
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Death on the High Seas Act
• Federal admiralty statute.
• Applies to wrongful death cases occurring past
the 12 mile territorial limit of the U.S. waters.
• Punitive Damages.
• Damages for Mental or Psychological Harm can
be awarded if they were caused by the injury.
– No emotional distress for lost baggage, evacuation, etc.
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Death on the High Seas Act
• Jurisdiction: particular conditions.
• The Multiparty, Multiforum Trial Jurisdiction Act
of 2002 gives federal courts original jurisdiction
of disasters.
• Time limitations: 2 years.
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Liability for Air Cargo
and Baggage Losses
• Cargo losses: air carrier is liable for “damages
sustained” to cargo under its control, up to 17
SDR’s per kilo, unless the shipper has declared
a higher value on the waybill.
• Baggage losses: limited to 1,000 SDR’s for each
passenger, unless higher value.
• Delay: airlines may be liable for delays, up to
4,150 SDR’s per passenger.
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Liability of Carriage of
Goods by Sea (COGSA)
• History- a codification of The Hague Rules;
great liability for the carrier.
• Carriers try to insert exculpatory clauses.
• Carriage of Goods by Sea Act (COGSA)
carries this tradition in invalidating clauses that
try to limit liability.
• COGSA allows a forum selection clause.
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COGSA Principles
• CARRIER MUST USE DUE DILIGENCE AT
THE BEGINNING OF THE VOYAGE.
• But carrier is protected from certain claims from
fire, storm, navigation and ship management
• Shipper has the burden of proving that the goods
were loaded in good condition and delivered in
damaged condition.
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COGSA Principles
• Written notice of the damage must be given to
the carrier before or at the time of taking the
goods or if the damage is not visible then within
3 days of delivery.
• A claim must be filed within one year.
• Failure to give notice creates a rebuttable
presumption that the goods were in good
condition.
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COGSA
• Burden shifts to the carrier.
• Carrier is liable for damage to the cargo from
failure to use due diligence to make the ship
seaworthy at its departure.
• Warranty of seaworthiness.
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Exceptions to Liability under COGSA
• Errors in navigation or management.
• Fire unless the fault is shippers, e.g.
cigarette.
• Perils of the Sea.
• Act of God.
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Exceptions to Liability under COGSA
•
•
•
•
Act of war.
Act of public enemies.
Legal seizure.
Quarantine
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Exceptions to Liability under COGSA
•
•
•
•
•
•
•
Labor strikes.
Riots.
Saving life or property at sea.
Insufficient packing.
Inherent defect in goods.
Inadequate marking of goods.
Latent (hidden) defects in ship.
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J.Gerber & Co. v. S.S. Sabine Howaldt
• In this case the cargo was damaged en route to
Delaware. The ship ran into very heavy seas.
• Issue: Is the Sabine protected from liability by the
exception to COGSA, the perils of the sea clause?
• Yes, the Sabine met its burden of proof that the
ship was of the sea. seaworthy and damage
resulted from a peril of the sea
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The
th
17
Exception: the “Q-Clause”
• Basically a general exception as long as the
carrier can prove it wasn’t his fault and can
show what was the cause of the loss.
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Carrier’s Liability for Cargo Shortages
• Carrier may be responsible unless can use
Q clause defense.
• WestWay Coffee v. Netuno : What could
the carrier do differently?
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Carrier’s Liability for Cargo Shortages
• But see Plastique tags v. Asia Trans.
Where carrier was not liable for shortages.
• Why the different result? Because in
Plastique bill of lading only referenced the
number of boxes and bags and the carrier
could not verify the shipper’s.
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COGSA “Per Package” Limitation
• Shipper must be given a fair opportunity to
declare the nature and value of the goods.
• $500 per package, limitation unless shipper
declared and paid for higher value.
• Z.K. Marine v. Archigetis: Court found that each
yacht was a “package” and thus the carrier was
limited to liability of $500 per yacht.
• How to solve this problem in the future?
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COGSA “PerLimitation
Package” Limitation
• What if the number of packages is not shown on the
Bill of Lading?
• COGSA requires carrier become a virtual insurer of
the cargo.
– If material deviation occurs, carrier cannot claim protection
of $500 per package.
• “Himalaya” Clauses. Exculpatory clauses that
protect independent contractors (like stevedores).
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The Hamburg Rules
• Would find the carriers liable for errors in
navigation.
• 1978 drafted.
• Rules opposed by insurance companies and
carriers.
• Mostly developing countries have indorsed.
• But many countries including the US will not
sign.
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Visby Amendments
• Visby amendments raise per package limitation
to $ 1000.
• Carrier liable for losses from “Recklessness” in
the operation and navigation of the ship.
• Not adopted in the US.
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Liabilibility of Ocean
Transportation Intermediaries
• Freight Forwarders: is not a carrier and is not
liable for the cargo during shipment. See
Prima U.S. V. Panalpina.
• Non-vessel Operating Common Carriers
(NVOCC): is a common carrier which does
not operate the vessel but assumes liability for
goods during transport.
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Prima U.S. Inc v. Panalpina
• W contracts with P, a fright forwarder, paying
$21,785. P did not issue a bill of lading. The
contract required “reasonable care” and liability was
limited $50 per shipment. W & P contracted about
1000 times. P hired an Italian customs broker that
hired CSM (stevedores). CSM improperly lashed
the transformer on the ship which broke loose and
crushed a laser cutting machine owned by Prima.
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Prima U.S. Inc v. Panalpina
• Prima sued the owner of the ship, W & P. The
Dist. Ct. found P liable and P appeals.
• Is a freight forwarder (P) liable for damage to
goods in transit?
• No, P was not a carrier (nor a vessel operating
as a common carrier). FF must use due
diligence and reasonable care.
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Proposals for major revisions to
COGSA (COGSA II)
• “Door to door coverage not just tackle to to
tackle”- the reality of multimodal transport
• Eliminate exclusion of carrier’s liability for
errors in navigation and management
• Increase limits, define package as in bill of
lading
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Ocean Shipping Reform Act 1998
• Service contracts govern- no posted tariff
schedules.
• Large shipper may gain lower rates.
• COGSA not apply because not common carrier
• Negotiable.
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General Average and FPA Losses
• Total loss.
• General average.
• Particular average- partial loss “free of particular
average” = no coverage for partial losses.
• READ POLICY CAREFULLY.
• Perils clause- definition see case.
• The York-Antwerp rules.
• What about “Real and Substantial” Danger?
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Particular Average Losses
• Open cargo policies: covers all shipments of
certain goods to certain destination over a period
of time and exporter can issue a certificate of
insurance.
• Total loss of all or part.
• General average (average means loss): loss that
results when extraordinary expenses or losses
result in saving the cargo or vessel at sea.
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Shaver Transportation Co. v.
Travelers Indemnity Co.
• Shaver, a barge co. arranged a policy with
Travelers to cover shipment. Buyer refuses
delivery because shipment has been
contaminated by barge lines. Travelers refuses
payment because contamination was not a
coverable loss.
• Was the loss covered by any provision of the
policy?
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Shaver Transportation Co. v.
Travelers Indemnity Co.
• No, it was not covered under:
– Perils.
– Free from particular average.
– Shore clause.
– Inchmaree clause or
– negligence clause.
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Conclusion
•
•
•
•
Read contract carefully.
Identify risks and insure coverage.
Sometimes self insurance may make sense.
How do you stay aware of problems?
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