Background
National Railway Equipment (NRE) arranged to ship four newly rebuilt locomotives by rail from Mount Vernon, Illinois, to the Port of Wilmington, North Carolina, for overseas delivery to an African customer. NRE’s logistics manager, Jay Smith—a seventeen-year veteran who contracted with rail carriers twenty to forty times per year—used Evansville Western Railway (EVWR) for the first leg and CSX Transportation for the second. When placing orders through EVWR’s online system, Smith entered Standard Transportation Commodity (STC) Code 3741110. That code triggered each carrier’s published price list: EVWR’s “EVWR Q 5012,” which capped liability at $25,000 per locomotive, and CSX’s “CSXT Public Price List 6051,” which capped liability at $10,000 per locomotive. Smith testified he deliberately chose the lower, limited-liability rates because NRE carried its own insurance through Lloyd’s.
During CSX’s leg of the journey, Hurricane Florence caused a derailment near Lilesville, North Carolina, destroying all four locomotives. NRE filed a claim with Lloyd’s, which paid the full invoice value minus the deductible. As NRE’s subrogee, Lloyd’s sued both carriers under the Carmack Amendment, 49 U.S.C. § 11706, seeking recovery of the full loss rather than the contractual caps.
The district court (S.D. Ill., Judge McGlynn) granted summary judgment to EVWR, capping its liability at $25,000 per locomotive. It denied CSX’s summary judgment motion based on factual disputes, but a jury subsequently found in CSX’s favor, likewise limiting liability to $10,000 per locomotive. Lloyd’s post-trial Rule 50 motion for judgment as a matter of law was denied. Lloyd’s appealed both rulings to the Seventh Circuit.
The Court’s Holding
The Seventh Circuit affirmed in full. Writing for the panel, Judge Lee held that both carriers had satisfied the three requirements for limiting Carmack Amendment liability: they gave the shipper a reasonable opportunity to choose between liability levels, obtained the shipper’s agreement to a particular level, and issued bills of lading before moving the shipment. The court rejected Lloyd’s reliance on the Fourth Circuit’s decision in ABB Inc. v. CSX Transportation, Inc., 721 F.3d 135 (4th Cir. 2013), finding the cases distinguishable: unlike ABB’s logistics manager, Smith undisputedly knew of the published price lists and consciously selected the lower rates.
The court further held that, while the STC Code on the bills of lading was facially ambiguous as to the precise liability cap it incorporated, that ambiguity was resolved by extrinsic evidence—specifically, Smith’s course of dealing with both carriers over seventeen years and his own deposition and trial testimony confirming he understood the code to elect the limited-liability rate. As to EVWR, that understanding was uncontested on summary judgment. As to CSX, the jury heard conflicting evidence and resolved it in CSX’s favor; viewed in the light most favorable to CSX, no rational jury was compelled to find otherwise, so the Rule 50 denial stood.
The court also rejected Lloyd’s argument that a bill of lading must expressly recite the dollar liability cap for the limitation to be enforceable. The Carmack Amendment’s written-agreement requirement is satisfied so long as the bill of lading or an external agreement manifests the shipper’s actual agreement to limited liability—not necessarily by spelling out the specific dollar figure.
Key Takeaways
- A shipper’s knowing selection of a lower published shipping rate that carries a contractual liability cap constitutes a “written agreement” sufficient to limit a carrier’s Carmack Amendment liability, even if the bill of lading does not recite the cap amount in words.
- An industry commodity code (STC Code) on a bill of lading may be ambiguous as to which liability level was chosen, but that ambiguity can be resolved by undisputed course-of-dealing evidence at the summary judgment stage, or by the jury at trial.
- An insurer suing as subrogee stands in no better position than its insured: if the shipper validly agreed to limited liability, the insurer cannot recover more than the agreed cap.
- The Fourth Circuit’s ABB decision—which found a carrier’s liability cap unenforceable where the shipper had no actual knowledge of the published price list—does not apply when the shipper’s familiarity with and deliberate choice of the limited-liability rate is uncontested.
Why It Matters
This decision reinforces that sophisticated commercial shippers who knowingly choose lower rail freight rates to offset insurance costs bear the risk of contractual liability caps when losses occur. Insurers who step into a shipper’s shoes as subrogees cannot rewrite the bargain the shipper struck. Carriers offering tiered liability structures through publicly available price lists—tied to commodity codes in bills of lading—can rely on those structures so long as the shipper had genuine awareness and made an informed choice, even without a line-item recitation of the cap in the shipping document itself.
The ruling also offers a useful contrast with ABB: the enforceability of Carmack liability limitations turns on the shipper’s actual knowledge and deliberate selection, not mere constructive notice. For attorneys advising shippers, the case is a reminder that delegating logistics to experienced managers who routinely choose budget rates to leverage existing insurance can expose the company—and its insurer—to significant coverage gaps when catastrophic losses occur.