Second Circuit Decision Affects COGSA Liability For Shipment Of Dangerous Cargo

On March 3, 2008, the United States Court of Appeals for the Second Circuit in In re M/V DG HARMONY,1 issued an important decision which clarifies the standard used to determine the liability of shippers and carriers transporting hazardous cargo under the Carriage of Goods by Sea Act (?COGSA?).2

Under the holding of this case, shippers will not be held strictly liable for damage caused by hazardous goods if both the shipper and the carrier had pre-shipment knowledge of the dangerous nature of the cargo, even if the carrier lacked information about the precise characteristics of the cargo and its hazards. Instead, in such a case the shipper's liability will be determined on negligence principles. In particular, where the carrier alleges that the shipper failed adequately to warn the carrier about the characteristics of the particular shipment, the carrier must show:

that the shipper had a duty to warn because the cargo presented dangers of which the carrier could not reasonably have been expected to be aware,

that the shipper failed to provide the adequate warning, and

that this failure caused the damage complained of.

Facts and Procedural History

On November 9, 1988, the M/V DG Harmony caught fire off the coast of Brazil as a result of an explosion in its third hold. The fire burned for three weeks, rendering the vessel and its cargo a constructive total loss. On board the vessel were ten containers, each packed with 16,000 kilograms of calcium hypochlorite (hydrated) (?calhypo?) which was manufactured and shipped by PPG Industries, Inc. (?PPG?). Calhypo is an industrial bactericide which is likely to combust when it reaches its critical ambient temperature (?CAT?), a figure which is dependent on the manner in which the calhypo is stored and is inversely proportional to the quantum of calhypo in a given sample. Calhypo is listed in the International Maritime Dangerous Goods Code (?IMDG Code?), which recommends that calhypo not be exposed to a heat source in excess of 55C for longer than a 24-hour period. PPG provided the carrier with documentation identifying the cargo by its IMDG code, declaring the containers had been packed in accordance with the requirements of the IMDG Code, cautioning that the containers should be stored in a cool, dry, well ventilated place, away from sources of radiant heat. PPG also warned the carrier that the cargo would become unstable above a certain temperature, but it omitted specific information about what...