Whose Burden Is It To Ascertain The Value Of The Freight For Insurance Purposes?

When freight loss occurs and the loss exceeds the limits of the motor carrier's cargo coverage, the motor carrier and the transportation broker typically wind up at odds over who was responsible for determining the value of the shipment for insurance purposes. Until recently, no published opinion has squarely addressed the issue. Finally, there is some clarity as to the scope of a broker's duties to a carrier with respect to cargo value, courtesy of Complete Distrib. Servs. v. All States Transp., No. 3:13-cv-00800-SI, 2015 U.S. Dist. LEXIS 37379 (D. Ore. Mar. 25, 2015).

Complete Distribution Services, Inc. ("CDS"), a broker, arranged for All States Transport, LLC ("AST"), an FMCSA-registered motor carrier, to transport two shipments of vitamins and nutritional supplements from Washington to Florida. AST picked up both shipments and, without informing either CDS or the shipper, combined both into one trailer. The following day, the trailer was involved in an accident in Oregon, damaging both shipments in the combined amount of $169,844.47. CDS paid the shipper for the loss, took an assignment of the claims, and brought suit against AST to recover the value of the cargo. In its responsive pleading, AST included both an affirmative defense and counterclaim against CDS for negligence in failing to inform AST of the value of the cargo. CDS moved to strike this affirmative defense and to dismiss the corresponding counterclaim (among others). The federal magistrate judge issued his Findings and Recommendations ("F&R") in favor of CDS on these issues, reasoning that CDS did not have a duty to advise of the value of the cargo. The magistrate judge relied on case law holding that a broker has no duty to hire a carrier with sufficient insurance to cover the value of the cargo (see KLS Air Express, Inc. v. Cheetah Transp. LLC, 2007 WL 2428294 (E.D. Cal. 2007) and Chubb Group of Insurance Companies v. H.A. Transportation Systems, Inc., 243 F.Supp.2d 1064 (C.D. Cal. 2002)). AST objected to this portion of the F&R, and the district judge undertook a de novo review of the issue.

AST asserted that the magistrate judge's decision was erroneous because KLS Air and Chubb Group do not address the...