Getting Time Limits on Your Side

William J. Augello, Esq. is an adjunct professor at the University of Arizona's College of Law and author of Transportation, Logistics and the Law.

Shippers are familiar with the rule that they must file claims against carriers in writing within the time limits defined in carriers’ bills of lading or tariffs, or in government statutes or treaties.

But rules have exceptions. The Carmack Amendment, for example, states that a motor carrier, freight forwarder, or railroad may not limit the time for a shipper to file a loss, damage, or delay claim to less than nine months from the delivery of the goods in question. It also gives shippers two years from the time a claim is disallowed to file a lawsuit.

Exceptions to this rule are based on the equitable theory of "estoppel," which relieves a party of a claim limitation when one party reasonably relies on the conduct or statements of another, and the relying party suffers harm as a result.

This principle has been applied sparingly in Carmack cases, when a carrier takes affirmative steps to induce the other party to believe filing a claim is unnecessary.

A variety of cases exist where carriers have been estopped from using the claimant’s failure to file a claim on time as a defense. Generally, these cases fall into two distinct categories:

1. Untimely filing cases. Courts may uphold claims when a carrier’s conduct misleads a claimant to believe that a timely filing is unnecessary. (Salzstein v. Bekins Van Lines, 1997) But courts infrequently use the estoppel doctrine because Congress’ goal when it passed the Carmack Amendment was to achieve uniformity in claims handling. (Foster Wheeler Energy Corp. v. Daily Express Inc., 1980)

In Lehigh Valley Railroad v. State of Russia (1927), for example, the court did not allow the carrier to use misfiling as a defense because a railroad agent gave the claimant incorrect instructions about where to send a claim.

In another example, a railroad’s agent repeatedly stated that a delivery was made, when in fact the shipment was not delivered. The court ruled the carrier equitably estopped from raising the nine-month statute of limitations. (Action Drug Co. v. Overnight Transp. Co., 1989)

And in Union Carbide Corp. v. Consolidated Rail Corp. (1981), the railroad told the shipper one of its cars was not seriously damaged in a derailment, and that goods would be delivered to the consignee. But the shipment was, in fact, damaged, and Consolidated Rail sold the goods without notifying the shipper. The court awarded damages despite the late filing of the claim.

2. Inducements not to file a claim. Another line of cases relieves claimants of the claim-filing requirement when carriers—by word or deed—induce claimants not to file a claim.

In Perini-North River Associates v. Chesapeake & Ohio Railway Co. (1977), for instance, the courts waived the claim-filing requirement when the carrier’s over, short, and damage claims clerk told the claimant that it didn’t need to file a claim because one was already filed.

In fact, only an inspection report was filed. The carrier in this case also departed from its normal practice of sending claim forms and copies of inspection reports to the claimant.

In Hopper Paper Co. v. Baltimore & O. R. Co. (1949), paper was destroyed in a wreck. The railroad claimed the damage was not serious and said it would deliver the paper. The court ruled that the railroad knew about the loss, and sold the salvage without the knowledge or consent of the paper company.

The claim was not filed until 11 months later, however. But the court excused the failure to file within nine months on the grounds that, "failure to give notice of a claim for damages or loss in accordance with a stipulation in a contract for shipping goods is excused, or is inapplicable, where the carrier has or is chargeable with, actual knowledge of all the conditions as to the damages that a written notice could give."

In Hicks v. BHY Trucking Inc. (1983), the court excused an untimely filing because the carrier told the claimant it would send an adjuster to assist in assessing damages and filling out the claim forms, but did not.

Weigh the Facts

Many instances occur during claims administration where carriers make representations that claimants rely upon. The law considers this justification for claimants that fail to meet contractual requirements for filing claims. Unless a carrier’s actions fall within these principles, claimants are held to whatever time limits the governing bill of lading, contract, law, or treaty contains.

In Usinor Steel Corp. v. Norfolk Southern Corp. (2004), Norfolk Southern failed to notify the shipper that the consignee rejected three coils, as required by the bill of lading’s terms. As a result, the shipper failed to file a claim within nine months. The court ruled that because the carrier breached the contract of carriage first, the shipper was relieved of the contractual time limit.

Claimants must, therefore, weigh all the facts and circumstances before writing off a claim simply because it failed to comply with contractual terms or conditions. Because a law prohibiting discrimination among shippers was repealed in 1996, however, carriers may waive time limits.

The aforementioned cases illustrate some of the circumstances that warrant applying the estoppel principle.