CNA Insurance v. Hyundai Merchant Marine Co.
747 F.3d 339
6th Cir.2014Background
- Corning shipped fragile glass in 20-foot intermodal containers from Harrodsburg, KY to Tainan, Taiwan under a Service Contract with Hyundai; Hyundai subcontracted motor and rail carriers for inland legs and handled ocean leg.
- Two containers were damaged after arriving at the Washington United Terminal; Corning’s insurer CNA paid Corning and was subrogated to sue Hyundai and two rail carriers (Norfolk Southern and BNSF).
- The district court concluded Carmack applied, tried the case under Carmack, denied prejudgment interest, and a jury found the carriers jointly liable for $498,509.91; CNA appealed and the carriers cross-appealed.
- The Service Contract incorporated Hyundai’s form bill of lading with Clause Paramount (to extend COGSA), Himalaya and subcontracting provisions, and a clause making Hyundai an independent contractor with indemnity obligations.
- The Sixth Circuit held Carmack does not apply to an intermodal overseas export shipped under a single through bill of lading; it nevertheless concluded CNA’s tort claims (bailment, negligence) fail because duties arose from contract, affirmed judgment against Hyundai (under contract principles), and reversed judgments against Norfolk Southern and BNSF.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Carmack Amendment governs inland (road/rail) leg of an intermodal overseas export shipped under a single through bill | CNA: Carmack controls; it was pled and used by district court | Carriers: Carmack inapplicable because shipment is a through maritime contract or not initiated by a Carmack "receiving" rail carrier | Carmack does not apply to the road/rail leg of an intermodal overseas export under a single through bill; district court erred but error harmless as to Hyundai |
| Whether CNA may pursue tort claims (negligence, bailment) against carriers in addition to contract claims | CNA: tort claims are encompassed by Carmack; alternatively preserved | Carriers: duties arise from contract only, so tort claims barred | Tort claims (bailment, negligence) are barred where duties derive solely from the Service Contract; only breach of contract survives |
| Whether rail carriers (Norfolk Southern, BNSF) are directly liable to CNA under the Service Contract | CNA: subcontractor carriers can be sued under the through contract | Rail carriers: not in privity; Service Contract disclaims agency and warrants no claims against subcontractors | Rail carriers are not contractually bound to CNA here; judgments against them vacated |
| Scope of Hyundai’s liability for damage caused by subcontractors and applicability of Carmack to Hyundai’s subcontractor-liability provision | CNA: Hyundai liable under Carmack for subcontractor-caused damage | Hyundai: Service Contract limits pass-through liability; agency and Himalaya/Paramount clauses restrict or define liability | Hyundai — being in privity — is liable to CNA; under the contract Hyundai’s liability for subcontractor-caused damage must be determined under Carmack principles (court applied Carmack to Hyundai and affirmed the judgment against Hyundai) |
Key Cases Cited
- Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. 89 (2010) (Carmack inapplicable to inland segment of an overseas import under a through bill because no Carmack "receiving" rail carrier; endorses harmony between COGSA and Carmack)
- Norfolk Southern R.R. v. Kirby, 543 U.S. 14 (2004) (through maritime bills of lading can extend COGSA inland and Himalaya clauses may protect subcontractors; focuses on maritime-contract analysis)
- Adams Express Co. v. Croninger, 226 U.S. 491 (1913) (Carmack preemption principles: initial carrier liability and inability to contractually exempt liability)
- Atlantic Coast Line R.R. v. Riverside Mills, 219 U.S. 186 (1911) (initial receiving carrier deemed principal and liable for connecting carriers under Carmack’s predecessor principles)
- Missouri, K. & T. R.R. v. Ward, 244 U.S. 383 (1917) (treating connecting carriers as agents for purposes of liability under the initial bill of lading)
- Missouri Pac. R.R. v. Elmore & Stahl, 377 U.S. 134 (1964) (explains Carmack burden-shifting; defendants must prove non-negligence and an excepted cause)