Road haulier’s liability

29 September 2013
Liability Newsletter 1/2013. If insures a great number of companies specializing in transporting goods around the world. This includes not least a lot of road hauliers’ transporting goods between different destinations on land.

Recently we have noted a trend in attempting to minimize the road haulier’s liability for damage that occurs during transport. Interpreting the transport legislation wider does this. In this article we will present you legislation examples together with some cases to get behind these different interpretations.

The damage caused by a road haulier

A road haulier may during a transport cause different kinds of damage, e.g. damage to the goods that are being transported, damage to other property in connection with the unloading and loading of the goods and damage to the environment when spilling substances such as oil or chemicals on the ground. Damage to the goods in transport may also cause certain consequential damages to the intended receiver of the goods such as loss of income. Because of the damage, the damaged goods may also cause further damage to other property.

Depending on the type of damage, the claim would be covered by different insurance policies. The relevant insurances would be a Freight Forwarder’s Liability insurance, a Motor Liability insurance and a General Liability and Product Liability insurance.

Traditionally, claims for damage caused by a road haulier are handled separately in accordance with the relevant legislation for the particular type of claim. I.e. the damage to the goods will be handled in accordance with the transport legislation whilst the damage to any other property will be handled in accordance with the relevant general liability and product liability legislation (in the following just general liability legislation).

Furthermore it may also often be that different claims departments at the road hauliers insurance company handle the claims separately. Traditionally it seems that there are clear lines between the handling of the transport claims and the general liability claims. However, recently we have noted that when it comes to road haulier’s liability, these strict barriers are breaking. The transport legislation is being interpreted not only to cover damage to the goods itself, but also to cover any other damage that occurs during transport.

The legislation

The notable difference, in this context, between transport legislation and general liability legislation is that transport legislation contains a limitation of the transporters liability whilst general liability legislation provides for “unlimited” liability. Although transport legislation varies from country to country, basically all transport law is founded on international transport law conventions and the very basics of transport legislation are similar in all civilized countries.

One of these basics is that the transporter has a very strict liability (shifted burden of proof) when damage occurs to the goods during transport. On the other hand, the transporter’s liability is limited to a certain amount and the transporter is not liable for consequential losses.

An example of an international transport law convention is the CMR code (Convention on the Contract for the International Carriage of Goods by Road). The CMR code applies to all international transports between contracting states (which is most). Furthermore, in most countries similar rules apply by law on domestic transports. Very often the CMR code has also been agreed as binding terms in the transport agreement between the road haulier and the shipper.

According to the CMR code the road haulier is only liable for the value of the damaged goods and the liability is in any event always limited to maximum 8,33 SDR (Special Drawing Rights) for each kilogram of the damaged goods. Furthermore the CMR rules provide specifically that road haulier is not liable for anything else (besides a few items such a freight and custom taxes). I.e. the road haulier is not liable for any consequential damages.

Illustrative examples

In a situation where a road haulier has caused damage not only to the goods in transport, but also to other property, it is arguable by reference to the CMR code, that the transporter is not liable for the damage to other property. The road haulier is merely liable for the damage to the goods up to a maximum limit of 8,33 SDR per kilogram of the damaged goods.

For instance, a transporter of diesel to a gas station causes damage to the diesel during the transport and then unloads the damaged diesel into a tank with sound diesel. The “existing” diesel in the tank then also gets damaged and the mixture is later tanked on to cars, which are then damaged.

The road haulier could arguable rely on the CMR rules, and if successful, would then only be liable for the value of the transported diesel but not for the damage to the “existing” diesel in the tanks and the damage to the cars. The liability claim against the road haulier would then certainly be very limited compared to a situation where claims for “existing” diesel in the tanks and the damage to the cars are handled in accordance with general liability laws (according to which the road haulier would properly be fully liable for all of the damage).

On the other hand it is also arguable that the scope of the CMR code does not intend to cover these types of damage (to the “existing” diesel and to the cars), as they are too remote to the transport. Another argument may be that the damage to the “existing” diesel in the tanks and the damage to the cars is product liability, which is mandatory law (and for EU counties a part of the EU legislation) and which prevails over the CMR code.

Case law

There is not much case law dealing with these grey zone areas and in particular about the potential clash between transport legislation and general liability legislation. A Danish Supreme Court case (U.1995.502H) dealt with a situation where a road haulier transported cement to a producer of cement elements. The transport was covered by the CMR code. The cement got damaged during the transport, which caused discoloration to the cement elements.

A claim was raised against the road hauliers General Liability insurance for the damage to the cement elements. The Court said that the road haulier could rely on the CMR rules and was therefore not liable for the damage to the cement elements, which were considered as a consequential damage.

The Court noted that the damage to the cement elements was not a product liability but did not comment on how the position would have been if the consequential damage were indeed a product liability. Based on that case it seems to be clear that as long as the road haulier’s liability for the damages is not product liability and the damage originates, or at least relates, to the damage of the goods in transport, all of the damage would fall within the scope of the CMR code.

Consequence

As a consequence, a road haulier is not liable for other damage than the damage to the goods in transport in accordance with the provisions of the CMR code. Any claims beyond that should be rejected. If the road haulier’s liability however is considered as product liability the legal position is uncertain because it may be that product liability simply prevails over the CMR code.

It should also be mentioned that even though losses caused by a road haulier have been suffered by a third party who is not part of the transport agreement but claims directly against the road haulier, the road haulier may in certain circumstances still rely on the CMR code (paragraph 36) or alternatively may even pass on the claim to the order of the transport.

Such third party might be the owner of one of the damaged cars that bought the damaged diesel or for instance the owner of the property that suffered environmental damage as a result of spilled substances by the road haulier.

Conclusion

The legal position may obviously differ from country to country and it is therefore not the intention of this article to try to analyse the outcome of the potential “clash” between the general liability legislation and the CMR code. The intention is merely to create an attention to the situation and a motivation to analyse the legal situation locally in relevant cases. And as mentioned all transport legislation contains a limitation of the transporters liability, whereas the issues discussed in this article are relevant for any transport case.

Anders Wahl