Subrogation Fails for Failure to State Amount of Damage

Carmack Amendment Requires a Statement of Damage

Subrogation is an equitable right provided to an insurer after it indemnifies its insured for a loss covered by the policy of insurance. As a result every subrogating insurer must know how much the loss was and how much the subrogating insurer is seeking from the person responsible for loss. When an insurer makes a claim under the Carmack Amendment, 49 U.S.C. § 14706, it is required to list the amount of damages so the shipper or its insurer can investigate.

THE ISSUE

In New York Marine And General Insurance Company v. Estes Express Lines, Inc.; Exfreight Zeta, Inc., No. 16-56748, United States Court Of Appeals For The Ninth Circuit, (April 17, 2018) Plaintiff-Appellant N.Y. Marine brought suit for carrier liability under the Carmack Amendment, 49 U.S.C. § 14706, against Defendant-Appellee Estes as carrier and Defendant-Appellee Zeta as broker, to recover $84,511.23 that N.Y. Marine paid to its insured XPO when a cargo of batteries owned by XPO’s customer TransPower suffered damage while carried by Estes.

THE TRIAL COURT DECISION

On summary judgment, the district court held that neither Estes nor Zeta was liable to N.Y. Marine, because the loss claims did not indicate “a specified or determinable amount of money.”

ANALYSIS

To obtain relief against a carrier under the Carmack Amendment, claimants must comply with “[m]inimum filing requirements.” [Ins. Co. of N. America v. G.I. Trucking Co., 1 F.3d 903, 905-06 (9th Cir. 1993)]. A claim must, at a minimum, “(1) contain[ ] facts sufficient to identify the baggage or shipment (or shipments) of property; (2) assert[ ] liability for alleged loss, damage, injury, or delay; and (3) mak[e] claim for the payment of a specified or determinable amount of money.”

The forms at issue here lack a specified or determinable claim amount, which is necessary to alert Estes to the extent of its liability: they state that “[e]xtent of damage” is “unknown until cargo is inspected,” and merely note the cargo’s total value of $148,055.30. Neither Estes nor Zeta was ever told of the results of the January 17 inspection conducted by TransPower and the NYC Transit Authority.

A few weeks after the claim was submitted, Zeta warned XPO that “the amount for the referenced claim” was still missing, and that the claim form needed to be updated “to include claim amount.” No update followed. In the absence of a “specified or determinable amount” listed on the claim form, and in the absence of any other means for Estes to assess the extent of the loss, the forms did not reasonably permit Estes to apprise itself of the approximate claim value. Merely identifying the upper bound of possible damages with exact damages “TBD” does not suffice.

Even under a “substantial performance” standard, N.Y. Marine’s claim fails. The damage to batteries here was nonobvious: the damage was out-of-sight without any apparent means for Estes to inspect them. While the letter did not specify an amount of damages, that amount was arguably determinable from the other information given in the letter or already available to the carrier.

ZALMA OPINION

Although its insured made the initial claim before it knew about the total extent of the loss to the insured’s batteries, once that amount was determined it was the obligation of the insured or the subrogating insurer to advise the people from whom it sought money of the exact amount before filing suit. It did not and its error defeated a compensable subrogation claim.


© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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