Royal & Sun Alliance Insur. v. Int'l Management Services Co.
U.S. COURT OF APPEALS, SECOND CIRCUIT
The logistics services agreement (LSA) under which UPS transported Ethicon's pharmaceutical products capped UPS's liability at $250,000 per shipment for "finished" goods. UPS arranged for subsidiary Worldwide Dedicated Services' (WDS) transportation of Ethicon's goods. UPS/WDS's truck transporting Ethicon's March 2009 shipmentdriven by International Management Services Company (IMSCO) employeescrashed and caught fire. Subrogee insurer Royal & Sun Alliance (RSA) sought recovery of $769,726 in loss payments. District court held UPS liable to RSA for $250,000 and held WDSas UPS's wholly owned subsidiarycovered by the LSA's liability limitation. It found IMSCO not so covered, at least under the Carmack Amendment to the Interstate Commerce Act. After bench trial on remaining issues, district court ordered IMSCO to pay RSA $500,000 plus interest. Second Circuit affirmed, holding that under either the Carmack Amendment or the federal common law of bailment, limitations on liability apply to subcontractors only if there is evidence of contractual intent that such limitations so extend. Because such intent was lacking, IMSCO was not entitled to the benefit of the LSA's liability limitation.