“Move fast and break things. Unless you are breaking stuff, you are not moving fast enough,” Mark Zuckerberg famously said. Good advice, unless you’re a residential moving company. The residential home moving industry is changing rapidly and it’s essential that the subrogation professional keep up to date on the most recent developments. For decades, the moving industry has remained relatively unchanged. When we envision a move, we imagine a homeowner calling a moving company who then sends a truck and movers to load, drive, and unload. The only real development in the past 100 years is the increased use of rental trucks and self-packing. But, things are beginning to change rapidly. Commercial carriers and other entities have entered the residential home moving industry and this has led to some major innovations.
The most influential change affecting the moving industry is the increased use of portable on demand storage (PODS). PODS is a new and rapidly expanding means by which consumers are deciding to move. In these moves, an individual will contract with a moving company to have a shipping container dropped in their driveway. These containers can range in size or shape depending on the demands of the specific household. Typically, the homeowners are responsible for loading this container or hiring outside contractors to do so. Once the homeowner has loaded the container, the company will load it onto a truck and move it to another location or into a storage facility. PODS usage is taking over the market due to the reduced cost and simplicity of use.
Another important innovation has been the increased use of commercial space to move household goods. Some commercial carriers have begun to take advantage of the profitability of the household goods moving industry. These companies have been able to combine residential and commercial transportation to reduce costs and increase efficiencies. In these moves a commercial container will be packed with both household and commercial goods. This allows the company to reduce costs by sending the household goods along a predetermined commercial route. These moves typically operate like PODS where the company drops the container off for self-loading and unloading.
These changes are not limited to the moving industry, but are also having a profound impact on the subrogation field. The movement of goods interstate is governed by the Carmack Amendment. This is an amendment to the Uniform Commercial Code (U.C.C.), which places strict liability upon interstate common carriers. Congress created the Carmack Amendment to codify the common law and guarantee certain protections for shippers in common carriage. The shipper must only show that they delivered the goods to the carrier in good condition and that they arrived in a worse condition. Upon this showing, the carrier is automatically liable, unless it can argue one of a few limited defenses (e.g., Act of God).
Further, the Carmack Amendment has an additional component that provides even stronger protections and recovery rights to shippers who move household goods through a statutorily defined “carrier of household goods.” Most importantly, carriers of household goods are required to disclose more details on the bill of lading and adhere to a higher released rate set by the Surface Transportation Board. Carriers cannot contract out of liability under the Carmack Amendment, but they may negotiate released rates, which are the artificial values at which the transported goods are to be carried at. The released rate will determine the amount that a shipper can recover from the carrier for goods damaged during transport. While the Carmack Amendment allows interstate common carriers to negotiate any released rate, a carrier of household goods cannot release rates below 60 cents per pound. In short, bringing a claim against a carrier of household goods can often provide additional avenues for claims and higher probability of recovery. This could mean the difference between a recovery of 10 cents per pound and a recovery for the actual value of all goods destroyed.
The innovations in moving affect the Carmack Amendment by creating difficulties in what should be defined a “carrier of household goods.” The question is whether a carrier that moves PODS or commercial containers filled with household goods will be deemed a carrier of household goods under the Carmack Amendment. Surprisingly, the answer is typically no. The Carmack Amendment can be found in 49 U.S. Code § 14706. The Carmack Amendment defines “household goods motor carrier” as a motor carrier that, in the ordinary course of its business of providing transportation of household goods, offers some or all of the following additional services: (1) Binding and non-binding estimates; (2) Inventorying; (3) Protective packing and unpacking of individual items at personal residences; and (4) Loading and unloading at personal residences. 49 CRF § 375.103. Further, subsection 3 states that, “the term does not include any motor carrier providing transportation of household goods in containers or trailers that are entirely loaded and unloaded by an individual other than an employee or agent of the motor carrier.” This statute signifies that the typical carriage of PODS or other containers will not be deemed carriage of household goods under the Carmack Amendment unless the carrier provides employees or agents to load or unload.
The fact that carriers of PODS will not be considered carriers of household goods under the Carmack Amendment can significantly affect your ability to recover on subrogation claims. The definition will be fact intensive and dependent on the circumstances surrounding the particular move and the obligations that the motor-carrier takes upon itself. You will need to consider whether there were any alternative facts that may overcome the presumptions of this definition. For example, did the carrier’s employees or agents load or unload? Most importantly, always review the bill of lading, unfiled tariffs, and other shipping documents early in your investigation. These documents will be the keystone of your claim and the early review and detection of these issues can help to formulate the argument
Millennials are entering the housing market and expecting new services and tools to utilize during their moves. The market has shifted profoundly due to this new focus on efficiency and technical advancement. It is important that the subrogation professional recognize these changes and alter their practices accordingly. The technicalities of these claims make it even more necessary to engage expert counsel early in the investigative stages.
If you should have any questions regarding this article, the Carmack Amendment, or transportation/cargo subrogation in general, please contact Ashton Kirsch at [email protected].