STC Codes and Course of Dealing Can Establish a “Written Agreement” Limiting Carmack Liability Without an Express Dollar Cap on the Bill of Lading

1. Introduction

Certain Underwriters at Lloyd’s (“Lloyd’s”), as insurer-subrogee of National Railway Equipment (“NRE”), sought to recover the invoice value of four rebuilt locomotives destroyed in a derailment during Hurricane Florence. The locomotives moved under rail transportation arranged by NRE’s logistics manager, Jay Smith, with Evansville Western Railway, Inc. (“EVWR”) handling the first leg and CSX Transportation, Inc. (“CSX”) handling the second.

The case turned on whether EVWR and CSX could enforce contractual liability caps—$25,000 per locomotive (EVWR) and $10,000 per locomotive (CSX)—under the Carmack Amendment, 49 U.S.C. § 11706, despite the bills of lading not expressly stating those dollar amounts. The bills of lading did, however, identify the shipment using an industry commodity designation: STC Code 3741110.

Key Issues

  • Whether NRE had a “reasonable opportunity” to choose between levels of carrier liability (and corresponding rates).
  • Whether § 11706(c)(3)(A)’s requirement of a “written declaration” or “written agreement” was satisfied where the bills of lading used an STC code tied to public price lists that included liability limits.
  • Whether extrinsic evidence—particularly course of dealing—could establish the contractual meaning of the STC code and support summary judgment (EVWR) or a jury verdict (CSX).

2. Summary of the Opinion

The Seventh Circuit affirmed. It held that EVWR and CSX validly limited liability under the Carmack Amendment because: (1) NRE (through Smith) knew of the carriers’ published rates and the ability to purchase higher liability limits; (2) Smith affirmatively selected the lower rates associated with STC Code 3741110; and (3) the STC code in the bills of lading, construed as a contractual term, was ambiguous on its face but its meaning was established through undisputed (EVWR) and trial-tested (CSX) extrinsic evidence of course of dealing.

The district court’s summary judgment for EVWR was affirmed because the record “irrefutably established” the parties’ intent that the STC code selection invoked EVWR’s $25,000-per-unit cap. The jury’s verdict for CSX (enforcing its $10,000-per-unit cap) and the denial of Lloyd’s Rule 50 motion were affirmed because a rational jury could find that Smith’s use of the STC code reflected agreement to CSX’s rate-and-liability package.

3. Analysis

A. Precedents Cited

Standards of Review

  • Nelson v. Town of Paris, 78 F.4th 389 (7th Cir. 2023): supplied the de novo standard for summary judgment and the requirement to draw inferences for the nonmovant.
  • Hossack v. Floor Covering Assocs. of Joliet, Inc., 492 F.3d 853 (7th Cir. 2023): framed Rule 50 review as highly deferential to the jury—reversal only if no rational jury could find against the movant.

The Carmack Amendment’s Uniform Liability Regime and Permissible Limitation

  • N. Am. Van Lines, Inc. v. Pinkerton Sec. Sys., Inc., 89 F.3d 452 (7th Cir. 1996): grounded the Carmack framework, emphasizing that the statute governs interstate carrier liability and replaced a patchwork of common-law/state rules.
  • Adams Express Co. v. Croninger, 226 U.S. 491 (1913): supplied the historical rationale (uniformity) and the classic statement that carriers may limit recovery by “fair, open, just, and reasonable” agreements tied to rate choices. The opinion used Adams Express both to justify the limitation mechanism and to reject the notion that Carmack requires full liability absent a perfectly itemized bill of lading.
  • Atl. Coast Line R.R. Co. v. Riverside Mills, 219 U.S. 186 (1911): reinforced Carmack’s purpose as “unity of transportation with unity of responsibility,” supporting the court’s insist on predictable, contract-based outcomes.
  • Bos. & Me. R.R. v. Piper, 246 U.S. 439 (1918): provided the proposition that, where a carrier offers alternative rates with different risk allocations, the shipper is “bound by the one chosen,” and that such limits are lawful as to amount (not an impermissible disclaimer of negligence).
  • Nipponkoa Ins. Co. v. Atlas Van Lines, Inc., 687 F.3d 780 (7th Cir. 2012): furnished the Seventh Circuit’s three-part test for enforcing a Carmack limitation (reasonable opportunity, agreement, and issuance of a bill of lading/receipt). The court applied this framework to conclude that Smith’s informed choice satisfied the “reasonable opportunity” and “agreement” requirements.

ABB and the “Written Agreement” Requirement

  • ABB Inc. v. CSX Transportation, Inc., 721 F.3d 135 (4th Cir. 2013): Lloyd’s primary authority for the argument that a carrier cannot rely on an unpublished/unknown price list and an otherwise silent bill of lading to impose a cap. The Seventh Circuit distinguished ABB on decisive facts: ABB’s logistics manager lacked knowledge of the price list and had unsuccessfully sought rate information, while Smith admittedly knew the published rates, knew he could pay for higher liability, and intentionally chose the lowest-rate/limited-liability option because NRE carried insurance. Importantly, the Seventh Circuit also read ABB narrowly: it did not require the bill of lading to recite the cap amount; it required an identifiable written manifestation tying the shipment to a rate authority/price list or other limitation mechanism.

Bills of Lading as Contracts; Contract Interpretation and Ambiguity

  • Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14 (2004): supported treating construction of a bill of lading as contract interpretation.
  • S&O Liquidating P'ship v. Comm'r, 291 F.3d 454 (7th Cir. 2002) (quoting United States v. Nat'l Steel Corp., 75 F.3d 1146 (7th Cir. 1996)): supplied the court’s approach to use general common-law contract principles (federal common law flavor) when construing Carmack-governed documents.
  • Funeral Fin. Sys. v. United States, 234 F.3d 1015 (7th Cir. 2000): provided the definition of ambiguity as a term subject to reasonable alternative interpretations.
  • Royal Ins. Co. of Am. v. Orient Overseas Container Line Ltd., 525 F.3d 409 (6th Cir. 2008): supported the proposition that, once ambiguity exists, intent is usually for the factfinder, but summary judgment is proper when extrinsic evidence is uncontested or overwhelmingly one-sided.
  • United States v. Rand Motors, 305 F.3d 770 (7th Cir. 2002), and Air Line Pilots Ass'n, Int'l v. Midwest Express Airlines, Inc., 279 F.3d 553 (7th Cir. 2002): justified considering commercial context and “extrinsic ambiguity”—i.e., a term may appear clear only because a judge lacks industry context.
  • Pierce v. Atchison, Topeka & Santa Fe Ry. Co., 65 F.3d 562 (7th Cir. 1995), and Young v. Verizon's Bell Atl. Cash Balance Plan, 615 F.3d 808 (7th Cir. 2010): supported using objective extrinsic evidence, including prior course of dealing, to interpret ambiguous terms.

B. Legal Reasoning

1) Carmack Liability Is the Default, But Limitation Is Statutorily Permitted

The court began from Carmack’s default: carriers are generally liable for “actual loss or injury.” It then emphasized § 11706(c)’s carve-out, allowing limitation of liability when tied to rate structures, so long as the shipper has a meaningful choice and the limitation is established by a “written declaration” or “written agreement.” The court treated the dispute as less about Carmack’s baseline and more about whether the parties’ shipping paperwork and established practices satisfied the statute’s limitation prerequisites.

2) “Reasonable Opportunity” and “Agreement” Were Shown by Informed Rate Selection

Lloyd’s argued neither carrier offered a true choice between full and limited liability. The Seventh Circuit rejected that framing based on undisputed facts: Smith knew the published rate schedules existed, knew higher rates could buy higher liability limits, and nonetheless selected the cheaper option because NRE relied on its own insurance. That evidence satisfied the first two Nipponkoa Ins. Co. v. Atlas Van Lines, Inc. prongs: a reasonable opportunity to choose and agreement to the chosen level.

3) The “Written Agreement” Requirement Can Be Satisfied Without Printing the Dollar Cap on the Bill of Lading

The court addressed Lloyd’s contention (grounded in ABB Inc. v. CSX Transportation, Inc.) that the bill of lading must expressly state the liability cap. The Seventh Circuit refused to adopt that reading. It treated the question as whether the written shipping documents (including the STC code in the bills of lading) sufficiently manifested an agreement to a rate authority that carried a known liability limit.

Critically, the bills of lading here contained STC Code 3741110, which corresponded to publicly available price lists: “EVWR Q 5012” and “CSXT Public Price List 6051.” Although the STC code did not itself list liability amounts, the court held it could function as a contractual term linking the shipment to the selected rate-and-liability package—especially where course of dealing showed the shipper used that code to request the limited-liability rate.

4) Ambiguity, Extrinsic Evidence, and Disposition (EVWR vs. CSX)

The court held that the STC code’s meaning in the bills of lading was ambiguous because it could be read either as merely identifying cargo or as invoking a particular pricing/coverage structure. Using “extrinsic ambiguity” principles, it relied on objective commercial context—especially the parties’ longstanding course of dealing—to interpret the term.

  • EVWR (summary judgment affirmed): Smith’s deposition testimony established that entering the STC code meant selecting EVWR’s STC-coded rate with a $25,000-per-unit cap. Lloyd’s produced no contrary evidence creating a triable dispute as to the parties’ shared understanding. Under Royal Ins. Co. of Am. v. Orient Overseas Container Line Ltd., summary judgment was proper because the extrinsic evidence was uncontested/one-sided.
  • CSX (jury verdict and Rule 50 denial affirmed): Similar testimony was presented at trial supporting the conclusion that the STC code selection requested CSX’s lowest rate and its $10,000-per-unit cap. Under Hossack v. Floor Covering Assocs. of Joliet, Inc., the Seventh Circuit found a rational jury could accept CSX’s interpretation; therefore, judgment as a matter of law was inappropriate.

The opinion also included a practical evidentiary note: although Smith worked for NRE, NRE had been compensated in full by insurance, so on this record he was not treated as an “interested” party in the sense that would undermine the objectivity of his account of the parties’ course of dealing.

C. Impact

The decision strengthens carriers’ ability—at least in the Seventh Circuit—to enforce Carmack liability limitations where the shipper’s written shipping documents include an industry/rate-identifying code (here, an STC code), and objective extrinsic evidence (especially course of dealing) shows the code was used to select a published rate that includes a liability cap. It narrows the practical reach of ABB Inc. v. CSX Transportation, Inc. by emphasizing that ABB turns on lack of shipper knowledge and lack of written indicia tying the shipment to the limitation authority, not on a rigid requirement that the bill of lading recite a dollar cap.

Likely downstream effects include:

  • More litigation over “code meaning” and incorporation: disputes may pivot to whether a bill-of-lading code is merely descriptive or operates as a rate-authority selection incorporating a price list (and its liability limit).
  • Heavier reliance on course-of-dealing evidence: repeat-shipper relationships will matter; parties will marshal testimony and historical transactions to prove that a code functioned as a liability-election mechanism.
  • Compliance incentives: shippers wanting full liability may need to affirmatively declare value or select higher-liability rates; carriers, in turn, have incentive to keep price lists public and to ensure order systems/documentation clearly tie codes to rate authorities.

4. Complex Concepts Simplified

  • Carmack Amendment: a federal statute that sets a uniform national rule for carrier liability for interstate shipping loss/damage, while allowing agreed limits tied to rate choices.
  • Subrogation: when an insurer pays its insured’s loss and then “steps into the insured’s shoes” to sue the party allegedly responsible.
  • Bill of lading: the shipping document that functions as the transportation contract and receipt; its terms and incorporated references can allocate risk.
  • STC Code: an industry commodity code used to classify shipments; here, it functioned as a key contractual signal linking the shipment to specific public price lists (and their liability limits).
  • Limitation of liability (not waiver of negligence): Carmack generally disallows carriers from contracting away responsibility for negligence, but allows agreements that cap the dollar amount of recovery in exchange for lower rates.
  • Ambiguity & extrinsic evidence: if a contract term can reasonably mean two things, courts may look beyond the document to objective context (like prior course of dealing) to determine intended meaning.
  • Rule 50 judgment as a matter of law: a post-trial motion arguing the evidence could not permit a reasonable jury to find as it did; it is difficult to win because courts defer to the jury’s role as factfinder.

5. Conclusion

Certain Underwriters at Lloyd's v. CSX Transportation, Inc. confirms that Carmack liability limits need not be printed as a dollar cap on the face of a bill of lading to be enforceable. Where the shipping paperwork contains a rate-identifying industry code (such as an STC code), and objective evidence—especially a longstanding course of dealing—shows the shipper used that code to choose a published rate tied to a specific liability level, the “reasonable opportunity,” “agreement,” and “written agreement” requirements can be satisfied. The decision both distinguishes and implicitly confines ABB Inc. v. CSX Transportation, Inc. to its facts (shipper ignorance and documentary silence), while providing a clearer roadmap for proving (or contesting) Carmack limitations through commercial practice and documentation.