STC Codes in Bills of Lading Can Evidence a Carmack Liability Limitation When Confirmed by Course of Dealing and Published Rates

1. Introduction

In Certain Underwriters at Lloyd's v. CSX Transportation, Inc. (7th Cir. June 25, 2026), the Seventh Circuit addressed when rail carriers may enforce contractual limitations of liability under the Carmack Amendment, 49 U.S.C. § 11706, even though the bill of lading does not spell out the liability cap in dollars.

Parties and posture. National Railway Equipment (NRE) shipped four rebuilt locomotives from Illinois to the Port of Wilmington, North Carolina, using two rail carriers: Evansville Western Railway, Inc. (EVWR) for the first leg and CSX Transportation, Inc. (CSX) for the second. The locomotives derailed during Hurricane Florence and were destroyed. NRE’s insurer, Certain Underwriters at Lloyd’s (Lloyd’s), paid the loss and sued EVWR and CSX as NRE’s subrogee under Carmack.

Core issues. The appeal turned on whether EVWR and CSX validly limited their Carmack liability via published rate schedules associated with an industry Standard Transportation Commodity (STC) code used on the bills of lading. Lloyd’s argued the carriers failed to provide a reasonable opportunity to select full liability and that there was no sufficiently specific written agreement establishing the limitation as required by § 11706(c)(3)(A).

2. Summary of the Opinion

The Seventh Circuit affirmed: (i) summary judgment for EVWR enforcing a $25,000 per locomotive cap tied to EVWR’s public rate “EVWR Q 5012,” and (ii) a jury verdict for CSX enforcing a $10,000 per locomotive cap tied to “CSXT Public Price List 6051,” along with denial of Lloyd’s Rule 50 motion.

The court distinguished ABB Inc. v. CSX Transportation, Inc., emphasizing that—unlike ABB—NRE’s logistics manager (Smith) undisputedly knew about the carriers’ published rates, knew he could choose higher rates for higher carrier liability, and repeatedly chose the lower-rate/limited-liability option because NRE carried its own insurance.

3. Analysis

A. Precedents Cited

  • Nelson v. Town of Paris and Hossack v. Floor Covering Assocs. of Joliet, Inc.: Used for standards of review—de novo review for summary judgment and Rule 50, with Rule 50 relief available only if no rational jury could find against the movant.
  • N. Am. Van Lines, Inc. v. Pinkerton Sec. Sys., Inc.: Framed Carmack as the uniform federal regime governing carrier liability for interstate shipping losses and displacing the pre-Carmack patchwork of common law and state law.
  • Adams Express Co. v. Croninger and Atl. Coast Line R.R. Co. v. Riverside Mills: Supplied the historical rationale for Carmack—uniformity and “unity of transportation with unity of responsibility.” Adams Express also provided the classic formulation permitting “fair, open, just, and reasonable” agreed-value limitations to obtain lower rates.
  • Bos. & Me. R.R. v. Piper: Reinforced that when a carrier offers alternative rates corresponding to alternative liability levels, the shipper is “bound by the one chosen,” and that such caps operate as lawful limitations on recovery (not exculpation for negligence).
  • Nipponkoa Ins. Co. v. Atlas Van Lines, Inc.: Provided the Seventh Circuit’s three-part test for limiting liability under Carmack: (1) reasonable opportunity to choose between liability levels, (2) agreement to a choice of liability, (3) issuance of a receipt/bill of lading before shipment. The court also reiterated that a bill of lading “serves as a contract.”
  • ABB Inc. v. CSX Transportation, Inc.: Lloyd’s principal authority. The Seventh Circuit treated ABB as a fact-specific warning against enforcing a limitation where the shipper had no demonstrated knowledge of a price list and the bill of lading contained no meaningful reference (no rate authority code/price list/classification) to incorporate the limitation. Critically, the Seventh Circuit noted ABB’s own statement that a reference to the price list on the bill of lading could have changed the result.
  • Norfolk S. Ry. Co. v. Kirby: Supported treating bill-of-lading interpretation as ordinary contract interpretation (within the applicable federal framework).
  • S&O Liquidating P'ship v. Comm'r and United States v. Nat'l Steel Corp.: Explained the court’s choice-of-law method: interpret Carmack-governed shipping contracts using “standard principles of contract law,” i.e., core common-law principles broadly shared.
  • Funeral Fin. Sys. v. United States: Supplied the Seventh Circuit’s definition of ambiguity—terms “subject to reasonable alternative interpretations.”
  • Royal Ins. Co. of Am. v. Orient Overseas Container Line Ltd.: Used to explain how ambiguity is resolved with extrinsic evidence, and when summary judgment is still appropriate despite ambiguity (uncontested extrinsic evidence or overwhelming proof).
  • United States v. Rand Motors and Air Line Pilots Ass'n, Int'l v. Midwest Express Airlines, Inc.: Supported the “extrinsic ambiguity” doctrine—courts may look to objective commercial context to identify ambiguity that is not apparent from the text alone.
  • Pierce v. Atchison, Topeka & Santa Fe Ry. Co. and Young v. Verizon's Bell Atl. Cash Balance Plan: Grounded what qualifies as “objective” extrinsic evidence, including course of dealing.

B. Legal Reasoning

1) Carmack’s default and the statutory path to limitation. The court began with Carmack’s baseline: carriers are generally liable for “actual loss or injury” (§ 11706(a)). But Carmack expressly permits limitation where liability is set by the shipper’s written declaration or a written agreement (§ 11706(c)(3)), and the Seventh Circuit’s Nipponkoa framework operationalizes that permission.

2) The decisive factual distinction from ABB: knowledge + choice. The court treated the “reasonable opportunity to choose” element as satisfied because Smith knew: (a) the STC code corresponded to publicly available carrier pricing, (b) higher rates could be selected to increase carrier liability, and (c) he chose the lower-rate option because NRE had separate insurance. This directly negated Lloyd’s attempt to analogize to ABB, where the shipper sought rates and got no response and did not know of the price list.

3) Must the bill of lading state the dollar cap? The court rejected Lloyd’s reading that Carmack requires the bill of lading to recite the cap expressly. Instead, the court read ABB to require a written agreement “sufficiently specific” to show assent—something ABB found lacking because the bill of lading there was silent as to any identifiable reference point (rate authority code, price list, classification). Here, the STC code supplied that reference point and, in the commercial context, functioned as the contractual “hook” tying the shipment to the published rate/liability package.

4) Contract interpretation: STC code as an ambiguous term resolved by course of dealing. The STC code on its face identifies the commodity, but it does not itself state liability. The court therefore found the STC code was an ambiguous contractual term—reasonably read either as mere description (Lloyd’s view) or as a selection of a rate/liability option (carriers’ view).

Having found ambiguity, the court used extrinsic evidence—principally Smith’s long course of dealing and undisputed understanding—to determine the parties’ intent. For EVWR, that evidence was uncontested, making summary judgment appropriate under the approach described in Royal Ins. Co. of Am. v. Orient Overseas Container Line Ltd. For CSX, the evidence went to the jury; after a defense verdict, the Rule 50 standard from Hossack required deference because a rational jury could accept Smith’s testimony and CSX’s evidence that the STC code reflected selection of the $10,000-cap rate.

5) Subrogation does not improve the shipper’s bargain. Although not framed as a separate holding, the opinion’s logic reflects a standard Carmack/subrogation consequence: Lloyd’s, as subrogee, stood in NRE’s shoes and was bound by NRE’s contractual rate/liability choice.

C. Impact

1) Greater enforceability of “code-based” incorporation in rail shipping. The decision strengthens carriers’ ability to prove limitation of liability where the bill of lading includes an industry code (here, an STC code) that is commercially understood to map to a public price list containing both the rate and the liability cap—especially when the shipper is a sophisticated repeat player.

2) ABB confined; shipper knowledge becomes the pivot. The Seventh Circuit reads ABB as turning on the absence of shipper knowledge and the absence of any meaningful written indicator tying the shipment to a limiting price list. Future litigants in the Seventh Circuit can expect ABB-like arguments to fail where the shipper’s employee has demonstrable familiarity with rate structures and intentionally selects the limited-liability rate.

3) Litigation focus shifts to extrinsic evidence and course of dealing. Because the court accepts “extrinsic ambiguity” and then resolves meaning through course of dealing, Carmack limitation disputes may become evidence-heavy: training, internal shipper practices, prior shipments, portal workflows, and testimony about how codes function in the trade will matter.

4) Practical consequences for insurers and risk allocation. Insurers pursuing subrogation will need early discovery on the shipper’s historical shipping practices and the carrier’s public price lists. Conversely, shippers who want full carrier liability must affirmatively select higher-liability rates (and document that selection) rather than rely on default Carmack recovery.

4. Complex Concepts Simplified

  • Carmack Amendment (49 U.S.C. § 11706): A federal statute that generally makes carriers liable for the full actual loss to goods in interstate rail transportation, but allows liability limits if the shipper agrees in writing as part of choosing among rate/liability options.
  • Bill of lading: The shipping document that functions as the contract for carriage; it can incorporate external terms (like a published price list) if it sufficiently identifies them.
  • STC code: An industry commodity code used to identify what is being shipped. Here, it also served (in context) as a pointer to a specific public rate schedule that included a liability cap.
  • Limitation of liability vs. waiver of liability: Carmack does not allow a carrier to contract away responsibility for its negligence altogether, but it permits agreed-value caps tied to rate choices.
  • Subrogation: After paying its insured (NRE), the insurer (Lloyd’s) steps into the insured’s shoes and can only recover what the insured could have recovered.
  • Extrinsic ambiguity & course of dealing: A contract term can appear clear until viewed in its commercial setting; evidence of how the parties have repeatedly done similar transactions can establish what a term was understood to mean.
  • Rule 50 (judgment as a matter of law): A post-trial request to overturn a verdict; it succeeds only if no rational jury could have reached the verdict.

5. Conclusion

The Seventh Circuit’s central contribution is its confirmation that, under the Carmack Amendment, a liability limitation need not be printed as a dollar amount on the face of the bill of lading when the bill contains an industry code that—together with uncontested course-of-dealing evidence—shows the shipper knowingly selected a published rate tied to a specific liability cap. By distinguishing ABB Inc. v. CSX Transportation, Inc. on shipper knowledge and written indicia, the opinion strengthens code-and-price-list incorporation as a viable mechanism for Carmack-compliant limitation of liability, particularly in repeat, sophisticated rail-shipping relationships.