Fourth Circuit Holds Ocean Carrier's Post-Settlement Status As Cargo Owner Does Not Affect Its Ability To Seek Indemnity Under Stevedoring Agreement
October, 2007
In American Roll-On Roll-Off Carrier, Inc. v. P & O Ports Baltimore, Inc., 479 F.3d 288 (4th Cir. 2007), the Fourth Circuit held that an ocean carrier's ability to seek indemnity from a stevedoring company under the stevedoring agreement was not affected by its status as a post-settlement cargo owner. Therefore, the three year time bar for indemnity claims found in the stevedoring contract was applicable, rather than the bill of lading's one year limitation period for a cargo owner to bring claims against the carrier.
Facts
American Roll-On Roll-Off Carrier, Inc. ("ARC") contracted with a third party cargo owner to transport privately-owned vehicles (POV) on its ships. ARC also had a stevedoring contract with the defendant stevedoring company, P & O Ports Baltimore, Inc. ("P & O") to load the POVs onto an ARC ship. The stevedoring contract required that all ARC bills of lading had to include a Himalaya clause, and ARC incorporated the Himalaya clause into its bill of lading with the third party cargo owner.
During transport, a tow tractor broke from its lashings and damaged the ship and most of the POVs. In response to the cargo damage, ARC reached a settlement with the cargo owner by paying the "blue book" value for the POVs. ARC held the title to the POVs after the settlement. Less than three years after the settlement was reached, ARC pursued an action for indemnity against P & O under the stevedoring contract and for the settlement payment made to the cargo owner under a negligence theory. The district court granted summary judgment in favor of P & O on the grounds that, as a result of the settlement, ARC took title to the cargo and stood in the shoes of a "cargo owner." The court held that both the indemnity and negligence claims were time barred because the Himalaya clause extended the bill of lading's one year time bar protection to P & O. On appeal, ARC dropped the negligence claim and only pursued the indemnity claim.
Analysis
The Fourth Circuit reversed and remanded, holding that even if ARC was the new cargo owner, it was not suing P & O in its capacity as cargo owner, because it was not pursuing a negligence claim. Instead, ARC was seeking indemnification in its capacity as carrier. The Fourth Circuit stated that this type of indemnity action was expressly authorized by the stevedoring agreement and that the claim was timely filed within the three year time limit established in the stevedoring agreement.
The conflict between the limitation periods in the bill of lading and the stevedoring contract were of particular importance in this indemnity case. Under the bill of lading, which was governed by the Carriage of Goods By Sea Act ("COGSA"), the cargo owner had only one year to bring any claim against ARC for damage to the cargo and liability for damage was limited to $500.00 per package. Because of the Himalaya clause, which entitled P & O to the same defenses in a cargo damages claim that ARC would enjoy under the bill of lading, this one year time bar also applied to cargo damages claims against P & O. However, under the stevedoring contract, ARC had three years to bring claims for indemnity against P & O.
The stevedoring contract stated that Maryland law was to control any indemnification cause of action. Maryland has a three year statute of limitations for indemnification actions. The Fourth Circuit held that a maritime claim for indemnity did not accrue until ARC's liability was fixed by its settlement payment to the third party cargo owner. Therefore, ARC had three years from the time of its settlement payment to file an indemnity action against P & O.
P & O argued that ARC brought suit as a cargo owner and that the Himalaya clause, which was incorporated in the bill of lading, would have no meaning if the stevedoring contract's time bar was used, instead of using the one year time bar in the bill of lading. The Fourth Circuit was not persuaded by this argument. The Fourth Circuit agreed that the Himalaya clause would extend the one year time bar defense to P & O, if it was defending against a claim for cargo damage; however, the Fourth Circuit stated that the Himalaya clause did not subsume the stevedoring contract. In other words, the bill of lading and the Himalaya clause were not an obstacle to ARC's indemnification claim. The Fourth Circuit held that the stevedoring contract operated independently and provided that ARC had three years to bring an indemnification action against P & O. Moreover, the fact that ARC took title to the cargo in the settlement did not convert ARC's indemnity action into action by a cargo owner. ARC had three years to bring suit against P & O to recoup the amount paid in damages to the third party cargo owner.
Learning Point
An ocean carrier's assumption of "cargo owner" status as a result of its settlement with an owner for damage to cargo does not render the bill of lading terms controlling or otherwise impact its ability to seek indemnity from a stevedoring company pursuant to the terms of a stevedoring contract.
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