At Genera Energy Inc., transportation of biomass is an important part of the supply chain. Understanding the various laws that apply to the transportation of biomass can help mitigate risk in many ways. Disputes may arise over liability in accidents, damage to the material, and injury to property or persons. Depending on the situations and circumstances, federal, as well as state laws, may apply in these situations.
Generally, cargo that is transported by motor carrier in interstate commerce will be under the Carmack Amendment. Carmack controls and limits the liability of carriers for damage. Carriers will be liable for the value of the lost or damaged cargo. This federal law preempts state law causes of actions in which there may be damages proximately caused by a negligent carrier that can be far greater than actual loss. The plaintiff under the Carmack Amendment need only show that the material was delivered to the carrier in good condition, the goods arrived at the final place of delivery in a damaged condition, and that the amount of damages is measurable. The plaintiff does not have the burden to prove that the carrier damaged the goods, only that the goods were damaged during the carrier’s custody. The carrier must prove that it was not negligent, a burden that is not easy to overcome. Some have viewed this as a strict liability standard, yet the intent of the law is to bring uniformity in the interstate transportation of cargo where state laws in this area can vary. Written agreements must take the Carmack Amendment into consideration. Many Bill of Lading documents have terms and conditions that attempt to limit the liability of the carrier to a specific value prior to transporting the material.
Appropriate insurance coverage for the transportation of biomass is critical. By law, common carriers are required to obtain certain levels of insurance. For instance, federal regulations require a motor carrier of non-hazardous cargo to have an insurance policy to cover liability at a minimum of $750,000 for injuries to the public. Various statutes will apply setting minimum requirements for common carriers. It is important that transportation agreements address insurance requirements. Suppliers should not assume that the insurance coverage for the carrier will be sufficient to cover claims that may arise against the supplier.
It is important to review the insurance policy if you are using a carrier for transportation of biomass to see if the policy is sufficient. Depending on the material to be transported, the minimum requirements of insurance may need to be increased in the contract. Likewise, suppliers may want to review their own policies to determine the coverage for cargo, injury and property liability. Biomass is a unique material and proper coverage is important in cases of damage or loss. In many contracts, the parties may negotiate risk using indemnification provisions. Some states have enacted anti-indemnification statutes to prohibit shippers from requiring carriers to indemnify them for all liability, including the negligence of the shipper itself. It is important to discuss any risks with your insurance provider and legal counsel.
Genera Energy Inc. believes that safety for the general public, as well as for all workers in the biomass industry, is of the utmost importance. Mitigating risks and costs is a valuable tool when negotiating transportation contracts. Working through risks associated with biomass transport with employees and/or contractors conveys the emphasis we place on safety.
By Julie Anderson, Legal Business Analyst
