Kuehne & Nagel, Inc. v. Baiden, 36 N.Y.2d 539 (1975)
Even when a shipper agrees to or permits on-deck stowage, a carrier remains liable for cargo damage caused by improper stowage or negligence.
Summary
Kuehne & Nagel, as assignee of Amber Maritime Corporation, sued Baiden’s insurance company to recover losses from cargo damage. A shipment of jeeps, partially stowed on deck with the shipper’s knowledge, was damaged during a storm. The shipper withheld freight payment, claiming cargo damage. The carrier’s insurer disclaimed liability, and the carrier settled by foregoing the freight claim. The New York Court of Appeals held that the carrier’s settlement was reasonable because the shipper had a valid negligence claim against the carrier for improper stowage, despite the on-deck stowage agreement, and the insurer was liable for the settlement amount.
Facts
Caribe Manufacturing Co. booked 300 jeeps for shipment from Poland to Colombia, with 82 stowed on deck. The bills of lading stated that on-deck stowage was at the shipper’s risk. During the voyage, some jeeps were damaged by stormy weather. Caribe withheld freight payment due to the damage and claimed the carrier failed to notify them of on-deck stowage.
Procedural History
The carrier notified its insurer, who disclaimed liability. The carrier then settled with Caribe by foregoing the unpaid freight and assigned its rights to Kuehne & Nagel, who sued the insurance company. The Appellate Division initially granted summary judgment to the insurance company, reasoning that the damage was caused by conduct not insured against. The Court of Appeals reversed, granting summary judgment to Kuehne & Nagel.
Issue(s)
Whether a carrier is liable for cargo damage resulting from on-deck stowage, despite a clause in the bill of lading stating that such stowage is at the shipper’s risk, when the damage is caused by the carrier’s negligence.
Holding
Yes, because even with an agreement for on-deck stowage, a carrier is liable for damage caused by its negligence or improper stowage. The exculpatory clause does not relieve the carrier from liability for its own negligence.
Court’s Reasoning
The court reasoned that while the Hague Rules and the U.S. Carriage of Goods by Sea Act did not apply to on-deck storage, general principles of common carriage law did. Citing Sonnesen v Panama Transp. Co., the court applied general maritime law since no foreign maritime law was proven. Even with the shipper’s agreement to on-deck stowage, the carrier has a duty to properly stow the cargo. The court referenced Pioneer Import Corp. v The Lafcomo, stating that carriers could still be held liable for negligent stowage even if the shipper assumed risks of on-deck carriage. Quoting Schnell v The Vallescura, the court emphasized that the burden is on the carrier to prove it was free from negligence. The court stated, “In general the burden rests upon the carrier of goods by sea to bring himself within any exception relieving him from the liability which the law otherwise imposes on him…He is a bailee entrusted with the shipper’s goods, with respect to the care and safe delivery of which the law imposes upon him an extraordinary duty.” Since the carrier could not prove freedom from negligence, the settlement was reasonable, and the insurance company was liable. The court concluded that the carrier reasonably settled the cargo owner’s claim, a risk insured by the defendants.