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The Carmack Amendment Preempts State Insurance Law Claims For Bad Faith And Unfair Claims Settlement Practices.

QuestionsMills & Associates’ practice focuses in a limited number of areas.  Two practice areas of interests are insurance bad faith law and trucking law.  So it is always interesting to find a case that we can blog about that that touches on both areas.  This is one of those cases.

The Nichols family hired Mayflower Transit, LLC to transport their household good from Sacramento, CA to Henderson, NV.  The goods made it over the Nevada state line, but not all the way to the Nichols’ home.  A trailer fire destroyed the Mayflower trailer and all of its contents.

The Nichols and their homeowner’s insurance company (as subrogee) sued Mayflower for the loss of the good.  The attorney for the Nichols used a standard set of state law claims including breach of contract, negligence, negligence per se, negligent misrepresentation and intentional misrepresentation.  For good measure, they also tacked on insurance-type bad faith claims including breach of duty to deal fairly and in good faith, violation of the California Insurance Code and violations of Nevada’s Unfair Claims Settlement Practices Act.  (NRS 686A.310).

The case of Nichols v. Mayflower Transit, LLC, 368 F.Supp.2d 1104 (D. Nev. 2003) discusses whether state law claims including those for insurance law violations survive Carmack preemption.

The court rightfully determined that as to the shipping contract claims, the Carmack Amendment, 49 U.S.C. § 14706 preempts those claims.  The unique question in this case is whether the state based insurance law claims should be dismissed as well.  Deciding the case in favor of the motor carrier, the court said that the process of declaring value for obtaining a tariff is not an insurance contract.  Following other opinions, the Nichols court determined that released valuation agreement was not an insurance contract.  The court said:

In Hughes v. United Van Lines, Inc., 829 F.2d 1407 (7th Cir.1987) cert. denied, 485 U.S. 913, 108 S.Ct. 1068, 99 L.Ed.2d 248 (1988) and White v. United Van Lines, Inc., 758 F.Supp. 1240 (N.D.Ill.1991), the courts dealt with similar released valuation agreements and dismissed plaintiffs’ causes of action asserted against the household goods carrier for breach of insurance agreement. The District Court in White held that the Carmack Amendment preempted the plaintiff’s state common law claim against the carrier for bad faith breach of “insurance contract.”

368 F.Supp. at 1108.  The court cited the case of Arnell v. Mayflower Transit, Inc., 968 F.Supp. 521 (D. Nev. 1997) where it says:

As this Court has already recognized in Arnell, 968 F.Supp. at 524, “anything other than complete preemption of state law claims is contrary to the very purpose of the Carmack Amendment, which was to establish uniform national rules of liability for interstate carriers.”  Id. 

In spite of the fact that all of the state law causes of action in Plaintiff’s Amended Complaint were dismissed, the court found that the Amended complaint did state a cause of action under Carmack.

If you have questions about the Carmack Amendment, Nevada Trucking Law or Nevada Bad Faith law, contact Mike Mills at