[Case Review] “Single Through Bill” ≠ “Full Liability Exemption”? Multimodal Transport Liability Dispute Triggered by Million-Dollar Cargo Loss
Company A and Company B signed a Logistics Service Agreement, stipulating that Company B would provide full door-to-door logistics services from China to Toronto, Canada, covering both ocean freight and the final road transport segment. After the cargo successfully arrived in Vancouver, Canada, it was handed over to local carrier’ s Company for the trucking segment. Unexpectedly, a serious traffic accident occurred in Ontario, destroying 156 pieces of cargo in a massive fire, causing direct economic losses exceeding USD 500,000.
Since Company A had purchased freight insurance, the insurer paid full compensation in accordance with the policy and obtained subrogation rights, subsequently suing Company B to recover the payout.
However, Company B argued that the accident occurred during a third-party trucking segment and that under Canadian law its liability should be subject to limitation. This sparked a cross-jurisdictional dispute over liability allocation and the scope of compensation in the context of multimodal transport.
[Key Issue] Freight Forwarder or Carrier – Who Is Liable for the Road Leg?
Company B argued it acted merely as an agent for carriage and should not bear liability for the cargo loss. However, the arbitration tribunal held that under the terms of the Logistics Service Agreement, Company B had in fact undertaken the obligations of a carrier, qualifying as a multimodal transport operator and thus bearing responsibility for cargo loss throughout the entire transportation process.
As the carrier in a DDP transaction, Company B failed to ensure cargo safety during delivery, resulting in total loss and triggering liability for compensation. Although Company B attempted to claim compensation from the overseas trucking company, the latter—citing the absence of declared value—only agreed to pay a limited amount, insufficient to cover the shipper’s total loss.
According to the Motor Vehicle Act of British Columbia, Canada, compensation is limited to “CAD 4.41 per kilogram.”
However, Article 46 of the Maritime Law clearly provides that where a contract stipulates full-course transportation, the carrier is liable for the cargo’s safety throughout the journey, regardless of whether the carrier personally performs any segment of the transport.
[Legal Analysis] Preconditions for Liability Limitation: Declared Value and Contract Transparency
This case is a classic example of international logistics risk, offering valuable lessons to industry peers:
· Ambiguous liability ≠ exemption from liability – Once a door-to-door agreement is signed, the logistics company cannot evade full-course liability by claiming “subcontracting to others.”
· Foreign law on the overseas leg is not a shield – The applicability of a foreign jurisdiction’s liability limitation depends on whether the shipper declared the cargo’s value, whether the contractual terms were transparent and reasonable, and whether such terms were reflected in the waybill. All of these conditions must be met.
· Insurance payout ≠ liability termination – Even if the shipper receives insurance compensation, the insurer may exercise subrogation rights. Without proper compliance measures, the logistics service provider may still face substantial recovery claims.
[Risk Alerts] Buying Insurance Does Not Mean You Can Rest Easy
The right of subrogation is a key statutory right in property insurance. When an insured property suffers loss due to the actions of a third party, and the insurer pays compensation, the insurer is entitled—within the amount paid—to assume the insured’s rights against that third party.
In this case, the insurer, having compensated the cargo owner in full, acquired the right to pursue the liable party (Company B) for recovery.
[Practical Recommendations] Three Steps to Build a “Door-to-Door” Risk Firewall
1. Clearly define contractual liability boundaries – Whether for ocean, air, or road transport, when providing door-to-door service, logistics companies should clearly stipulate in the service contract the responsible party for each leg, the applicable law, and the dispute resolution mechanism. The contract should explicitly state whether the company is acting as the carrier, whether it bears full-course liability, and the claim process in multimodal transport cargo damage scenarios. This helps prevent failed risk transfer due to ambiguous status or unclear responsibility.
2. Carriers should obtain carrier’s liability insurance – For high-value shipments or routes to high-risk destinations, carriers should prioritize purchasing Carrier’s Liability Insurance that covers the entire logistics chain (including the final land transport leg). This is especially important in high-risk areas such as the Red Sea or regions with elevated geopolitical risk, where such coverage can significantly reduce the risk of large recovery claims from insurers.
3. Strengthen declared value mechanisms for the final land transport leg – Carriers should ensure that for any business involving transshipment or land transport, the cargo is fully declared for value before carriage, to avoid limited compensation in case of loss. In this case, the absence of declared value meant the trucking company only compensated according to the statutory limit (CAD 4.41 per kilogram), far short of the total loss. It is advisable to require partners to confirm that declared value procedures for the final leg have been completed before accepting the booking, making this a precondition for cooperation. This is especially crucial in countries such as Canada, the United States, and European nations where transport liability limitations are clearly stipulated.
In the multimodal transport chain, any weak link can later be “traced back” for liability. Freight forwarding enterprises should shift from an “operational mindset” to a “risk control mindset,” establishing a systematic risk prevention and control mechanism to remain competitive in the complex and volatile cross-border logistics environment.
JCtrans continues to track risk cases, empowering member companies to strengthen their Risk Alerts. By keeping a close watch on partner activities through our platform’s Risk Alerts, you can stay one step ahead. Subscribe now to get started.
