Royal Insurance Co. v. Orient Overseas Container Line, Ltd.

Ford Motor Company (Ford) (plaintiff) entered into a multimodal-transportation contract with Orient Overseas Container Line Ltd. (OOCL) (defendant) for OOCL to transport Ford transmissions from France to the United States. Under the contract, OOCL provided transportation for thousands of transmissions overland from inland France to the French port of Le Havre, then by sea to Montreal, Canada, and then overland to inland locations in the United States. During the sea portion of the route, the container ship encountered stormy weather, resulting in the loss of some containers overboard and flooding of others. More than 5,000 of Ford’s transmissions were lost or damaged. Ford’s insurance agent, Royal Insurance Co. (Royal) (plaintiff) reimbursed Ford for the loss. Ford and Royal then sued OOCL in federal district court to recover the value of the loss. OOCL asserted the $500-per-package liability limit of the Carriage of Goods by Sea Act (COGSA) as an affirmative defense. Ford and Royal argued that a different set of maritime rules, the Hague–Visby Rules, applied, claiming that the parties had incorporated those rules into the contract. OOCL moved for partial summary judgment to specify COGSA as governing the liability limitation and to identify each rack of transmissions, not each individual transmission unit, as the designated package under the COGSA limitation. The district court held that COGSA did apply and that each rack constituted a package for liability purposes. Ford and Royal appealed.