## Facts

- Twenty packages of hard disk drives were shipped from Malaysia to San Francisco on China Airlines for ultimate delivery to Seagate Technology.
- Dimerco (freight forwarder) arranged the shipment using China Airlines’ standard-form air waybill, which was the sole contract-of-carriage document.
- The waybill contained preprinted terms limiting liability for cargo loss or damage to $20 per kilogram unless a higher value was declared and an additional charge paid.
- The “Declared Value for Carriage” field stated “NVD” (no value declared); the shipper instead insured the cargo with HIH Marine Insurance Services.
- Gateway Freight Services acted under a ground-handling agreement with China Airlines, taking possession of arriving cargo and transporting it to Gateway’s off-airport warehouse for storage and delivery to the consignee.
- After arrival, four packages were stolen from Gateway’s warehouse before delivery; the thieves were identified and had no known connection to Gateway.
- HIH paid Seagate about $430,000 and sued Gateway and the thieves in subrogation; HIH settled with the thieves for $120,000.
- The trial court granted summary judgment for Gateway, holding the waybill capped Gateway’s liability at about $31,200 and that the $120,000 thief settlement fully offset any Gateway exposure.

## Issues

1. Whether Gateway, as China Airlines’ ground-handling agent operating at an off-airport facility, could invoke the air waybill’s contractual limitation of liability.
2. Whether federal common law’s released-value doctrine made the limitation enforceable where the shipper had an opportunity to declare a higher value but did not.
3. Whether the theft occurring during off-airport storage was within services “incidental to air carriage” covered by the waybill limitation.
4. Whether HIH’s settlement with the thieves could be credited to offset any limited liability of Gateway to zero.

## Decision

- The Court of Appeal affirmed summary judgment for Gateway.
- The court held the air waybill’s $20/kg limitation applied to Gateway as the carrier’s agent and covered Gateway’s handling, transport, and storage as services incidental to air carriage.
- The court held the limitation was enforceable under the released-value doctrine because the shipper, through a sophisticated freight forwarder, had a fair opportunity to declare higher value and chose “NVD” instead.
- The court upheld the trial court’s calculation of Gateway’s capped exposure (about $31,200) and the crediting of HIH’s $120,000 settlement with the thieves, eliminating any remaining recovery against Gateway.

## Legal Principles

- An air waybill’s liability limitation may extend to the air carrier’s agents when the contract terms are drafted to include agents and cover ancillary cargo services tied to the carriage.
- Under federal common law’s released-value doctrine, a liability limitation is enforceable when the shipper is given a fair opportunity to declare a higher value and pay a higher rate and knowingly elects the lower-liability option.
- Post-arrival cargo handling and storage by the carrier’s agent can remain within the scope of air carriage when treated as continuous, incidental services leading to delivery, even if performed off-airport.
- Settlement proceeds received from primary wrongdoers may be credited to offset a defendant’s capped contractual exposure, potentially reducing liability to zero.

## Conclusion

The court enforced the air waybill’s released-value liability cap against the insurer-subrogee and held that the carrier’s off-airport ground-handling agent could invoke the limitation for theft occurring during incidental storage and delivery operations; because the thief settlement exceeded the capped amount, Gateway owed nothing.


HIH Marine Ins. Servs., Inc. v. Gateway Freight Servs., 96 Cal. App. 4th 486, 116 Cal. Rptr. 2d 893 (Cal. Ct. App. 2002)