An insurer cannot recover funds paid on behalf of a policyholder for damaged cargo because the extent of the damage was not adequately specified, says a federal appeals court, in upholding a lower court ruling.

New York-based New York Marine and General Insurance Co., a unit of ProSight Specialty Insurance Group Inc., had insured a cargo of batteries carried by policyholder Greenwich, Connecticut-based XPO Logistics Corp., according to the complaint in New York Marine and General Insurance Co v. Estes Express Lines Inc.; and Exfreight Zeta Inc.

The batteries were owned by XPO’s customer, TransPower USA, a unit of Escondido, California-based Transportation Power Inc. The cargo had a declared value of $100,000, according to the complaint.

XPO retained Lake Worth, Florida-based Exfreight to move the cargo from TransPower’s warehouse in Poway, California, to Linden, New Jersey.

Exfreight then hired Richmond, Virginia-based Estes Freight to transport the cargo, and Estes picked it up at TransPower’s Poway facility.

The cargo showed significant damage when it arrived in New Jersey in January 2014, and XPO became legally obligated to TransPower for $84,511.23, which New York Marine paid, said the complaint.

It then filed suit in U.S. District Court in San Diego, charging breach of contract and negligence, and seeking reimbursement of its payment, plus related costs and interest.

The U.S. District Court ruled against the insurer, which a three-judge appeals court panel of the 9th U.S. Circuit Court of Appeals in San Francisco affirmed Tuesday.

The 9th Circuit referred to the Carmack Amendment, which established a national liability system for interstate carriers. 

Under the Carmack Amendment, a claim must, at a minimum, be for the “payment of a specified or determinable amount of money,” said the ruling.

“The forms at issue here lack a specified or determinable claim amount, which is necessary to alert Estes to the content of its liability: they state that the ‘(e)xtent of damage’ is ‘unknown until cargo is inspected,’ and merely note the cargo’s total value of $148,055.30….

“In the absence of a ‘specified or determinable amount’ listed on the claim form, and in the absence of any other means for Estes to assess the extent of the loss, the forms did not reasonably permit Estes to apprise itself of the approximate claim value.

“Merely identifying the upper bound of possible damage with exact damages ‘TBD’ does not suffice,” said the ruling in affirming the lower court’s decision.