In Atwood Oceanics, Inc. v. M/V PAC Altair, the Southern District of Alabama considered what happens when a carrier wants its cake, and to eat it too. In Atwood Oceanics, , the shipper of a cargo of marine drilling riser joints sued the carrier for damage and loss overboard as a consequence of a rogue wave hitting the vessel during its transit from Malaysia to Mobile, Alabama. The bill of lading stated on its face that the cargo consisted of “85 pieces joint risers and 1 crate accessories.” The bill of lading also stated that the cargo is “shipped on deck at shippers risk & expense.”

Plaintiff made a motion for partial summary judgment to strike the $500 package limitation defense provided under the United States Carriage of Goods by Sea Act (COGSA), Section 4(5) on the grounds that COGSA is not applicable to cargo carried on deck.

The Court agreed that COGSA, by its very terms, states that it does not cover “cargo which by the Contract of Carriage is stated as being carried on deck and is so carried.” Since the bill of lading expressly stated that the cargo was carried on deck and the shipper agreed to that carriage, COGSA by its own terms, as a matter of law, cannot apply to the subject cargo.

The District Court also noted that in order to apply COGSA to on-deck cargo, the language in the bill of lading (such as a Clause Paramount) must “expressly” state that COGSA shall be applicable to on-deck cargo. In reviewing the Clause Paramount in the subject bill of lading and the other bill of lading terms, the District Court found that the clause was “wholly silent as to COGSA’s applicability to on-deck cargo.” Consequently, the Court had no alternative but to grant the plaintiff’s application to strike the defense of a $500 package limitation and the application of COGSA to the carriage of the cargo.

Although this decision is consistent with well-established law and does not present any unique issues of first impression, it serves as a very important reminder that on deck stowage is not automatically subject to the application of COGSA, including the carrier’s defenses, and that COGSA could apply as a “matter of contract” to the cargo if the parties had agreed to extend COGSA to cargo carried on deck. This is frequently done in many ocean bills of lading in order to take advantage of the 17 defenses provided under COGSA and The Hague Rules, as well as the $500 package imitation.

This decision did not decide the issue of whether the cargo being hit by a rogue wave fell within the defense of “carried on deck at shipper’s risk.” However, whether the “shipper’s risk” should, at a very minimum, include damage attributable to an Act of God or Peril of the Sea defense is worth considering. On the one hand a Peril of the Sea defense might not be applicable in this case because there was no damage to the ship’s structure itself. Damage to the ship’s structure has been a requisite in many decisions in both the Second and Fifth Circuits as a requirement for invoking Peril of the Sea under the logic that the storm needs to be serious enough to damage both the cargo and the ship’s structure as well.

Of course, this naturally raises a very interesting question when it comes to on-deck cargo. If COGSA does not apply as a matter of law to the carriage of goods on deck, then why should the stringent requirements for Act of God or Peril of the Sea, as provided by COGSA? Frankly, we are of the view that as long as the damage to the cargo is due to a risk which is foreseeable from carriage on deck, such as the cargo getting wet or falling overboard, that is all that is needed as a matter of contract to satisfy the provision for “carried on deck at shipper’s risk.” The reverse is certainly true, as there have been decisions which have held that the term “carried on deck at shipper’s risk” does not cover damage which is attributable to activities other than deck carriage. For instance, damage during loading or discharging of cargo from the vessel, or movement of the cargo around the terminal, or delay of the vessel, would not invoke the “shipper’s risk” defense.