A shipper's insurer just learned a hard lesson about subrogation: when your client picks the cheap freight rate, the carrier's liability cap holds. 

On June 25, 2026, the Seventh Circuit affirmed that two rail carriers owed only the capped amounts their shipping contracts allowed, even after four locomotives were destroyed in a hurricane. 

Here's what happened. National Railway Equipment, or NRE, rebuilds locomotives. It needed to move four newly rebuilt units from Mount Vernon, Illinois, to the Port of Wilmington, North Carolina, bound for a customer in Africa. NRE's logistics manager booked Evansville Western Railway for the first leg and CSX Transportation for the second. 

Both carriers publish price sheets tied to a shipping code. Choose the listed rate, and the carrier caps what it owes if something goes wrong. Evansville Western's cap was $25,000 per locomotive. CSX's was $10,000 per locomotive. NRE could have paid more for higher coverage. It didn't - because it carried its own insurance through Lloyd's. 

That choice mattered when the CSX train ran into Hurricane Florence and the locomotives were destroyed in a derailment near Lilesville, North Carolina. NRE filed a claim. Lloyd's paid the full invoice value minus the deductible, then stepped into NRE's shoes as subrogee - the party that takes over an insured's right to sue - and went after both carriers to recover the money. 

Lloyd's argued the carriers couldn't hide behind their caps. Under the Carmack Amendment - the federal law that governs a carrier's liability for damaged interstate shipments - a carrier must give the shipper a real choice between liability levels and lock that choice in writing. Lloyd's said that never happened. 

The court disagreed. NRE's logistics manager had used these booking systems for seventeen years and ran the same carriers dozens of times a year. He knew the published rates, knew he could buy more coverage, and chose the cheaper option. By entering the shipping code, the court found, he was selecting the low rate and its matching cap. 

Lloyd's leaned on a Fourth Circuit case, ABB Inc. v. CSX Transportation, where a cap failed because the shipper never saw the price list. The Seventh Circuit said the two situations were nothing alike: here, the shipper knew exactly what he was choosing. 

The bottom line: a district court granted Evansville Western summary judgment, a jury sided with CSX, and the appeals court affirmed both rulings. Lloyd's recovery was limited to the contract caps - $25,000 and $10,000 per locomotive - plus prejudgment interest. 

For insurers and subrogation teams, the lesson is plain. When an insured picks a limited-liability freight rate while leaning on its own coverage, that choice can shrink the recovery later. The cap travels with the cargo.