An insurer paid $250,000 for a missing luxury watch. A federal appeals court says it can recover just $100.
The Eighth Circuit ruled on September 3, 2026 that Federal Express owed only $100 for a watch that disappeared in transit, upholding a cap that leaves the insurer to absorb almost all of the quarter-million-dollar loss.
The watch cost $250,000. The buyer purchased it from a jeweler and had it routed first to a Montana golf club, then forwarded to Arizona through FedEx. When she collected the package at a UPS store in Scottsdale and opened the bag, the watch was gone.
She filed a jewelry claim. Pennsylvania Insurance paid the insured couple $250,000 under a private collections policy, then sued FedEx to recover what it had paid, stepping into the couple's shoes as their subrogee.
The recovery ran into the shipping contract. The golf club sent the package on its own FedEx account and declared no value. FedEx's service guide said “[t]he declared value of any package represents our maximum liability in connection with a shipment of that package,” and that “unless a higher value is declared and paid for, our liability . . . is limited to US$100.” For jewelry, the guide capped the declared value at $1,000.
The insurer tried three ways past the $100 limit. All three failed.
Its claims for negligence, unjust enrichment and civil theft were knocked out by the Airline Deregulation Act, a federal law that stops states from enforcing rules “related to a price, route, or service of an air carrier.” The court treated package handling as a core FedEx service that state law could not reach.
Its next argument came up short too. The insurer said a FedEx employee had removed the watch in an unmonitored area and stolen it. Normally a carrier can cap what it owes for a lost shipment, and loses that protection only if it “appropriated the property for its own use or gain.” The court found no evidence of that, and said theft by a single employee would not break the cap.
The notice argument failed as well. The golf club had a 2009 pricing agreement that folded in the service guide, had shipped with FedEx before, and clicked “Finalize” beside a line reading, “By clicking ‘Finalize,’ I accept the Terms of Use of the FedEx website and the FedEx Service Guide.” Staff were also shown a box to “[p]urchase a higher limit of liability from FedEx.” That was enough notice, the court held.
FedEx pushed back on its own cross-appeal, and lost. It argued there was no contract, no proof it ever received the watch, and no valid claim to recover. A November 23, 2022 invoice naming the club as sender and the buyer as recipient, with a $127.69 charge, established the deal. Trial testimony supported the finding that the watch was in the bag at pickup and gone at delivery. And paperwork from the underwriter, together with the undisputed $250,000 check, gave the insurer the right to step into the couple's place.
The takeaway is simple. When a carrier's contract caps liability and no extra value is declared, the size of the loss does not lift the ceiling. The insurer paid $250,000 and recovered $100.
