Concealed Vs. Hidden Damage

Q: We had a machine delivered to us by a major less-than-truckload carrier that was damaged (an arm near the top of the machine was bent). There was no visible damage to the packaging, but when we opened the carton, the damage to the machine was immediately evident, and we reported it timely to the carrier.

The carrier says there’s “a very distinctive difference between concealed damage and visible damage,” and that “we have a clear movement with no signs of mishandling of the shipment.” The inspector found oil on the inside of the packaging and a hole poked in the packaging in the same location as the bent arm, and opined that the machine may have tipped over, but the carrier dismissed this as only the inspector’s opinion.

We’ve told the carrier that if it pays the claim, we’ll turn over the damaged machine to it for salvage, but it says we have a legal obligation to mitigate the damages, and wants us to make repairs instead.

To make a long story short, it’s offered us one-third of the claim amount. We may be able to repair the machine for what they’re offering, but if the need was immediate, wouldn’t our economic loss be the full amount, and they could salvage?

Also, am I wrong that the law makes no distinction between visible and concealed damage?

A: All things considered, I’m going to have to side with the carrier here, though I don’t care for most of its thinking. Yours, however, is even further off the mark.

The one-third offer it’s made to you derives, I’m sure, from the old “exposure” test carriers used to apply to concealed damage claims. That is, they used to say it was proper to prorate such claims based on how many exposures the goods had to possible damage. Here the carrier is considering there was one such exposure on the shipping dock, a second while the goods were in transit and a third on the receiving dock; therefore it has only one-third liability.

But the exposure test has long since been discredited. The law, as you say, makes no distinction between concealed and visible damage; if goods are damaged in transit, the carrier is 100 percent liable, period, irrespective of whether the packaging is or is not also damaged.

I’ll also go along with the inspector about the likely cause of the damage being that the machine tipped over. The carrier can dismiss that as mere opinion, but a professional inspector who’s actually seen the damage certainly has a more valuable opinion than a carrier claims adjustor who never laid eyes on it.

So, while I seem to be agreeing with you on all your primary points, why am I coming down on the carrier’s side? Well, there are a couple of reasons.

The first is that, although there’s no legal distinction between visible and concealed damage, there’s a big one when it comes to the matter of evidence. Your obligation is to prove you gave the goods to the carrier in good condition and received them back with damage. But you can’t really do that, can you? We may agree the machine tipped over, but where and when? It could have happened any time between when the machine was boxed up and when it was unpackaged.

Perhaps it seems more likely to have happened while the carrier had the machine and it was in motion, but then we come to my second reason. The carrier is entirely correct in saying the owner has a legal obligation to mitigate the damages as much as possible. That is, you can’t just total this thing and wash your hands of it; you have to minimize the dollar amount of your injury.

You say you “may be able to repair the machine for what they’re offering,” but in the circumstances I take that “may be” to amount to pretty much a certainty: you can repair it for that sum. And that’s all the carrier owes you. It has no obligation to accept the damaged machine and try to salvage it. Yes, it owes you your economic loss, but it appears the loss will be minimized by repairing the machine, not scrapping it.

So forget the carrier’s flawed reasoning. You’re getting all you’d be entitled to if you fought through your evidence problem and won. Take the money, fix the thing, and everybody comes out even — which is how the law says it should be.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.

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