Q: We’re a motor carrier, and recently subbed out a load to another carrier. The shipment was of snack-type foods in small plastic baggies, all contained in cartons and palletized, of course.
The truck was involved in a bad highway accident. The van burst open, and the contents sprayed out all over the ground. The palletized configuration, even most of the cartons, of course didn’t survive the carnage, and even many of the plastic baggies burst or were torn open. Total value of the load was about $100,000.
The subcontracting carrier acknowledges liability, but points out the entire load wasn’t destroyed. They’re right about that; nobody ever went around trying to pick up the intact baggies so we don’t have an accurate count about how many weren’t broken open, but from photographs of the scene we estimate that maybe 35 percent of them might have remained intact.
Our shipper/customer, of course, isn’t willing to settle for anything less than the full value of the load. How do we deal with our subcontractor’s issue about salvage value of what remained of this load?
A: You tell them, as politely as you can, that so far as you can tell there was no salvage value.
And that’s a true statement, notwithstanding that some parts of this load may have remained intact. The problem is simply that there was no realistic way of sorting out the good from the bad.
There was once a British cartoon of a humble vicarage curate being treated to breakfast by the local lord of the manor. The lord apologized to the curate, saying, “I’m afraid you have a bad egg there.”
“Oh, no, sir,” said the curate, unwilling to criticize someone so far (as he saw it) up the social ladder; “parts of it are excellent.”
Well, of course an egg is an egg is an egg; it’s either all good or all bad. This is a bit like the curate’s egg, in that you can’t readily separate the good (salvageable) bits from the busted-up ones.
Let’s consider having a crew of laborers prowling about through the wreckage, retrieving this intact baggie and that one by one, breaking their search to carry the good ones over to a central collecting point, and then returning to look for more. It’ll take what, a day? Two days? More? Meantime the road is closed, of course. We can’t have folks running their cars over the good bags (not to mention the searchers), can we?
And even if the state cops allowed it — they wouldn’t — what would be the cost of this exercise?
Let’s also consider the value of any merchandise thus salvaged. You say the whole load was worth about $100,000 and that from photos you estimate that 35 percent of it, or about $35,000 worth, was undamaged. Well, it was $35,000 when it was packed in cartons on pallets, but it’s hardly worth anything close to that when it’s individual baggies shoved into sacks.
So, assuming this had actually been done, what’s the actual salvage value? A common rule of thumb is 10 cents on the dollar, which is $3,500, but let’s be generous and say 20 percent, which gets us up to a gross of $7,000 — less the cost of collecting all those baggies, less the cost of hauling them to the salvage location, less the cost of a salvage sale, don’t forget.
That leaves a net value of what, about a buck-and-a-half — if that? It could be even a negative sum.
Your subcontracting carrier’s argument is spurious. There simply wasn’t any realistic way to collect the scattered undamaged bits and pieces of the load and reassemble them for salvage sale, and even if there had been, the net proceeds would have been inconsequential at best. This was Humpty-Dumpty; all the king’s horses and all the king’s men couldn’t put it back together again.
And I think, if you explain it this way, your subcontractor will see your point. Look, if I wreck my car, there’ll still probably be some good parts; the battery may be OK, the alternator, the rear seat, the stereo, one or two tires, etc. Some salvage yard may actually make a buck or two if it’s willing to invest the energy into dismantling the wreckage.
But if the car as a whole isnít drivable, and canít be economically put back into drivable condition, my insurer is going to total it ó consider the entire car a loss. Itís the same here, the whole shipment is a goner. Your subcontractor is just jerking your chain.
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, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.