Salvaging a Damage Claim

Q: A motor carrier damaged a 1,000-pound box of our product, a polymer. I filed a claim for $13,870, and we advised the carrier to scrap out the material.

We don’t want the material back because it’s contaminated. Our customer makes a tiny electronic part in which even the smallest amount of foreign material or dirt will cause a failure. We don’t want to take on this risk. We have no other customer for this particular material nor do we have a way to strain the pellets to ensure no contamination.

The carrier has called to let us know they’re refusing to scrap out the material and pay the claim. They want us to receive the material back into our plant and try to recover it.

Can you offer any advice?

A: What you seem to have here is a disagreement about whether the damaged material is or isn’t a total loss. Well, as my late father used to say, a difference of opinion is what makes for horse races.

I phoned you to check whether there might an alternative market for this material, somebody else who wouldn’t be quite so picky about microscopic contamination. You told me you doubted it, that this particular product was a special order for the one customer, for whom the most minuscule trace of contamination would be fatal.

You can’t ensure the product isn’t contaminated, and therefore your customer doesn’t want it. Your first step should be to document both those things to the carrier.

Then you should provide whatever evidence will satisfy the carrier that you also have no alternative market handy for the product in its current condition. Probably a simple assurance will take care of that.

You’ve now demonstrated there’s no point to your taking the product back, because you have no means of restoring it to its original, pristine condition or selling it as is. You can’t, that is, realize any salvage value out of this material now that it’s been damaged while in the carrier’s hands.

That makes the carrier liable. Ah, but wait, you tell the carrier. “You (carrier) won’t accept that this renders the product worthless, so have we got a deal for you!”

You tell it to pay the claim, as it’s legally obligated to do, but in exchange you’ll turn over the (possibly) contaminated product to it free and clear. Whatever it can realize from selling the goods will belong to it as an offset to the claim payment.

Of course, the carrier itself won’t try to peddle the product; it’ll turn everything over to a commercial salvor who’ll do the actual selling, of course, taking a piece of the action as compensation for its trouble. But that’s all the carrier is entitled to anyway, the net salvage proceeds, so nobody loses anything that way.

And maybe you're wrong; maybe there is somebody out there who wants to buy this stuff and who isn’t near so worried about contamination as is your customer. Salvors are pretty canny about digging such folks out of the woodwork, and the potential buyers may well be scouting salvage offerings for exactly such bargains.

Or maybe (more likely, I expect; it’s your market, and I’ll bet you know it better than the carrier) you’re quite correct, nobody’s interested in paying a plugged nickel for the product as is. So it never sells, and, ultimately, the salvor disposes of it.

Either way, what do you care? You’ve got your claim payment, you’ve satisfied the carrier’s concern that it’s being deprived of the salvage value of the material, and everybody is (or should be) happy.

Note I haven’t even touched on the issue of whether the product is or isn’t contaminated. That’s moot. The point is that the mere possibility of contamination is sufficient to have cost you the sale to the only customer you have for this stuff. The possibility of contamination is a direct result of the damage occurring while the material was in the carrier’s hands, and that suffices to establish liability.

It isn’t, that is, necessary to establish actual injury to the product. In this instance, the perception of possible injury is sufficient to destroy the market for the goods, and it’s the loss of economic value, not physical damage, for which the law obliges the carrier to compensate you. By turning over the goods to it, you take away the last of its defensible objections to doing so.

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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