Q&A: No Deal in This Liability Claim

Q: We are having a big dispute with a carrier over a claim.

We’re a grocery retail chain. This was an inbound shipment of canned and packaged foodstuffs from a wholesaler/distributor. The load showed up apparently intact, and under seal. However, the seal number did not match what was shown on the bill of lading. We have no idea what happened, but we suspect that at some point the shipment was transloaded for some reason. We accepted the shipment, but held it in quarantine pending an explanation, which we never got.

It’s our policy that all inbound shipments must have a clear seal record. These are, after all, foods intended for sale to the public. Ultimately, after the carrier failed to explain the discrepancy in the seal numbers, we decided to treat the shipment as a total loss. We filed a claim with the carrier for full value of the load.

The carrier declined our claim on the basis that the shipment was moving under an FAK Class 70 rate, and its tariff sets a limit of $1.25 per pound for Class 70. This is significantly below the value of this load. Are we bound by the carrier’s tariff limit, or can we insist on the full amount of our claim?

 

A: I’m afraid you’re going to be sorry you asked this question, not because I’m going to disagree with you over whether the carrier’s liability limit is binding on you but for another reason entirely.

There is some disagreement among courts about whether carrier tariff provisions purporting to limit their liability are or are not valid. A number of courts have upheld such provisions, whereas at least as many have declined to do so. Thus, I think it would be the luck of the draw whether, if you filed suit, your claim would wind up before a court inclined to back the carrier in this case.

But that isn’t your main problem here, which is not the amount of your claim but whether you have one at all.

What the law basically says is that a carrier owes you for any loss of or damage to your freight while that freight was in the carrier’s custody. The thing is, you have to be able to prove such loss or damage, and so far as I can tell, you can’t do so — or at least you haven’t in your letter to me.

You say that the load arrived intact, notwithstanding the seal discrepancy. Now, I can understand your concern about the seal; clearly, the carrier had access to the shipment en route, and so perhaps did others. And since these are foodstuffs meant for public sale, that has to be a worry to you.

Unfortunately, the law doesn’t entitle you to compensation for your worry, but only for actual loss or damage. You seem to be unable to show any of the latter. The consumable contents of the cans and packages remain protected, and you report no penetration of this packaging, so the shipment remains ready for sale and consumption by your retail customers.

I have no idea why the carrier was even willing to entertain your claim at its tariff-based liability limit; perhaps you are a very good customer, and they want to keep you happy. But if you object to the limited recovery the carrier has prepared to offer you, you’ll have to go to court to overturn the carrier’s limitation, and if you do so, you’ll have to persuade the court of the validity of your claim, which I don’t think you can do in the circumstances.

It doesn’t matter why the carrier broke the original seal, or even whether the shipment was, in fact, transloaded or not, nor whether the carrier can give you an explanation that satisfies you. The key point here is that a certain quantity of goods in a certain condition were loaded at origin, and the same quantity in the same apparent condition arrived at destination, which is the optimum result of the transportation process and all that the law requires.

I think what any reasonable court would tell you is simply remove these goods from quarantine and put them on your shelves for sale. If you want to be super-safe, I suppose you could have representative samples of the cans and/or packages tested for possible contamination (at, I’m afraid, your own expense), but even that seems excessive. Without proof of such contamination, however, I don’t see that you have a claim any court would uphold, irrespective of the amount of actual carrier liability.

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.

 

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