Q&A: With 'Special Damages,' There Are No Guarantees

Q: My company has a number of construction sites around the country. A good many of them are in high-crime areas or areas that are pretty sparsely populated at night and so are vulnerable to trespassers and, to put it plainly, thieves.

For that reason, we can’t leave valuable construction materials unprotected overnight. Even storing them in locked sheds or taking other measures isn’t proof against theft, as we’ve found; people simply break in. We’ve had a good deal of stuff stolen, especially copper tubing, machinery of various sorts intended for installation, even lumber and fasteners (nails, screws, etc.) over the years.

At our most vulnerable sites, we use guards, on-site guard dogs, etc., which generally serves pretty well to protect goods that have been installed. Loose material, though — awaiting installation but not yet installed — still tends to disappear.

So our new approach is to have goods delivered the morning they’re supposed to be installed. We contract with our motor carriers for guaranteed on-time delivery, and we’ve found it has worked well.

My concern is, what happens if the delivery doesn't show up? We have some pretty stiff penalties for lateness in our contracts, including forfeiture of all freight charges if the carrier is more than an hour late, but that’s not going to cover us if a delivery just doesn’t show up a whole day (or more). I mean, I’ll have a crew standing by for the installation, and I have to pay them even if they’re idle. Can I recover that cost from the carrier?

 

A: No, almost surely not, unless you build it into your contracts as well, and the cost of doing that likely would be prohibitive.

I’ve had no experience dealing with this sort of question in connection with guaranteed carrier service, and neither can I find any court cases specifically on point. But I see no reason it shouldn’t be treated the same as if there were no guarantee, and if that’s the case, you’d be out of luck.

The problem is the kind of injury you’re describing — enforced idleness of your work crew because a shipment didn’t show — is classified in law as “special damages.” And as a rule, special damages aren’t recoverable unless the carrier had (and accepted) notice that they might occur at the time of shipment.

Special damages are “those which are the actual, but not the necessary, result of the injury complained of, and which in fact follow it as a natural and proximate consequence in a particular case, that is, by reason of special circumstances or conditions,” Black’s Law Dictionary says. “Hence, general damages (which are recoverable) are such as might accrue to any person similarly injured, while special damages are such as did in fact accrue to the particular individual by reason of the particular circumstances of the case.”

Yours is a classic example. Not every receiver would have a work crew standing by awaiting a delivery, of course, so these damages wouldn't accrue to them. They would to you only because of your “special circumstances or conditions.”

There is a stack of cases holding that the carrier can be held liable for such special damages only if it had advance notice or knowledge of the possibility. See, e.g., William v. A. C. L. R. R., 48 So. 209; Perlow v. AAAcon Auto Transport, 421 A.2d 399; Armstrong v. C., M. & St. P. Ry., 152 N.W. 696; M. P. R. R. v. S. L. Robinson Co., 65 S.W.2d 902; Marquette Cement Mfg. Co. v. L. & N. R. R., 281 F.Supp. 944, aff'd per curiam 406 F.2d 731; and Starmakers Publishing Corp. v. Acme Fast Freight, 615 F.Supp. 787, among others.

In my opinion, the mere fact that you paid for guaranteed on-time delivery doesn’t meet this test. Your contracts set the penalties for lateness, and you’re not entitled to unilaterally expand those penalties to include an indeterminable (by the carrier) sum for your cost of an idle work crew.

To be sure, as I said before, you can try to build this into your contracts. If you do, though, at least some of your carriers are going to run for the hills; and even if you can get others to accept the added liability, you’ll wind up paying a really substantial premium.

Instead, try this approach: Rent warehouse space as close to your construction site as possible, and store your valuable materials there. Then you can just truck it a few blocks to the site on installation day. You’ll save the guaranteed delivery costs and still keep safe.

 

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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