Who to Pay?

Q: For a domestic shipment moving under a uniform bill of lading, it’s been my understanding that a carrier can accept/settle a claim with the named consignor or named consignee, as both are named parties in the bill of lading or shipping contract.

Is there an obligation on a carrier to go further and determine ownership of goods if it is one of the named parties in the bill of lading that files the claim and/or a verified assignee thereof?

Parties shipping or receiving goods don’t necessarily hold title or ownership to goods. How far must a carrier go in establishing entitlement of party filing a claim?

A: It’s always a good idea to be sure you’re paying a debt to the person to whom you owe it, don’t you think?

And in cases of freight loss or damage, that person isn’t necessarily named in the bill of lading. Your obligation to pay for the injury flows out of the B/L contract in one sense, but it isn’t due to some contractual breach (or not necessarily); it’s founded, rather, in the common law and, to some degree, statute.

Now, in the law, any old body can file the claim. There are a few isolated rulings to the contrary, but the heavy weight of precedent is that, as long as the carrier is put on notice that the goods were lost or damaged by somebody, and that monetary compensation is expected, it’s immaterial who the somebody is.

When it comes to making payment, though, the proper identity of that somebody becomes a lot more important. You certainly don’t want another somebody beating down your door showing that it, and not whomever you paid, is actually entitled to the money.

Proof of ownership need not be overwhelming. The general rule is that the original copy of the B/L, or the original paid freight bill, will do it. Or other evidence can be used, such as a paid invoice for the lost or damaged goods, etc. And if the claim was assigned, the original of the assignment paperwork will be needed.

But you need to apply a rule of reason here, too. For example, a warehouseman or a 3PL that arranged the transportation may be in possession of the original B/L and/or paid freight bill and still clearly not be the proper party to receive payment.

Claims showing parties you know to be in such lines of work ought to send your antennae up. It usually won’t be your best idea to direct payment to them without some further showing that they’ve already paid off the goods’ owner and are therefore entitled to receive payment from you.

A further potential for confusion can derive from the possibility that terms of sale don’t match freight terms. Goods can be sold f.o.b. origin, freight prepaid (meaning the consignee owns the goods, but the shipper is paying freight and thus has the original shipping documents), or f.o.b. destination, freight collect (the opposite situation).

Clearly, you can’t spend your life investigating all these possibilities, and the law doesn’t expect you to. As long as you’ve made a good-faith effort to correctly ascertain ownership of the goods (and therefore the right to collect on the claim), you’ll probably be exonerated from having to double-pay if matters get to court.

That is, if you pay someone who falsely claimed to have the right to collect, that person may be guilty of fraud; but you yourself won’t be held responsible.

One way of protecting yourself is to have any questionable claimant — one who lacks the requisite documentation of presumptive ownership — execute an indemnity bond. Such a bond promises the party will give the money back if another claimant with superior proof of a right to collect later appears.

Such an indemnity bond, however, is only as good as its executor’s ability to pay (or your ability to find it afterward). Because fraudsters and other criminals have a way of spending their ill-gotten gains quickly and disappearing (not necessarily in that order), I wouldn’t suggest you substitute it for a due-diligence check.

Finally, if you receive multiple claims on the same shipment, regard this as a major red flag. Until and unless the competing claimants agree between or among themselves in writing, or one of them can conclusively prove ownership, don’t pay anybody. You may get yelled at for sitting on the money, but it’s better than paying the wrong person.

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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