Claim Denial: A Case of Bad Timing

Claim Denial: A Case of Bad Timing

Q: Would you be kind enough to give me your thoughts on the following issue?

1. Shipper files a claim with a motor carrier for damages based on a delivery receipt that had the damages noted on it.

2. Trailer was dropped at the consignee on Nov. 29, 2010, and the delivery receipt was dated Nov. 30.

3. The carrier is taking refuge in a tariff item that states that the consignee only has 24 hours to report any damages or shortage issues. The actual claim is being filed by the shipper and not the consignee, who this tariff item is designed to cheat out of valid claim reimbursement.

A: You’re being a bit harsh in your characterization of a tariff item that, as you acknowledged in an e-mail to the carrier that you enclosed with your question to me, is actually intended only “to protect (the carrier) from concealed damages” — that is, potentially bogus concealed damages.

But you’re of course correct as to the validity of the claim.

The sticking point here, as stated by one of the carrier’s “claims examiners” in an e-mail he sent to you, is that although “the delivery receipt has the damage information recorded,” that document “was not received by (the carrier) within 24 hours.”

“In view of these circumstances,” he continues, “we have no alternative but to decline this claim for our account.”

I’m not exactly sure how it is that the delivery receipt, a copy of which was of course given to the driver at the time of delivery, is deemed not to have been received timely by the carrier. Perhaps it was an interline shipment, with the driver employed by the connecting carrier. Perhaps the carrier simply has an overly specific view of the meaning of “received” — for example, “received” at its offices, not merely by an employee or agent.

Who cares, though? Clearly, the carrier is perverting the intent of the 24-hour rule in its tariff, which is to stave off concealed damage claims that aren’t noted for weeks or months following delivery. In such cases, there’s a genuine question of whether the damage might have occurred after delivery. When the damage is noted on the receipt, that possibility doesn’t occur.

So, contrary to the “claims examiner’s” comment, the carrier certainly does have an “alternative” to declining this seemingly valid claim: to pay it, as it properly should.

Ordinarily, I’d tell you the “examiner” who wrote you is probably a low-level minion acting on his own initiative to apply an overly literal construction of the carrier’s tariff rule. I’d suggest you talk to his supervisor, who would presumably overrule him.

You named the carrier, though, and I’ve had some past dealings with it. Even going fairly high up the organizational ladder, its hirelings tend to be uncommonly rigid about strict application of anything the carrier has committed to writing (and even some that aren’t written). So going over the examiner’s head probably won’t work.

In actual fact, a rule such as this has no support in law. Its only legal effect is to advise shippers that the carrier will resist claims where damage reports aren’t filed timely, not to legally refute liability in such cases. In law, a belated concealed damage claim still stands or falls based on the evidence, not some carrier pronouncement about its policy.

Now, some (though by no means all) courts have become fairly free about enforcing unilateral carrier limitations of their liability by tariff rule, even when those limitations appear to contravene the law. Even so, I can’t imagine any court being so easygoing about it as to support either this rule or the carrier’s unconscionable application of it here.

So if you take it to court and it tries to fob you off on no better basis than this petty defense, I think you’ll win easily. Trouble is, the claim is a small one — a bit under $500 — and your cost of suing will exceed your injury.

Still, there’s a simple answer: “self-help,” or setoff. Just withhold the value of this claim from any freight charges you owe the carrier, whether on this or another shipment. As long as the claim is provably valid, as this one appears to be, that’s perfectly legal; and you thereby leave the carrier in a position of having to sue you for the same non-cost-effective sum or let it ride.

Yes, this is a pretty draconian solution. But it seems an appropriate response to the carrier’s hidebound refusal to pay you, so it’s tit for tat.

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.