Damaged Shipper-leased Cars

Damaged Shipper-leased Cars

Copyright 2004, Traffic World, Inc.

Q:

I read with interest your column on responsibility for damage to hopper cars caused by a track obstruction (June 21, 2004).

AAR Interchange Rule 96, Owner's Responsibility, states: "This rule covers loss, damage, or defects as listed below, on any car, unless otherwise designated as handling or delivering line responsibility in these rules....

"10. Damage caused by passing over obstruction on track."

Most full service leasing agreements exclude this type of damage, passing the responsibility along to the lessee.

It is unfortunate for private car owners (and lessees) that the Association of American Railroads allows the railroads to exclude this type of damage from their responsibility.

Q:

Hopper cars are generally unloaded from the bottom via equipment placed alongside or underneath a receiver's siding. Many such sidings are the maintenance responsibility of the receiver and are often in poor shape, thus this damage could be the responsibility of a car receiver. It's possible that the damage to the unloading door was caused by a track obstruction on a siding versus the railroad's over the road movement, and the railroad's train crew that picked up the empty car may have missed the damage since it was under the car (especially if at night or in a poorly lit area).

In addition to your response, the hopper lessor might also (in my opinion) check with the last known receiver in case the damage occurred there. Naturally everyone involved will probably deny responsibility, since they don't want to pay the $4,000 repair cost, but as you said in the column, "stranger things have happened."

Q:

We had a similar situation occur on our own leased cars. We shipped a leased covered hopper (Car B) coupled to, and in back of, a second leased hopper (Car A). Both cars are supplied by the same lessor. En route the drawhead fell out of Car A and down onto the tracks. The "A" end gate of Car B struck the drawhead causing serious damage to the gate and slope sheet and loss of the entire product in the "A" end cell. The other two gates on Car B were also damaged and began to leak product. Meanwhile the railroad replaced the drawhead on Car A and it continued on (apparently not otherwise damaged).

There's no argument as to how the cars were damaged. Under our contract the condition of, damage to, and repair of, the drawhead is not a lessee responsibility.

Car B was pulled to the rail yard and, in the interest of time and to avoid further loss of product, the balance of the load was removed at our expense. The railroad says it accepts no liability for loss of product, transfer cost, or repair to either car.

Since the damage to Car B was a direct result of a mechanical failure of Car A, responsibility for which lies with the lessor, we contend that the lessor is responsible for all costs. We have advised the lessor that we will notify the railroad of our position and request that the railroad contact the lessor on this matter.

Would you agree with our contention that the lessor and railroad need to resolve all costs of repair to both cars, and that we should file claim against the lessor for the cost of the transfer unloading and lost product from Car B?

A:

Thanks to all three correspondents for their knowledgeable and informative comments. I admitted before that my own knowledge about railroad operations is skimpy, and you've all added substance to my response.

With regard to my third correspondent's effort to collect all costs of his two-car monte (to coin a phrase) from the lessor, however, I can only wish you the best of British luck. Frankly I doubt that you'll see a thin dime save for the costs of repairing the car A drawhead per the lease agreement.

Your problem is that it's not enough that all the damage was caused by the drawhead falling off. In addition to that you must prove negligence on the part of the lessor. The mere fact that the drawhead fell off won't suffice for that; you're going to have to show that it resulted from the lessor's failure to properly maintain Car A. If there's some kind of maintenance schedule you can point to which the lessor failed to meet, or obvious physical evidence of poor maintenance, etc., you might get that far. But you can't pass the buck to the railroad; this is between you and the lessor.

What's more, even if you can surmount this hurdle, you face another one. The damage to the Car B gates and the resulting loss of product and transfer of the remainder all seems to me to come under the heading of "consequential" damages. If Car B hadn't been immediately behind Car A there would have been no damage to Car B; further, even allowing for the cars' relative positions, if Car B hadn't been loaded there would have been no loss of product and no expensive transfer of what was not lost. I think it's unlikely that any court would take all these ifs and put them together into a damage award covering your entire cost.

Take this one to your lawyers before going overboard. I really don't think your claim is anything like so solid as you seem to feel.

-- Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at P.O. Box 76, Morganton, Ga. 30560; phone, (706) 374-7201; fax, (706) 374-7202; e-mail, BarrettTrn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.