Destroyed Goods, No Calls

Destroyed Goods, No Calls

Q: We are a broker who hired a carrier that had an accident in a truck hauling six pallets of merchandise for our customer.

All of the cargo was destroyed. We have an accident report, and we filed a claim, but the carrier will not take our calls. Their insurance company won’t deal with us directly.

Do we have any recourse?

A: Do you have any recourse? No, probably not other than declining to pay any freight bill the carrier may have submitted — which you’ve most likely done anyway.

However, there’s a lot your customer can do, starting off with a lawsuit. If you’ve described the circumstances accurately, there’s not much question the carrier owes the claim. Even if the accident wasn’t the carrier’s fault, it is “virtual insurer” of the goods. So suing seems the way to go.

And a lawsuit will get the carrier’s attention a lot more powerfully than a phone call, and will probably serve to fetch the insurance company out of the woodwork as well.

Alternatively, if the claim value is comparatively small — you don’t say how much is at stake here — your customer can go directly to the insurer with a so-called BMC-32 claim. This is a claim against the $5,000-per-shipment coverage carriers are required to maintain “for the protection of the public” under the Code of Federal Regulations, 49 CFR Section 387.303(c).

The point is the carrier is well within its rights to stiff-arm you; you aren’t a party with a legal interest in the claim. And its insurer is even more justified in its refusal to talk to you, for not only that reason but also because you aren’t its insured; the carrier is.

This is one of the awkward realities about the multi-partite relationship when third parties are involved. Typically, the third party files claims in loss-and-damage situations, but the shipper (or sometimes consignee) is the actual claimant and the only one with standing to pursue, and collect on, the claim.

Yes, there’s a way to change this, but it’s fraught with risk and I don’t recommend it. If you choose, you can pay your customer yourself and have the customer assign the claim to you. Then it becomes your claim, and you can pursue it by, among other things, setting off against other freight charges you may owe the carrier.

But that’s where the risk comes in. First, you may not owe the carrier enough money to cover the claim, and you can bet it’ll stop taking your loads as soon as it finds out you aren’t paying actual cash money. Second, you may push it into bankruptcy, thereby flushing yourself down the drain.
You see, under bankruptcy law, all claims aren’t treated the same. If it was your claim to start with, you still have the right of setoff (subject, of course, to the validity of the claim, and with the bankruptcy court’s permission). You retain, thus, a decent prospect of getting at least some of your money out of the carrier.

If, however, you received the claim by assignment within 90 days prior to the bankruptcy filing, you forfeit that right; 11 U.S.C. Section 553(a)(2). You have to pay the carrier’s freight bills and move to the back of the queue of creditors, so you wind up almost certainly receiving nothing.

As I say, most brokers won’t go the assignment route, and I don’t advise that you do that, either. Without having the claim assigned to you and thereby attaining legal status to pursue it, in court or otherwise, however, you have no more role in its resolution than a passerby in the street. You can exhort, you can use whatever persuasion you can muster, but if the carrier continues to stonewall, it’s only your shipper who can bring it to heel.

Now, I know this isn’t the answer you had hoped to hear. Shippers who use brokers don’t want to involve themselves directly in the transportation process, which is one reason they use brokers. Especially when it comes to breakdowns in that process, such as claims, they look to the broker to insulate them from its nuts and bolts.

Unfortunately, there’s only so much a third party can do. If a carrier proves recalcitrant, as this one seems to be, it requires action by the beneficial party in interest — which is to say your customer — to bring the legal pressure to move it off its posterior.

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 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.