Q: We delivered an air compressor unit with noted visible damage to its side panels. Rightfully, we received and paid a claim for repairs filed by the third party.
Two months after the initial filing, we received a secondary claim from the shipper, stating total loss for $29,000. The dispute is that upon installation of the equipment, numerous leaks and other issues were discovered. These issues could not be determined on delivery as the components were underneath insulation and coatings. This unit is beyond repair.
What would the extent of our liability be since we’re unable to verify if the claimed additional damages were a result of installation some two months after the original settlement was made?
A: Ordinarily I’d advise you to tell the shipper what it can do with its johnny-come-lately claim for the total loss.
All claim settlements that I’ve seen are paid by a check with some fine print on the endorsement that has to be signed in order for the claimant to negotiate the check. And I gather that your first check has indeed been negotiated (cashed) and cleared by your bank. The fine print says that by doing so your claimant accepts the payment in full settlement of the claim, which precludes the claimant’s entitlement to any subsequent claim it may file on the subject shipment.
The thing is, though, I don’t like the fact that the initial claim was filed by and apparently paid to “the third party.” Whoever that third party is, he isn’t the shipper, who apparently owns the air compressor that was damaged. I’m not sure exactly why you paid this claim to a party who had no legal right to file a claim on the unit; you still may be OK. But you may not be, too.
If you handled the original claim properly, you made out your payment check to the beneficial shipper, who was evidently the third party’s customer and the proper claimant, and the shipper endorsed your check and thereby subscribed to your disclaimer that it accepted the payment in full settlement. That precludes it from later claiming additional damages. The same holds true if the shipper assigned the claim to the third party and you had proof of the assignment before paying the third party.
Now, I can sympathize with the shipper’s apparent inability to fully assess the damage to the unit earlier. But, knowing that such a possibility existed, the shipper should have held off making a claim (through the third party) or assigning the claim to the third party until it had a full handle on the amount of damage. It hasn’t got a free hand to come back later and tell you, in effect, “Oops, sorry, carrier, but this unit was messed up even more than we first thought, and now we want a bunch more money from you.”
What’s hairy about this belated claim is that you aren’t altogether clear about the shipper’s actual involvement in that initial claim that you paid. If, as seems possible from your abbreviated recital of events, that original claim was filed by and (carelessly, by you) paid to the third party without any assignment by the shipper, then the shipper hasn’t given up any of its rights, even if the third party may have passed on your payment to it on an informal basis.
There is, however, a further point I must make here. You don’t go into time frames with your question. Shippers have, per standard bill of lading terms, nine months after delivery to file a claim. You don’t say how much of that nine-month period elapsed before you received the first claim from the third party, only that the shipper’s amended claim reached you “some two months” after the first one showed up. If that was still within the nine-month time limit, then all’s well for the shipper, because in the scenario I’ve postulated, that was the first proper claim filed with you.
If it was beyond that time, though, the claim is too late. The second claim can’t be treated as an amendment of the first (which may be made at any time, without regard to the nine-month limit), since it was filed by a different — albeit, apparently the correct — party, to whom you made no direct previous payment.
That’s where it stands. If the first claim was handled correctly, you don’t owe anything more. If, on the other hand, you messed up in paying the first claim to the third party, you’re still on the hook for the shipper’s claim, if timely filed.
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; email, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.