Defending concealed damage claims

Q My company delivered a load on November 15. The shipment was unloaded by the consignee without incident and the delivery receipt was executed with no notice of damage. More than a month later, the consignee filed a concealed damage claim. Are we liable for this claim under these circumstances?

A Concealed damages are the most troublesome type of cargo claims. Frequently they are settled for a percentage of their actual value because neither the claimant nor the carrier can prove who was actually at fault or responsible for the loss.

It has often been held that the issuance of a clear bill of lading and notation of damage by the consignee at time of delivery creates a rebuttable presumption under the Carmack Amendment that the carrier is responsible for the damage. The shipper, under this circumstance, does not have to prove negligence or causation, and it is up to the carrier to prove one of the five common law exceptions (act of shipper, act of God, public enemy, public authority or inherent vice of cargo).

In concealed damage situations, however, the shipper does not have the benefit of the presumption that the shipment was damaged in transit. The question of liability becomes far more fact intensive.

For carriers, there is no substitute for immediate inspection and a thorough development of the facts. If the shipment showed no visible signs of damage upon delivery, it may well have been damaged when tendered to the carrier at the outset. Moreover, testimony from your driver to the effect that the shipment rode safely from origin to destination is now relevant since the shipper has lost the benefit of the presumption.

Regardless of when the concealed damage is reported, the claimant has a difficult burden of proving that even though the shipment was accepted without objection, it was damaged when delivered. Moreover, there is an old line of cases – still reflected in the language of some bureau tariffs – that suggest that if a consignee does not notify you within 15 days of delivery, it must prove that the loss or damage was not incurred after delivery.

When inspecting a concealed damage shipment, pay particular attention to the packaging. If the shipping container is now crushed, should not that fact have been readily observable when the shipment was delivered? If, on the other hand, the shipping container is intact, were the contents of the container sufficiently packed to withstand ordinary perils of transportation? Is it just as likely the shipment was damaged before pickup and that the defect was not observable to the driver at that time?

Finally, with respect to concealed damages, it is important to remember that items like used machinery, scientific equipment or electronics can be extremely susceptible to transit damage that is not discovered until the consignee attempts to use the item. Given the high value of such items, carriers should seriously consider released evaluation to limit liabilities and take extra precaution to insure that the product, if used, is fully operational at point of pickup and is adequately inspected and tested in the driver’s presence at time of delivery.