Storage in transit may be costly

John D. Russell, an Arkansas-based commercial freight broker and forwarder, was sentenced in U.S. District Court in Fort Smith, Ark., to 51 months in prison and three years of supervised release, and ordered to pay $165,712 to about 15 victims in connection with a scheme to defraud interstate carriers entitled to freight fees, according to the Department of Transportation’s Inspector General’s Office, which conducted the joint investigation with the FBI.

New Jersey Assembly passed the Motor Vehicle Owners’ Right to Repair Act (A-803). The bill now moves to the New Jersey Senate for consideration. The proposed legislation provides that New Jersey independent repair shops will have the same access to service information, tools and software that vehicle manufacturers make available to their new car dealers. For more information, go to www.righttorepairnj.org.

ArvinMeritor, ZF Friedrichshafen AG (ZF) and ZF Meritor reported winning a jury verdict on the patent infringement suit against the ZF FreedomLine automated transmission brought by Eaton Corp. almost five years ago in a Michigan federal district court. Eaton said it was reviewing its options, including taking the case to the federal appeals court.

California Air Resources Board fined Fresno-based farm service company Western Farm $114,000 for failing to inspect its truck fleet for diesel emissions violations at facilities statewide. Also, CARB fined Hunt Valley, Md.-based security company Dunbar Armored $36,375 for inspection violations at Bay Area and Southern California locations; and the City of Palmdale $18,500 for inspection violations.

Q We are an intermodal drayage company that provides service to and from the ports. The port authorities have short time limits for removing loaded containers, so our customers frequently ask us to hold shipments on our yards awaiting subsequent delivery appointments as “storage in transit.” Given the theft of cargo at the ports, we do not wish to accept carrier liability for high-value shipments. What can we do?

A The theft of goods stored in transit that are let unattended awaiting delayed delivery appointments is a major issue, as you clearly understand. As a carrier, taking possession of a shipment pursuant to a through bill of lading, you become the virtual insurer for goods lost, damaged or stolen, even while stored in transit. You are liable for the full actual value of the cargo unless you properly limit your liability through use of release rates. Under the Carmack Amendment, your negligence is not even an issue. Notwithstanding any reasonable security procedures you follow, if a shipment is stolen – even from a guarded lot – you are liable as the carrier.

On the other hand, if the same shipment had been transported to a warehouse or stored by a mere bailee who did not accept carrier liability, state tort law would apply, and a finding of lack of reasonable care would be a predicate for liability.

A warehouseman is not strictly liable, but it can become liable if it allows goods to be damaged or stolen for want of reasonable care or by failure to keep them in a safe or suitable place. However, the owner of the goods bears the burden of proving the warehouseman’s negligence. So under the same circumstances – a reasonably secure storage lot – a bailee or warehouseman would be free from legal liability, but a carrier storing the goods in transit would not.

For this reason, you probably should provide by contract that your storage is performed as a bailee or warehouseman and not as a carrier and, in particular, that you do not accept bill of lading/Carmack liability for goods stored for a shipper’s or third party’s convenience.

Whether or not you accept carrier’s or warehousemen’s liability for theft of cargo stored on your terminal lot for the shipper’s convenience, you should limit your potential exposure by an agreed release rate coextensive with your limits of liability. Being a gratuitous bailee of your customer’s cargo is one thing; becoming a virtual insurer for the full actual value, in the case of theft, is another.