February 2005 | Commentary | Risks and Rewards

Fencing in Cargo Theft Concerns

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Q: I operate a warehouse with a fenced yard. As a favor, I recently allowed a truck driver to park his rig with a trailerload of cargo in my yard over a weekend. I did not issue him a standard warehouse receipt because it was a temporary arrangement, and the goods were not unloaded from the trailer.

During the weekend the rig and container were stolen, and I now face a claim from the cargo owners for the stolen goods. Why am I being held responsible? Shouldn't the truck driver be liable for this loss?

A: Unfortunately, your case presents a common issue in the trucking industry today. Cargo theft is a significant concern, and warehouse operators must be vigilant in protecting against it.

The delivery of the trucker's goods into your custody is known as a "bailment." The delivery can be made on an actual basis—where you take actual delivery of the goods—or constructively, where your actions demonstrate that a delivery has occurred.

Your agreement to allow the trucker to park his rig in your yard can be construed as a constructive delivery of the goods—however temporary the intent.

While laws differ from state to state, it is generally agreed the person taking the goods into custody—the bailee—must exercise reasonable care to safeguard against any foreseeable loss. What constitutes "reasonable care" is determined by the facts of each case.

Theft of cargo from an unguarded yard, for example, could be viewed as a foreseeable event. A bailee who fails to exercise due care in protecting goods from a foreseeable loss will be liable for that loss, unless an agreement to the contrary was made.

The truck driver in this situation was a bailee, and therefore, he too was under an obligation to safeguard the goods. But it's likely the truck driver issued a waybill containing a limitation of liability for a specific sum, or for a sum based on a factor such as the weight of the goods.

Even if the truck driver did not limit his liability, he may choose not to respond for the loss for any number of reasons: his insurance policy may not cover the loss; the policy's limit might be too low, or might only apply to the actual transit, rather than the storage of goods; or the policy might have expired.

Cargo owners are left to seek recourse against anyone else involved in storing the goods, such as the yard operator. While there is no direct contractual relationship between yard operators and cargo owners, this won't necessarily stop the owners from asserting a claim for negligence.

The cargo theft in your case demonstrates the importance of issuing delivery receipts that clearly outline the terms under which a yard operator takes custody of goods. In the absence of an agreement to the contrary, the trading conditions should contain a limitation of liability.

It is also imperative to make sure the warehouse yard is adequately protected, and to verify the insurance of all contractors with whom you operate.

Finally, speak with your insurance agent to ensure your legal liability policy covers cargo losses in the warehouse yard.While no system is completely foolproof, these preventive measures can place you in a better position to defend yourself if a similar incident occurs.

Have a liability question or concern? I will try to help. Please send your questions to me via e-mail at: dan.negron@thomasmiller.com.

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