Warehouse Claims & Other Legal Issues - gccaonline.com

1 Warehouse Claims & Other Legal IssuesJohn F. Horvath, Horvath & Weaver, and Other Legal Issues Claims July 1, 2010 through June 30, 2011 Storage rack inspection Customer requests and the Standard of Care STB demurrage/detention update Questions (any time) Except Tarnowski3 Claims : July 1, 2010 June 30, 2011 Temperature Abuse6 Ammonia Leak2 Rack Collapse1 Roof Collapse1 Theft1 Handling Damage1 Inventory Shortage1 Contamination1 TOTA L144 Temperature Abuse claim #1 Bakery products $37,000 claim Received warm No notice to customer Put into freezer Carrier paid5 Temperature Abuse claim #2 Frozen Bacon $30,000 claim Overseas shipment Transported to Warehouse NO refrigeration (24+ hours) Real facts No liability6 Temperature Abuse claim #3 Seafood $90,000 claim 18,000 pounds During storage No follow-up7 Temperature Abuse claim #4 Container of Ham Products $150,000 claim Driver signed bill of lading Initialed 0 Fahrenheit Denied claim8 Temperature Abuse claim #5 6,960 pounds of Shrimp claim amount unknown Room temperature hand written As high as +23 Fahrenheit Consistently above +14 Fahrenheit9 Temperature Abuse claim #6 6,237 cases of dried Persimmons $100,000 claim Hand written temperatures Maximum +5 Fahrenheit Not properly dried Deemed liability10 Ammonia Leak claim #1 Frozen Poultry Products $300,000 claim Liquid slug Boiler machinery coverage Preserve limitation provision11 Ammonia Leak claim #2 Frozen Poultry Products $400,000 potential claim Leak in NH3 feeder line Empty room C02 No product damage12 Theft claim Frozen Crab $400.

2 000 claim Customer retained carrier Carrier subcontracted load Warehouse released load to subcontractor Subcontractor was fraud Denied claim13 Shortage/Damage Frozen Pork Products $350,000 claim Sudden surge inbounds/outbounds No request to customer Settled14 Contamination Frozen Seafood $500,000 claim Forklift hydraulic fluid Detailed inspections No claim15 Roof Collapse Frozen Products $ million potential claim Roof damage 2 years earlier Heavy rains 2 days prior Corner of building Temporary repairs Bad roof design No claims16 Rack Collapse Frozen Products $50,000 claim Independent contractor negligent No insurance Paid claim17 Rack Inspection Canadian Standards Association FEMA Material Handling Industry of America18 Rack Inspection Qualified employees/third parties Periodic, at least annually Written inspection plan Documented inspections19 Rack InspectionThe inspector should inspect the entire storage rack system for the following structural deficiencies: Missing, loose or damaged anchor bolts; Missing or damaged connection locking devices; Missing or damaged rack guards; Missing or damaged rack accessories; Damaged, dented buckled, or bent rack framing members; Weld fractures that are detectable by visual inspection; Corrosion and Other deterioration that may adversely affect structural capacity; Rack frame misalignment; Rack beam spreading or excessive deflection; Improper beam installation.

3 And Floor damage that may adversely affect the support or anchorage of the storage rack InspectionThe inspector should examine the entire storage rack system for the following operational deficiencies to the extent that they are observable at the time of inspection: Storage rack system overloading and Other improper material storage; Use of pallets that are inappropriate for the storage rack system; Damaged pallets; Rack contents that are improperly or inadequately restrained; Missing or inadequate storage rack system plaques; and Obstructed aisles, inadequate lighting, or poor Requests and the Standard of Care Product is very temperature sensitive and trailer must be pre-cooled to -18 Fahrenheit before loading Impact on reasonable care standard22 STB Demurrage/Detention Update Advance Notice of Proposed Rulemaking Purpose: .. To explore whether [the STB] should explore whether [it] should look to new ways of determining the liability of warehousemen for demurrage.

4 liability on receiver of rail cars Will likely apply to detention, too23 Why Need for Rule? Conflicting Federal Court decisions 7thCircuit Court of Appeals (2003) Covering IL, IN and WI 3rdCircuit Court of Appeals (2007) Covering DE, NJ and PA 11thCircuit Court of Appeals (2009) Covering AL, FL and GA247thCircuit CaseIllinois Central Railroad Company vs. South Tec Development .. Being listed by third parties as a consignee on some bills of lading is not aloneenough to make South Tec a Legal consignee liable for demurrage charges, although it, coupled with Other factors, might be enough to render South Tec a consignee. 253rdCircuit CaseCSX Transportation Company vs. Novolog Bucks County We hold that the recipients of freight who are named as consignees on bills of lading are subject to liability for demurrage charges arising after they accept delivery unless they act as agents of another and comply with the notification procedures established in ICCTA s consignee-agent liability provision, 49 10743(a)(1).

5 2611thCircuit CaseNorfolk Southern Railwayvs. Groves Savannah cannot be made a consignee by the unilateral action of a third party, particularly where Savannah Re-load was not given notice the unilateral designation in the bills of lading. 27 STB s Statement on the ANPR One possible rulewould place liability for demurrage on the receiver of the rail cars regardless of the designations in the bill of lading. 28 Statement by STB on the ANPR .. Should 10743 be read as applicable to demurrage charges at all? 29 IARW Objected to Recipient liability Rule Matter of Contract Party responsible for demurrage should pay Better reasoned case law 49 10743(b) applies to demurrage Actual placement30 Rail Carriers Responses American ASSN of Railroads BNSF Canadian Pacific Indiana Harbor Belt Norfolk Southern Union Pacific