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From: Marjorie Simmons (lawyercarpereslegalis.com)
Date: Fri Jun 06 2008 - 18:13:35 CDT
< Friday muse on a shipper's duty >
| Even if you go with a conservative estimate that one
| 'identity' is worth less than 20 bucks (recently stated
| in a paper) . . .
First, the worth of an identity is not the market value
of the identity, because the market is illegitimate.
: if a package's worth is more than insurance will
: cover the carrier can refuse to carry the package
Second, many carriers will not refuse such shipments
but will limit their liability instead. The focus of the
liability for losses needs to remain on the shipper
rather than the carrier.
It may be helpful to view these losses through a legal
"damages" lens. First tho, a simple cost-benefit analysis.
Last time I read the standard contract of carriage for a
FedEx overnight item it limited damages to the extent
of the insurance, which was itself limited to a specific
amount. For example, an item with a liquid value of
$3000 (a negotiable instrument) could have a maximum
insurance of $500, and so carrier loss of the item limits
the carrier's liability to $500. The risk of loss beyond
the $500 cap is upon the shipper, not the carrier.
In commercial contracts (B2B) involving carriers the
loss limits can be higher but still have a cap, thus claims
are similarly limited to no more than the pre-arranged
damages cap, no matter how much the actual value of
the incurred loss. The calculation businesses often use
in determining the benefit of a low-cost (low insurance)
shipping rate involves the statistical loss rate of the
carrier. The value of the shipper's benefit in using a
specific carrier can be (simplistically) derived from the
cost of carriage plus the statistical likelihood of loss,
minus the benefit derived from the carrier's actual
delivery of the shipped item(s). One accounting
method for a cost-benefit analysis is:
1. Identify a risk [ here, carrier loss ]
2. Estimate the potential loss from the risk.
Multiply the loss by its likelihood to get the
3. Determine a control procedure that,
if implemented, reduces the risk.
4. Determine the reduction in risk exposure
resulting from the control procedure.
This is the quantitative benefit.
5. Identify incremental costs of the control
6. Compare the incremental costs with the
reduction in risk exposure.
7. Consider qualitative benefits (those difficult to
state in financial terms) and the accuracy of
The question thus becomes whether the shipper (not
the carrier) has a duty to insure beyond the limits of the
contract of carriage. A shipper's duty does not pass to a
carrier because the shipper's relationship with regard to
the item shipped is with the shipper's intended recipient.
Such a duty cannot be contracted to a carrier without the
consent of the recipient.
Most carriers limit absolutely the insurance available to
items of "extraordinary value" (negotiable instruments,
works of art, jewelry, etc.) because such items have
value beyond their face value which is often speculative.
For example, let's say a lawyer FedEx's a legal
document to a court, knowing that document must be
received by a date certain, but FedEx loses the shipment.
What are the losses flowing from that event? FedEx
loses $100 unless the lawyer declared a higher value
and paid the fee, but still stands to lose no more than $500.
The lawyer's clients may stand to lose millions if the
court where the document was to be filed does not
excuse the lawyer's FedEx loss.
The loss of data which can be used in identity theft and
is normally considered private also has a speculative
value (as far as most carriers are concerned), and thus
is something that most carriers class like the above
items of "extraordinary value". Such data has intrinsic
value but is not currently measured with an absolute
</ Friday muse on a shipper's duty >
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