Surprise Package

September 1998

Managing:Legal Issues

Surprise Package

What happens when a box of jewelry you've shipped shows up without its contents? Know how to prove you sent the goods


You obtain two bracelets from a manufacturer to show to a customer. The customer decides against both, so you need to ship them back to the manufacturer. One of your salespeople carefully wraps, seals and addresses the package and calls your shipping carrier. On the shipping label, you declare the value to be $25,000. The driver doesn't unwrap the package when he picks it up. He fills out the paperwork and is gone.

The next day the manufacturer calls to say that when the package was delivered, it seemed too light to contain two bracelets so he asked the driver to witness him open it. The package contains only a costume jewelry ring and no bracelets. After the initial shock wears off, you sigh with relief remembering you declared the full value of the bracelets.

This is a true story. But for the jeweler who lived the experience, the problems had just begun. The carrier denied his claim, saying he hadn't followed packaging guidelines. The jeweler checked the carrier's guidelines and was able to prove he did pack the items correctly. The carrier lost the argument but still refused to pay the claim, saying the jeweler first had to prove the package contained the bracelets.

The manufacturer still hasn't been paid for his loss and is threatening to sue the jeweler. The jeweler has suffered a blow to his reputation and has had to call his own attorney in on the case. A nightmare? You bet.

Prove It
The law requires a shipper (the jeweler) who has suffered the loss of an item or damage to an item to establish his case. He has to prove three things (this would be true if the claim were made under private insurance as well):

  • He delivered the item in good condition to the carrier's driver.
  • The item arrived in damaged condition, was switched with something less valuable or did not arrive at all.
  • The amount of loss or damage suffered.

The second and third points are easier to prove; the first may not be. If you take certain precautions and think about the law's requirements before you ship, however, you stand a good chance of making your case. Keep in mind that because litigation is so expensive, the chief purpose of "making your case" is to convince the carrier or insurance company that your claim is legitimate and to settle it early.

Because you or a staff member pack, seal and address the package before a shipping service picks it up, an invoice or shipping document isn't conclusive proof that what you say is in the package is actually there, in good condition or worth what you say. You need circumstantial evidence. Federal courts (where shipping cases are often heard) have repeatedly said shippers (jewelers) can present circumstantial evidence to show delivery of an item to a carrier. Circumstantial evidence is proof of a fact that makes proof of another fact more likely.

Example 1:Evidence of tampering to a box is circumstantial evidence the missing item was stolen in transit. But remember, proof of tampering is not direct proof of transit theft because it's possible the jeweler sent an empty box that was tampered with in transit.

Example 2:Courts have ruled a shipper's (jeweler's) general shipping practices may be enough to prove the case and, thus, also can be presented as circumstantial evidence.

Below are several practices you can initiate to create the circumstantial evidence you would need in such cases.

  • Know and be relatively sure you can trust the person who did the packing. This employee is likely to be your key witness. An employee who has questionable honesty or is careless won't make an effective witness on your behalf.
  • Keep good records. A log with dated entries that indicates who wrapped what, where it came from, where it was going and signed by the person who made the entry is admissible in court as a business record. These can be hand-written or computer-generated. You might also consider setting up a video camera in the area where shipments are prepared.
  • Packaging. A great deal has been written about how you should package and address what you ship. The Jewelers' Security Alliance, New York City, issued a bulletin in April with a variety of recently updated recommendations. Contact JSA at (800) 537-0067 or e-mail See related article on these guidelines in "A Tight Ship" (p. 115).

The Package
Jewelers Mutual Insurance Co., Neenah, WI, also gives packaging advice to help its clients avoid shipping losses. The company (800-558-6411) offers a laminated guide outlining proper packing and shipping procedures. Security tape is one answer, says spokeswoman Barbara Kretsch. The company recently cited Consolidated Graphics Materials Inc. of Somerset, NJ, as one company that sells security seals and void tapes (the company can be reached at 732-448-1400). You should note, however, some security experts question whether these sophisticated packaging materials make your package more noticeable to thieves to steal outright (see "A Tight Ship"). In this case, protecting yourself legally may make you more vulnerable from the loss-prevention perspective.

From a legal standpoint, proper packaging is important for two reasons:

  • If a package arrives empty or with your item switched for another, proof of tampering will be strong circumstantial evidence in your favor. The more difficult it is for a thief to open and reseal a package, the more likely the tampering can be detected later.
  • Conversely, if the carrier believes the package was not tampered with and was delivered without the contents you said were there, it has strong evidence you never put the items inside. Or the carrier might say the person you shipped an item to stole it. (It's not uncommon for the addressee to be drawn into these disputes.) In such a case, the carrier or insurer is not likely to settle your claim, and you may lose should you pursue the case to trial.

Know Your History
How long you've been in business, your professional standing in the community and personal and professional references are all elements a carrier, insurer or jury can consider if the issue before them is credibility. Lawyers often hear a client say he doesn't have a case because "it's my word against his" or "I don't have any proof." But every day in courtrooms across the country, plaintiffs win their cases because a jury believes them when they say things like "I put the bracelets in the package. I didn't ship an empty box. And I didn't commit fraud."

Jewelers often complain carriers and insurance companies are happy to take their premiums, but then make them jump through hoops when it comes to paying claims. But often this complaint disregards the obligation that claims adjusters have to their companies and their customers. It's an unfortunate fact of life in any industry that fraud is committed. People do ship empty packages to collect insurance money. They carefully wrap damaged items and then blame the carrier. This is true in every industry, and claims adjusters know it. It's quite simply their job to look carefully at each claim and determine whether it seems suspicious. To keep down shipping rates and insurance rates, they have a duty to investigate claims before paying them.

William H. Donahue Jr. is an attorney practicing in New Jersey.




Copyright © 1998 by Bond Communications.


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