PURSUING CLAIMS FOR INTERNAL LOSSES - Food Resources Manual

General

Claims may be filed by country offices for the loss or misuse of food against CARE employees, counterpart staff, transporters, owners of commercial warehouses or others. CARE may be liable to the donor for the value of the food unless the donor determines the loss could not be prevented considering normal commercial practice in the country and the difficulties associated with carrying out programs using food resources.

Unless otherwise approved by a donor in writing, CARE must undertake all necessary efforts to recover the food or its value from the person responsible for the food when the loss occurred.

CARE may elect not to pursue claims in the following two instances:

  • The loss on which the claim is based is caused by force majeure. In other words, the events causing the loss were beyond the control of the parties responsible and could not have been avoided by the exercise of due care. An example would be a flash flood which damages food stored in a community distribution center, assuming the distribution center is not located in a flood plain.
  • The value of the claim is less than US$500, failure to pursue the claim would not be detrimental to the program, or costs of collecting this claim would exceed $500.

The US$500 limit on filing claims applies to each contract under which the losses occur. For example, if bags of U.S. Government wheat are lost by a trucking company contracted by CARE, the amount of the loss is based on the transport of the entire shipment under the transport contract and not the loss attributable to each individual truck.

Coordination between CARE Finance and Logistics Staff

CARE Logistics and Finance staff are usually involved in pursuing claims.

Logistics staff may keep the internal claim files and ledgers, and finance will be responsible for receiving payments or deducting claims from invoices or disbursing monies to donors or others. Country offices must establish procedures for regular up-to-date communications between these offices to assure that all necessary steps are being taken to pursue and close out claims.

Valuing Claims

Generally, claims should be valued higher than the market price of the food at the time and place of the loss, or the cost of food, insurance and ocean freight (C.I.F.) as stated on the Bill of Lading. All decisions on valuing claims should be agreed to by donors’ local representatives.

Many country offices value the food 10% higher than market price. This serves as a penalty against those responsible for the loss.

Pursuing Claims

A claim letter must be prepared and sent to the person or organization responsible for the loss. CARE must make reasonable attempts to collect claims. “Reasonable attempts” shall not be less than the follow-up of the original claim letter with three progressively stronger demands at not more than 30-day intervals. If such action does not achieve a satisfactory result, legal action must be pursued in the country where the loss occurred unless:

  • Liability of the third party is not provable.
  • Costs of pursuing the claim would exceed the amount of the claim.
  • The third party would not have sufficient assets to satisfy the claim.
  • Maintaining legal action in the country's judicial system would seriously impair CARE's ability to conduct an effective program in the country.
  • It is inappropriate for reasons relating to the judicial system of the country.

Donors must be provided with copies of all claim letters and other relevant claim information, if requested. If CARE decides not to pursue legal action, the reasons must be submitted to the donor and/or the appropriate CARE International member. Likewise, any settlement for less than the claim value must be approved by the donor.

Monitoring the Status of Claims

An internal claims ledgeris used to monitor the status of all losses and claims. Below is one format that could be used to keep track claims. The information in this ledger is taken from the Loss and Adjustment Report and the claims letter. It allows management to monitor the status of all internal losses. Prepare a separate ledger and file by donor and by shipment.

Country offices should establish an internal claim numbering system similar to that used for marine claims.

Reporting Claims Information to the Donor

Provide the donor with copies of claim information. This can best be done by providing a copy of the claims ledger and submitting additional information, as requested.

Claims Proceeds

For U.S. Government food, deduct collection costs such as reasonable legal fees and other collection costs from the proceeds. Remit net proceeds to U.S. Disbursing Officer, American Embassy. For all other donors, report the amounts collected less collection costs. Request permission to use net proceeds for programming activities within the country.

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