ERM-BC-COOP Stolen item may cost former owner "big bucks"

 

If you owned something that was stolen, and the stolen item was used against someone or caused damage, are you liable?

Maybe.

In an article in the Milwaukee Journal-Sentinel headed Patrick Cudahy sues Navy over 2009 fire, "Patrick Cudahy Inc., its parent corporation Smithfield Foods, and several insurers have sued the U.S. Navy, seeking $326 million in losses from the massive 2009 fire at the meat packing plant caused by a stolen military flare set off as part of a Fourth of July celebration."

The plaintiffs contend that the Navy's negligence allowed the flare to be stolen from a California Marine base. The Navy denies responsibility under the Federal Tort Claims Act.

Basically, the suit contends that the Navy failed to properly inventory and control its property.

Strictly a Navy or government problem?

Hardly.

If the plaintiffs prevail, any organization that makes almost anything could be sued for damages.

In most civil suits, plaintiffs sue "the world" jointly and severally, looking for any organization with "deep pockets."

Most organizations have insurance coverage, but increasingly, two things are happening:

1. Awards, especially jury awards, exceed the insurance coverage
2. The insurance company either refuses to pay or sues the insured to recover its payout.

In the Navy case, the insurers are among the plaintiffs.

The core complaint in the Navy action seems to be that the Navy allegedly failed to perform due diligence when dealing with its resources, in this specific instance, a green star flare. According to the suit, the flare was found outside the actual training area and therefore the Navy breached its duty.

While the suit was only recently filed in federal court, the outcome will be interesting.

Unlike non-government entities, the Navy claims immunity from such suits. Non-government organizations lack that protection.

What then, based on the main focus of the suit, can an organization due to avoid or mitigate similar suits if someone uses something the organization owned to cause damage ? In three words: Use due diligence.

Inventory both stock on the shelf and resources - hardware and software items - and regularly revisit the inventory. If the organization deals in things that can go "bang in the night," perhaps inspect all packages, briefcases, and the like, as they exit the building.

The organization may still be sued, but if it can prove due diligence it may be removed from the action by the court.

Caveat: I am not a lawyer and I do not play one on tv.