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The Almighty Buck

United Parcel Service Sued for Insurance Fraud 167

Is0t0pe writes "It seems that UPS might have been taking all that money we spend for insuring our packages and funneling it into an offshore company owned by UPS shareholders- Here's the scoop." The story's from An interesting tale of alleged financial manipulation that affects anyone who's ever insured a UPS package for over $100.
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United Parcel Service Sued for Insurance Fraud

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  • I worked for UPS recently and can tell you a little bit about OPL.

    As the article states, OPL is "Overseas Partners, Ltd." .. when the stock was private, every time you purchased shares of UPS stock, you also had to purchase a certain amount of OPL stock. This was mandatory if you wanted to buy UPS stock.

    OPL was known to my co-workers (middle management) as the company that provides package insurance. I remember hearing something about UPS starting it up and spinning it off years ago.

    Wish I could provide more info. Thats all I remember about UPS and OPL. I wasn't involved in package systems.

  • I'm not sure that the shipping companies mind us knowing how hard the packages are tossed. I saw a knowledge network item discussing a fedex parcel sorting installation once, and a battering ram punched the box off the conveyer into a sorting bin at shockingly high speed. And that was in an item that FELT like a promotional fluff piece.

    Perhaps the bulk of their customers would rather ship faster and cheaper, and handle the prospective damage through better packing?
  • I was wondering the same thing as well. If the customers are paid when their stuff is damaged, how does it matter exactly what UPS does with the money? Of course they'll invest the money somewhere, they won't just leave it sitting around.

    Sure, they take more in than they pay out, but that's how it is with all kinds of insurance -- otherwise insurance companies wouldn't exist.
  • Actually, they pay what they want to pay, not the insured value. Bastards. I need their service, but I'm not gonna cry over them getting caught.
  • UPS is very good about paying claims, as long as packaging guidelines were followed. Act early and follow up.

    That's been your experience because you work for a company that provides a large revenue stream for UPS. I have a damaged package claim that has been in the works for 6 months and they are still trying to figure out how to proceed.

    Bottom line: If you aren't a big fish, they will do all they can to weasel out of paying the claim.

  • by sjames ( 1099 ) on Saturday November 20, 1999 @06:09AM (#1517611) Homepage Journal

    If it doesn't affect your payout (as in, *all* of the money is invested and they won't compensate you for damage), I don't see what right you'd have to object.

    The objection is in the level of assurance for that potential payout. For example, all 5 of Timothy's Overnight Delivery's trucks collide in the parking lot, and are a total loss. TOD now goes bankrupt, and has no special structuring to assure proper payout of the damages on the packages, and the customer is in the lurch.

    In order to avoid scenerios like that, various states have strict licensing policies on who can be an insurance company, and how much risk they can assume. The requirements are set up so that if an insurance company is getting into trouble, it gets shut down BEFORE it becomes unable to pay it's claims.

    In this case, nobody has gone bankrupt, and nobody didn't get paid as a result of insolvency, so the damage is minimal. Basically, everyone 'got lucky', and didn't even know they were at risk until now.

    The point of the suit is that the customer paid for insurance (the assumption of risk for a loss) believing that the rather strict solvency rules were being followed by the insurer, and they weren't. It's like discovering that your bank had no deposit insurance, and was keeping the money in a bunch of shoe boxes out back.

    For the record, I doubt it's worth $42 billion in damages precicely because no actual harm was done.

  • I'm assuming you didn't look here [] before making your "rubbish" comment, where it plainly states:

    "Firearms must be shipped via FedEx Priority Overnight."

    All of the carriers I am aware of now have such restrictions, or disallow firearms shipments outright.
  • Uhh??? Huh?

    Couldn't that also mean that for they didn't break that much of the stuff that was insured?
  • UPS does make you pay the insurance. First they ask you if your item costs above $100, and if it does, you've to pay the insurance. You can try lying of course. For international shipments, they even want a copy of the receipt (for customs purposes as well).
  • by Anonymous Coward on Friday November 19, 1999 @03:37PM (#1517619)
    Couple things to be concerned about here..

    This is just my IANAL understanding so I may be off. But the crux of it seems to be that:

    • UPS used to self-insure it's packages until 1984.
    • Rather than face all the strict laws regulating the insurance biz, they got out and started using a company called National Union Fire to insure their stuff. No problem there.
    • National Union Fire re-insured (insurance companies back themselves up with re-insurance to spread the risk) with a company in Bermuda. No problem there.
    • The Bermuda company was owned by some private stock holders of UPS. This is a problem because since they own a major stake in UPS and the Bermuda company it amounts to being self-insured.
    • Because UPS was now self-insured again (albeit in a round about way) they should have paid taxes on the profits of the insurance side. So they basically ripped off the government for a few billion.
    • Again, since they were self-insured they were operating as an unlicensed insurance company. They were selling you insurance but they weren't licensed to do so. That is insurance fraud and a huge no-no in Ohio and probably every other state.
    So that's my take anyway...
  • According to CNN and stuff, the suit is based on UPS charging for package insurance (which is optional last I checked) even though they were self-insured. And in 1984, UPS outsourced their incurance. So, is this suit for charges before or after 1984?

    I still don't get what they did wrong. Okay---so they are putting some of the money offshore for tax reasons and uncle sam's getting them for that (and I still don't see anything wrong with the offshore deal - screw the IRS!)

    I guess in my mind it comes down to one thing:
    Did UPS payout for damaged insured packages?

    If so, then where is the fraud? If you are not happy with where the unused money went, tough shit. If you don't like it - don't pay it.

    Or am I missing something - I guess I just don't understand the government and lawyers. Only thing I see (on both sides) is greed.
  • Interestingly, something awfully similar is happeneding up here in Canada. It turns out that our Federal government has been taking in WAY more money in Employment Insurance than it is paying out and now has a surplus in the range of $15 billion. They want to take the money and use it in other parts of the government, but a lot of people think it is money that should either stay in the EI pool or be refunded to workers.

    I suppose since they were collecting way more money than they paid out, UPS could have (should have?) used the money to lower rates on insurance or provide free insurance. But that doesn't seem illegal, just greedy. And the figures asked for in the court case still seem ludicrous.

  • by parc ( 25467 )
    I find it interesting that this suit comes AFTER UPS's IPO. It seams that a few people might want to drop the stock a bit to get in, eh?

    And how is UPS funnelling the money away different than an insurance company doing the same thing? How does an insurance company pay claims? By investing the premiums paid to them! It seems that's what UPS is doing. They just cut out the middle-man.
  • if it's actually a class action then the money would be divisible by everyone in the class (a lot more than 20 people) who claims it (usually far less than 100% of those elidgeable) and can prove it (usually most who claim) not the ones that filed the suit. That's the whole point of a class action suit.
  • I just sold all my Redhat and Colbalt Stock for UPS stock too!

    I am gonna jump out my Open ( source ) Window!
  • This practice is used by virtually all large corporations in the US. It's called Captive Insurance. You setup a subsidiary Insurance company in Bermuda or the Cayman Islands and handle all your own Insurance through it.
    These Captive Insurance companies actually normally do buy insurance from other companies. Bermuda actually has the worlds second largest reinsurance market after Lloyds of London and it's perfectly legitimate.
    As a matter of fact if I was a shareholder in a large company that didn't do it, I would consider a shareholder suit, because it saves a lot of money for the companies that do it.
    I didn't see any details in the article about how the insurance was structured, but even if they didn't use third party underwriters in Bermuda. Setting up your own Insurance company is perfectly legitimate as long as you have the necessary capital requirements.
    I'm a geek and therefore I buy a lot of Gadgets. If I chose to get the service plan on every gadget I buy I would be a poor (and stupid) man. I therefore have my own service plan called my bank account. If something goes terribly wrong with my gear, I either have it fixed or buy a replacement at the expense of my bank account. For me this works out cheaper than involving a third party and that's basically what UPS are doing.
    It's cheaper because companies can save money by keeping some of the insurance premiums that they would other wise have paid as commisions to a US insurer.
    Most US Insurers handle most of their reinsurance needs in Bermuda or London anyway.
    By setting up a captive company you just save the middleman.
    Should UPS give the savings back to their customers? Thats another case. But is that worth a lawsuit?
    The relationship between UPS and the insurer should be in their SEC repots somewhere. If not then that might be fraud? I don't know, I'm no lawyer.

  • by Kyrrin ( 35570 ) on Saturday November 20, 1999 @08:19AM (#1517627) Homepage
    > The notion of "self-insurance" is quite common for extremely huge
    > organizations where they figure that they have such a huge number
    > of potential sources of claims that it makes sense to keep the
    > insurance money and pay the costs of claims as they come up.

    Self-insurance is very common for major corporations for such things as Workers' Compensation insurance, but not quite for the reason you've stated. It's because a major company is capable of assessing only its own risk and setting the rate of money they need to set aside. Quick lesson in how insurance works, so that I can make my point:

    The concept of insurance runs on two principles -- risk and indemnity. Risk is the likelihood that a loss will occur; indemnity is the principle of returning the insured to the state of being whole -- ie, taking them back to the state they were in before the loss. Often, this is impossible (ie, life insurance -- you can't bring someone back to life) and in that case, the company will compensate the insured for the loss in a monetary fashion (such as the loss of income that the deceased would have earned).

    In order to have such coverage, the insured must pay for it. In order to set the premium rates, the insurance company assesses how likely it is that an insured will have a loss; they calculate the risk. Insurance companies have huge tables (known as actuarial tables) that contain nothing but demographic data and histories of loss; using those tables, they can calculate roughly how likely it is for an individual to suffer a loss. The premiums charged to that individual then reflect the amount of risk that the insured represents. This is why, for instance, a person who receives a speeding ticket will see his/her auto insurance go up; it demonstrates that the individual is more of a risk for the insurance company.

    The advantage of this for the insurance company is that they have a broad pool of insureds, some of whom are in high-risk brackets, some of whom are not. The people who are higher-risk will indeed get charged more, but the people who are at a lower risk will be charged at such a rate that they are partially financing the high-risk insureds. In such a manner is the financial liability to the insurance company spread out over the entire pool of insureds. Fred Smith from Sheboygan, who has never had an insurance claim in his life, drives slowly, only goes to the grocery store on Fridays, etc, etc, is partially financing the insurance company's ability to assume the risk for Jane Doe, who drives everywhere at 90 miles an hour and has had her license suspended six times for careless driving.

    Major corporations, however, find the process of partially subsidizing other companies' insurance distasteful. Looking at workers' comp, it's easy to see that an automobile factory would have a much higher assessment of risk than a sedate law office. To this end, companies are permitted to self-insure as long as certain conditions are met. In my example, let's say that the law firm of Dewey, Cheatem and Howe chooses to self-insure for their workers' compensation coverage. The amount of money that they need to set aside for potential claims would likely be much, much less than they would need to pay an insurance company for the same coverage, because they would likely have a smaller range of possible losses, and thusly less risk.

    So basically, I'm just nitpicking your assertation that a company self-insures because of the number of claims; it's usually because of the nature of the claims involved.

    In the UPS case, it appears that it might indeed have been detrimental to the consumer. In most of the cases where self-insurance is permittable, it is on an internal basis; the company is insuring itself against certain risks incurred by the company. In the UPS case, it appears that self-insurance was a roundabout way of saving the company money and evading US tax and insurance laws. The clouding issue is the fact that UPS was not directly insuring itself, however; it was using reinsurance.

    Reinsurance is another mechanism that the insurance companies use to reduce their own potential liability. The example that my insurance instructor gave me was a basketball player insuring his hands for $20 million. That is a very large risk for the insurance company, and a claim on such a policy could cause the company immediate financial distress. In order to protect itself, the company will often purchase insurance for itself with other insurance companies, thus diversifying the risk -- XYZ Insurance, who has written that $20 million policy, would then go to ABC Insurance and take out a policy for $1 million, to DEF Insurance and take out another policy for $1 million, etc. That way a sudden claim will not cause a catastrophic drop in the original company's general fund, the account out of which claims are paid.

    Reinsurance is a very common practice in the insurance industry, particularly in the property and casualty insurance market (auto, home, liability), because of the possibility of natural disasters that affect an entire area. For instance, a company that insures large blocks of Florida, say, might purchase reinsurance for itself in a company that doesn't have much business written in Florida at all. That way, a natural disaster in Florida wouldn't bankrupt the company. The company I work for was heavily involved in the area that was hit by the Oklahoma tornado a while back, and the only thing that saved our P&C department was the fact that we had a great deal of reinsurance and therefore did not need to pay all the claims ourselves.

    In this case, UPS appears to have purchased its insurance with a standard insurance company, and then that company purchased reinsurance with the company UPS owned. This is going to make things a little stickier.

    Disclaimer: I am an insurance agent, but this is not insurance advice. See your local insurance agent who is familiar with your state laws for any specific insurance questions.
  • I had the same experience as another poster: UPS claimed they had a signature as proof of delivery for a package that clearly hadn't been delivered. Apparently, "getting confused" about digitized signatures is commonplace at UPS.

    Signing on paper is not an option. Their mandatory system of digitized signatures raises a lot of privacy and evidentiary red flags.

    Also, UPS has done some pretty bad things to computer equipment I have had shipped through them over the years.

    So, I just say "no" to UPS and ask vendors for an alternative. USPS is usually a better deal, and FedEx is more reliable in my experience.

  • If this is indeed true, it could mean MAJOR problems ahead for UPS. It could also mean severe economical impacts for a great portion of companies. A lot of corperations rely on UPS to ship goods to consumers, including my own.
  • yeah thats how it is :)

  • by GossG ( 108241 ) on Friday November 19, 1999 @02:40PM (#1517631)
    Do we care where they hold the insurance? To me, if the parcel arrives in three pieces, they will pay for it. Or not. Depending on whether it was "insured".

    Do I care where they keep the money in the meantime?
  • I'm not joking. Every experience with UPS I have ever had was extremely bad.

    One, they don't really operate in Atlantic Canada where I live, even though their main call centre is in Moncton, NB. They handle it through garbage local companies (here, it's sameday (someday) express). Surprisingly enough, they won't even let me insure something I send from here.

    It took me over a month to receive a laptop I bought. It came broken so I called up the company for a replacement and decided to get another one instead. I asked them to send it via Purolator or FedEx and that I would pay the full shipping costs. Nope. UPS had them in a contract that they were not allowed to use other services even though the customer is paying for it. Sound familiar?

    Matrix Orbital (It's sad to say this), who makes cool LCD displays for Linux boxes, has signed one of these contracts. I worked for a company that needed one overnight. FedEx or Purolator would have done it, but UPS wouldn't. It was UPS or nothing and it took a week to get.

    That not only sucks, it should be illegal. I'm paying for it, shouldn't I get a choice?

    When I sent my laptop back, not only would they not insure it, but they didn't give me any kind of receipt. Egghead couldn't reimburse me the the CAN$200 without the UPS receipt I didn't get. UPS refused to give me a receipt no matter how many times I called them ("there's nothing we can do", BS, they lost their records???).

    That's why this story doesn't surprise me. UPS are dickheads, and they always were in my experience.
  • by Anonymous Coward
    Why is this story on Slashdot?

    Sure, its news but I expect to hear about it here as much as I expect speculations on EgyptAir 990.
  • I'm not sure here, but it sounds a little bit filthy to do a self-insurance for a job one company does for a third person.
    I mean it's bad for the customer, in case of self-insurace and a suit about a broken package, the plaintiffs were the same as the defendand.
    My chances of getting the money should be worse compared to the "legal" case when UPS would be a "neutral" plaintiff because a independend insurance company was sued by me.
  • I think this is posted on slashdot because it could mean problems for computers sold over the internet. Think about it, if UPS become's liable for $42 billion (as the story states) they would have to raise prices quite a bit. That causes all companies that ship via UPS to have to raise their shipping prices. It's a cascading affect, and once again, the people who think they are hurting the company doing the wrong are hurting you and me, by raising the prices WE have to pay.
  • When ibm or your company go bancrupt no one else is hurt because they can't pay some repairs for fire or an accident.
  • Probably because this has a direct impact on a lot of us... How many of us ship and recieve things through UPS?
  • Who gives a rodent's posterior _how_ the insurance is created and paid out, as long as it actually does pay out on a legitimate loss?

    The answer to "who", of course, is the insurance "regulation" industry inside of the various state goverments. Without something to regulate, these people are out of a job. And the lawyers lose a lucrative income stream.

    A most irritating situation ...
  • Nerds are interested in all kinds of things. There is no reason to believe that a certain subset of the readers of /. might find this interesting and relevant. That's the beauty, of course - you can choose to read what you want. If it's not relevant to you, feel free to skip it.

  • With american society the way it is now, I'm not worried by what they did, I'm worried on what the rulling will be. We end up having to pay the higher prices for that lawsuit.
  • Insurance means basically that they charge you enough to offset the chance that it would break and so they can reimburse you. That's what actuary work is for.

    The first insurance is already included in the price of the package. Then they have you pay another insurance that is useless.

    So basically, they're charging you more than they should be doing (which is normal profit) but they justify it as insurance (which is fraud).
  • by Royster ( 16042 ) on Saturday November 20, 1999 @10:03AM (#1517642) Homepage
    Fradulent in terms of "company was actually self insured, and just trying to be sneaky and pretend they weren't?"

    There was a direct writer which was licensed to write the insurance. That company (National Union Fire Insurance, a co-defendant in the suit) was the insurer. They chose to reinsure the business back to an insurer owned and controlled by UPS. They are perfectly within their rights to do so.

    I understand that the general public dosn't understand the difference between insurance companies and reinsurers. If you have insurance, that changes are very great that some company that you never heard of holds part of the risk. Reinsurance is commonly used in insurance to spread the risk of too many claims around a larger group of companies.

    That company (the reinsurer) does not need to be licensed in the state where you bought the insurance -- this is one of the bogus claims of the suit. You have no relationship with or claim against the reinsurer in the event of a loss. If the reinsurer becomes insolvent and can't pay its claims, you aren't out a penny. The direct writer, with whom you have a contract, is out. They still owe you for the claim.

    Yes; the courts have already decided that. This suit is a result of that decision, not a speculation hoping to achieve that decision.

    No. Please reread the article. The company was convicted of tax fraud because of the way that they structured the overseas reinsurer. They apparently attempted to avoid paying Federal Income Tax on the underwriting profits. The court decision does not prove fraudulent dealings with insureds. []

    Frankly, this is a nuisance suit which has no basis in law. I would be very surprised to see the plaintiffs prevail.
  • This reminds me of a story I was told in Sunday School about David and Goliath.

    The bigger they come the harder they fall?

    Seriously though, look at the numbers on the link " 1984, UPS billed its customers $99.8 million for insurance and paid out claims of about $22 million." which is a large profit margin!

    Time to switch industries I think. I quite like the idea of all the money around in the insurance game of "fuck the little guy" - hang on, there's money to be made in the technology game of "fuck the little guy"

  • This reminds me of a story I was told in Sunday School about David and Goliath. The bigger they come the harder they fall?

    Eh, That was jimmy cliff. That's what I know.
  • I say you shouldn't have to buy insurance on a package in the FIRST place.
    You don't pay a waiter not to spill your drink on the way to your table! Sure, you tip him, but if he spills it, it gets replaced, without INSURANCE.

    "Hi, UPS? How much extra does it cost for you NOT to break my stuff?"

  • Actually, they didn't stop shipping firearms. They merely force you to ship Next Day Air, adding up to $30 to the price of a firearm.

    I too, decided to boycott UPS after this action. Unfortunately, all of their competitors quickly followed suit...
  • by Anonymous Coward on Friday November 19, 1999 @03:59PM (#1517650)
    First off, this story is the abridged version, but the essential facts have been preserved.

    So I've got a 2 month old Epson printer that has gone bad. Epson replaces it under warranty by cross-shipping me a new one, and I am suppossed to put the old one in the old box and let UPS come pick it up. I do so, then I leave town for a week.

    I get back, I call Epson to make sure they have received the broken printer (and thus won't be charging my credit card for the new printer). They have not received it. I call UPS, they have a record of picking it up, but nothing from there. They put a trace on it and will get back to me in 10 days.

    10 days come and go, I get a letter from UPS saying that the results of the trace are that Epson did receive the package, they even have a copy of the digitized signature of the receiving person at Epson to prove it. That same day, the printer is uncovered at my local Mailboxes Etc, UPS had misdelivered it back to my mailbox and it had been sitting in storage ever since.

    Clearly the printer was never received by Epson, and clearly UPS abused their digitized signature system to avoid paying on the insurance they owe Epson. They just printed up a copy of the signature captured for some other package and said that it was for the printer they never delivered.

    Not only that, but they told Epson the same thing and Epson accepted it, assuming that they had lost the printer in their own internal returns system. So now I still have a broken printer, but I have a working one too. Epson doesn't care, and despite a number of calls to UPS, they've done an excellent job of ignoring me.

    So, beware when you sign on that digitizer pad, who knows what nefarious game UPS will play with your signature.
  • Interesting. But since UPS is a private enterprise, it's free to make its own business decisions. The customer is told that he has to pay this price, and if the thing breaks, he is paid this much. If the customer isn't happy with the price he has to pay for insurance, he can always go elsewhere (unless we have a monopoly or collusion within the industry). So I'm not that there is really a case.

  • The Bermuda company was owned by some private stock holders of UPS. This is a problem because since they own a major stake in UPS and the Bermuda company it amounts to being self-insured.

    Not only does this lead to UPS being self-insured again, but wouldn't it also be a conflict of interest?

    Droit devant soi on ne peut pas aller bien loin...

  • I've heard more than a few stories about how a company ordered computers that sent through by UPS that have arrived dead and disfigured on arrival. Usually these machines were the victim of rough handling -- you'd pick up the machine and hear a loose component rattling inside the case. This was usually more of an annoyance (although a big one) since the box was insured and somehow the next machine would survive the journey unscathed.

    The most extreme case I've ever seen regarding UPS damage happened when friend of mine shipped a generator to Reno for Burning Man '99 via UPS. It came out of the box severely beaten, even sporting some impressive (but non-critical) dents. Keep in mind that generators are pretty tough. We've lugged my friend's one up and down steep rocky hills, even dropping it many times -- all without doing more damage than scratching the paint job. How the hell did UPS manage to dent it?

    Perhaps the big brown trucks have little mini-catapults...

  • Well, a certain postmaster in a certain town decided they wanted to skim off money, so they took the money paid for insured shipments, didn't insure the items, used the cash to purchase USPS money orders, and flew. They was nailed, though, hardcore

    And that's a federal crime.. BTW: don't fuck with the postal police.

    Amen to that... Back when I was a wee lad, and in Sunday School, my Sundat school teacher was alos a postal inspector/Mail Cop... He would often keep us psellbound with stories of how his faith in the lord above (snort :-) helped him nab people who would steal mail...

    As an interesting followup... Sevral years later, (around the age 14-16) Some friends of mine had the wounderful idea to hang out near certain wealtyh apartment complexes after school... the logic being.. since the neighborhood was good, and the complexes were easy to get into, they could easily lift postal, and other packages left by the front doors...

    The end result, my old sunday school teacher busts 2 friends of mine... (I always chickened out about going, so I got off free) and the 2 friends each got 30 days in the Juvie hall, 2+ years of probation... Indeed... Do not Fuck with the postal service...

    (What's really sad is that these morons tole about 30+ packages, and they never ever found anything remotly valuable to themselves... Except one of them kept the antique Tea set....?)

  • Next time order from someone who gives a damn about the way they package your stuff after they have your money
  • Firstly, you can still ship them overnight. It makes sense to have as little handling as possible on highly desirable stuff like firearms, video games, jewelry, pokemon stuff, etc. If you ship a handgun from California to New York by ground its probably going to be handled 8-10 times along the way (an educated guess) by sorting personel who by and large are one step up the job ladder from the fry boy at McDonalds. It is fairly easy for him to punch a hole in your box and grab whatever's inside if he suspects its gonna be good. If you ship by air it probably gets handled twice in a period of 10 hours between the time it goes from one brown truck into another. I know that most drivers won't sacrifice their good wages and benefits to "go shopping" in the back of their truck, so the chances of tempting a criminally inclined employee along the way are reduced.
  • If your friend took the time to package his generator properly im sure it would have ended up looking better on the delivery end of things... You wrap your 80lb hunk of metal in 1/4 inch of corrugated cardboard and some masking tape and you get what you deserve. As a UPS driver you see this sort of thing all the time and the person who cries loudest about how UPS shitkicked their stuff is the same one who who freaks out when you say you won't pick up their 17" monitor thats crammed into a rotten old box with some old T-shirts and jeans wadded up to protect the screen. Next time you ship something, if you wouldn't feel confident raising it 3 feet high and dropping it to the floor you haven't packed it well enough. Its reality- you don't move 12 million packages a day by having each package placed on a velvet pillow.
  • by Anonymous Coward
    Wrong! Their voice activated sorting machines (Bullfrog) could let packages drop from the top of the belt to the ground. This would occur on missort packages that weren't sorted into the smalls bags and made it to the end of the belt. In a typical sort hundreds could fall.
    More often though, damage occurs at the end of the prelaod sort belts where the loaders didn't grab their packages as they went by and the packages made it to the end of the belt. Most facilities have a stop bar that packages could get jammed up against, or, after building up for the sport span, topple to the ground.
    In the reload operation many feeder belts are close to the ceiling and during high package flow packages WILL fall (sometimes up to twenty feet).
    In the unload operations unloaders will sometimes topple a package "wall" because the topmost boxes are not reachable (and they don't want to use the assist).
    In all operations, especially near missort return belts, packages are often thrown. Jams occur often, near slides, diverters, shifters, etc.. In the heat of the operation these packages have been kicked, shoved, torn apart, etc..
    Was this done purposefully? No, of course not. But these design flaws have occurred. In other cases it's because the outdated facilities cannot keep pace with the package volume.
  • Ask yourself: is Matrix Orbital passing along this savings to you?

    1 - PC suppliers enjoy a price break putting Windows on all PCs. They pass the savings on to me. However, I don't use Windows and I immediately delete it to install Linux. How much money have I saved now? I think that many people agree with me that this is harmful to the consumer and only benefits Microsoft or UPS.

    2 - I'm willing to pay more to get something shipped overnight rather than a fscking week. I end up sitting around waiting for it to arrive while my employer loses money due to lost productivity and missed deadlines. For a lousy 20 extra bucks they're saving many hundreds if I get equipment immediately.

    I have tried very hard to get such companies to "make an exception." It simply doesn't work. I'm the one paying for the shipping so I should have a choice.

    Get a clue, hoser.

    That certainly helps your credibility...
  • Part of this is certainly related to how they are handled. Boxes obviously containing computers are thrown several feet and land harshly on a conveyor belt. Imagine picking up your computer and your monitor and throwing them as hard as you can against the wall. This happens... hundreds of times a night. Any item shipped through UPS will probably be handled at least 8 to 10 times, and each time it will go through the same level of treatment.

    Why doesn't this surprise me? Because the company I used to work for shipped a computer from AZ to my office in MI. The clueless moron who shipped it packed it in a box that was filled only with shredded paper.

    When it arrived, this thing looked like someone had played football with it. Both the CPU and monitor case had been broken/cracked...the monitors case had a hole big enough to stuff three fingers in!! It was a frickin' miracle this equipment worked at all!

  • Thanks, this made it almost clear. I still do not get why they did anything illegal given that two out of three entities in that business were licensed insurance companies. Why was UPS "operating as an unlicensed insurance company"? Seems to me that by getting National Union Fire into the loop they got around that pesky restriction. Where is my logic flawed? I must say that this is one of the few cases where I root for the big guy. I think that this is typical legal excercise at the expense of common sense. Common sense says that since noone had a problem then let UPS go with a warning.
  • by Anonymous Coward
    Do we care where they hold the insurance? To me, if the parcel arrives in three pieces, they will pay for it. Or not. Depending on whether it was "insured".

    I guess it's on /. because we geeks get a lot of toys shipped to us via UPS. I've waited for a class action lawsuit against them for a long time. I write production scheduling software that handles everything from inventory to shipping. I keep track of damaged deliveries, and UPS constantly averages over 3% damage rate. That's almost 10x what FedEx or even USPS (unbelievable, yes) averages. The system automatically generates a form letter to send to the companies' local rep. In 5 years, my damaged shipping settlement routine has never logged a credit from UPS. From a quick glance, one company that uses my software has used it to ship almost 50,000 packages over the past 5 years. In that time, they have never gotten a single dime out of UPS for a damaged package. They filed 1488 damage (or lost shipment) claims and collected nothing. UPS's insurance is a complete fraud. Someone is exposing the money laundering scheme now. Hopefully their bad business practises will also be more publicized.

  • Back in 1994 my parents sent a $100 trench coat and $50-$100 in dried food goods (rice, noodles), some gloves, and a few other things from Alabama to California via UPS (/aka/ United Package Smashers). The (insured) package arrived a month later than it should have, and when it arrived, the contents of the package were soaked. Water doen't harm coats and gloves, but almost all of the food was a loss. Worse still, talking with my parents over the phone we discovered that the box I had received was not the original shipping box. My parents contacted UPS concerning the insured package and were given lots of excuses. I don't know if they ever collected (I don't think they did, or if so, it wasn't much), but UPS was definitely *not* planning to honor the insurance contract and did what they could to prevent us from collecting.

    This isn't the only bad experience I've had with UPS, either. I've had computer parts packages arrive smashed up (getting a smashed box with your motherboard inside is not conducive to sanity or happy thoughts).

    I don't have any experience with FedEx, since their rates are steep. After this, though, I may switch.

    Who am I?
    Why am here?
    Where is the chocolate?
  • I've been meaning to make a top X list of UPS acronym meanings (see my previous post for why), so here goes...add yours too ;)

    1. United Package Smashers
    2. United Picket Service
    3. Uselessly Pathetic Scum
    4. Unlimited Pain & Suffering

    etc. ...

    have fun :)

    Who am I?
    Why am here?
    Where is the chocolate?
  • Thats true. My wife has hot sauce shop and even though her breakage rate is low (~1:300) they hardly ever pay. They claim insufficient packaging.
  • by Anonymous Coward
    they absolutely treat packages like shit.

    That's the serious truth. I had a summer job with Gandalf (used to make short-haul modems among other things), and I was responsible for drop testing both new products with their packaging and every so many that came-off the assembly line. I was also responible for handling UPS damage claims (I was a peon summer intern, so I got all the crap jobs). Some of the boxes we got back from UPS were horrible. Dropping a modem in our shipping box from the third floor onto the parking lot did less damage than UPS often did. We got one metal cased modem back that had been flattened. For fun, I drove my car over one of the empty metal enclosures, and I didn't flatten it as much as they did. Can you say truck? A good portion of the terminals we shipped got poked with fork lifts. UPS never would pay for damage on those, because they claimed they didn't use fork lifts to handle the packages. OK, we didn't have a fork lift or even a loading dock nor did most of our customers, so what was stuck through the CRT in so many of the monitors? Did they use them for jousting practise? UPS bah!

  • It doesn't matter which company sends them (and you're right, Amazon's constant shipping delays with the Brown Ones frustrates to no end;) the UPS folks don't yellowslip. They stick it right in my front door, or next to the front door, or on our bench or in our geranium pot (no kidding!) I work in the daytime and my grandmother is sick of watching my house when I'm expecting a package.

    I'd prefer to come to the UPS office to pick up the packages rather than risk theft by having it stuck near my door. Now that I hear this about the insurance, that makes me even more unlikely to ship anything out via UPS. It's the Postal Service for me!

    (And more Amazon funnies-I ordered a bunch of books a few months ago, along with a Pikachu beanie. The books were delayed, and I didn't mind getting them late, so I had the order indicated to ship all at once. They rush-shipped the Pikachu in an absolutely giant box compared to the size of the toy. What a waste! BTW, the UPS guy left the Pika in the door but the books were shipped Priority. Despite what they said about rushing the Pika, the books got to my house first.)
  • Solution: Dont buy from that company, and let them know in very cordial, and clear terms, why you are taking your buisness elsewhere.

    In many cases the "savings" difference is not worth the loss in revenue/ missed deadlines/ general bad karma that not having the item may result in.

    The only caveat to this is if the product is REALLY unique...
  • Hmm. That has been changed since I was hired, and employees in the IT Division weren't notified.

    Thanks for the correction.

    I'll try to find out whether there are FAA regulations involved in that decision.
  • Do we care where they hold the insurance?


    Insurance is a complex business, and prone to many forms of fraud. To prevent this, most countries require that "insurers" comply with some pretty strict (sic) legislation before trading as an insurer. If you're a big company, you can maybe afford to carry your own insurance (and it probably makes sense to do so), but it's likely to be quite illegal to do so unless you also comply with the rules for "being an insurance company".

    As an obvious example, consider UPS not delivering something (their fault) and then arguing that it really was delivered (your fault). If they also suffer the financial loss as the insurer, would you really trust them to admit that they'd lost the package and so should pay up ? I'm only a little guy - no way can I (usually) afford to sue huge UPS over it, so being reluctant to pay legitimate claims would make good economic sense for them (not that I claim they'd ever have done this).

  • I know that something fishy is going on from personal expierence.
    I had some computer equipment shipped and insured by UPS. It was damaged when I recieved it. In July I asked to collect on the insurance. They got back to me in September, inspected the equipment and said they would refund me. Well, I'm still waiting for the money. These guys have pissed me off.
    Do not use UPS to ship anything worth over $100!!!
  • I know exactly how you feel. I shiped my computer across the country, coming to school. The monitor ended up broken. The package looked like it fell off the back of the truck. After sending it back accross the country, they finally inspected it after about a month. They finally did admit they were at fault, but gave a false phone number to call to get the claim paid. All of this was insured of course. The moral of the story is even if they are at fault they don't pay. Now I know why. Unfortunately I didn't have a chance to refuse it, because the school signs for it. Their supposed to check it, but whoever did didn't look very closely. Needless to say, a good time was not had by all.
  • The state in which they're registered as a corporation (Ohio) doesn't allow you to self-insure without a license.

    That's not very confusing. They knew, otherwise they wouldn't have tried to form a phony insurance company in Bermuda.
  • You know... courts have ruled, in the past, that 'tax avoidance' is not the same thing as 'tax evasion'.

    Putting money offshore, and structuring things so that you can argue you don't owe tax on it, is not a crime in and of itself.
    If you hide things, and try to 'evade' paying taxes, that is a crime.
    If you simply work things so you are willing to say 'I don't HAVE to pay taxes, because of so-and-so', that is your duty and right.
  • I know I shouldnt feed the trolls.. but here goes, but like the accident on the side of the road... cant help looking...:

    Nerds ship stuff too.... nerds order online....
  • FedEx has a new ground service that is cheaper than UPS 2-day.

    Their ground services will certainly continue to expand.

    FDX (the parent company) also owns RPS now, which is probably UPS' biggest competitor in the day-specific (as opposed to time-specific, which is FedEx's bag) market.
  • Fradulent in terms of "packages weren't insured"?


    Fradulent in terms of "company was actually self insured, and just trying to be sneaky and pretend they weren't?"

    Yes; the courts have already decided that. This suit is a result of that decision, not a speculation hoping to achieve that decision.
  • Where did you hear that rubbish?

    FedEx doesn't stop you from shipping firearms any way you want. They just don't want you shipping ammo.
  • I ordered some cds from cheapbytes and it took them 5 days to get to my house. They were guaranteed for 2 day delivry. So i called ups and after explaining my situation to the clerk she rudely told me that they'd issue me a refund.

    .. it never arrived.

    matisse:~$ cat .sig
  • OK, I guess if you ship millions of packages a day you'll be able to find some folks who got screwed one way or the other. My UPS karma is real great, My FedEx karma is good, My AirBorne karma sucks big time. I mean, they let my dog sign for a touch screen and the dog ate it! I have floppy disks with teeth bites through them. Of course Airborne said not our problem.

    Stuff like this happens, I don't like it and just won't use them, luckly we still have choices.
  • By the way, I thought I would mention that UPS Ground is probably the absolute worst method of shipping anything on the entire planet. One time I ordered some coffee from Peet's, had them mark the package perishable and prominently put "No Signature Required" all over it since I knew UPS would deliver during the day when I was at work. Sure enough, UPS gave me the dreaded yellow slip, resulting in a two day delay. After numerous experiences like this I've told people that if they UPS me anything and I get yellow slipped, I'll simply refuse delivery.

    Another recent problem is with Their standard shipping uses Priority Mail for smaller orders, UPS Ground for bigger ones. Packages sent Priority Mail always arrive two days after shipping. My UPS Ground packages never take less than a week, and usually ten days or more. I've written to bitch and moan about this, and to suggest that amazon have a "No UPS" option on their standard shipping. Heh, no such luck yet, but there is a number you can call to request that your order be shipped Priority Mail. It is (800) 201-7575.
  • Because the way they'll make more is to leave their prices alone and wait for what used to be UPS' customers to show up at the door.

    For an example of how this works that is maybe a little more relevant to the /. crowd, remember when Prodigy was the #1 online service? They were cheaper than AOL, and much more popular. But they weren't making any money; so they instituted a pricing structure more like AOL's. Did AOL say 'hey the competition raised prices, so can we?'. No. They lowered their prices. The rest, as they say, is history.

  • They broke my computer too. It was a full tower case, all set up and ready to go for the dorm network, and when I opened the box, I was greeted with the sight of my hard drives tumbling out of the box.

    I kid you not, my mouth dropped when I saw the damage. The edges of the box, and the 6" of foam peanuts, was completely crushed in. So was one corner of my case. In fact, it took a mallet to hammer out the drive bay back into shape so that I can slide my CD-ROM and CD-R back in. They've crushed one of the corners of the chassis, knocked all 4 harddrives off it's mount, and the 4 drives tumbled inside the case and knocked everything loose. 2 of the drives never spun back up after that abuse - they even managed to crack the RAM holder on my motherboard.

    Insurance was unhelpful at best. They told me not to touch the computer and they'll send someone out to assess the damage. It took over 10 calls and a few reschedules and 3 weeks before they even gave me the phone number of the tech. And it took a bit more wardialing before he decided to come out to take a look at the remains.

    When I called the first time, the person on the phone flat out told me that anything weighing over 40 pounds gets rolled, end-over-end, onto a truck. "Sometimes handtrucks aren't availble". That just sounded like total BS.

    Fortunately, I was never one to follow the rules. I reasembled the machine, bought new parts with the money I had saved up, and disassemble it before the tech came out to show him the remains. "Good call that you didn't power up the box" was his remark. "Yeah, right" was the thought that went thru my mind. 3 weeks without a computer? Gimme a break, I needed that box for all my work.

    The final line? Almost 2 months, and fighting them tooth and nail, before they'd give me $1700.00 of the $2000.00 declared value. The cool thing was that the let me keep the parts. With the money I bought a new laptop (never gonna let them ship my box again!).

    Moral of the story is:

    A: If they broke something, keep all the packaging, keep all the receipts, and LOG ALL PHONE CALLS. Like any large organization they have a tendency to forget that you've called. Having a name of someone you talked to means accountability.

    B: ALWAYS ALWAYS ALWAYS let an authorized UPS shipping place pack your box. I can't emphasise this enough. If I packed it myself, the insurance tech would have just said "sorry". If someone else packs the box UPS can't claim it as "bad packaging".

    C: BACKUP before you ship. Fortunately for me, I had the insight to do that, and had the discs on my person. It may sound obvious, but software and data is NEVER insured.

    -=- SiKnight
  • I say you shouldn't have to buy insurance on a package in the FIRST place.

    If UPS were to insure packages themselves and without an "extra" charge, the result would be higher costs for shipping across the board and you have no say in the matter. You may not like it, but it's just a fact of business life.

    I see their offering of insurance as an OPTION as being a Good Thing (TM). It gives you, me, and everyone else the freedom to decide whether we want to pay the higher rate and have it insured, or pay the lower rate and not have it insured. What you're suggesting seems to be that they take away our choice as to whether to pay for insurance, and make a decision for us that we MUST pay for insurance every time we ship with UPS. That's not what I want to happen in my dealings with UPS, and I don't think most other people do, either.
  • Like we'd say when I worked shipping and receiving...


    (disclaimer: here in Brattleboro, Vermont, FedEx sucks worse and UPS has been pretty good. Not that I've tried to insure anything, mind you ;) )
  • Yes, using an offshore company to hold funds wasn't the problem. Some countries don't even tax foreign income. ;-)

    What the problem was, is UPS made the fatal flaw of owning the offshore company, which brought it back in under the jurisdiction of the United States.

    The technical term is 'alter ego.' (Companies are a legal entity, which can be used in lieu of an individual.) See Blacks Law Dictionary for more info.

    You are correct that tax-avoidance is not the same thing as tax-evasion.

    Remember, what does the name IRS stand for?

    Internal Revenue Service.

    Doesn't it seem logical that one could legally be external ?

    Here are two hints:

    If you read the IRS tax form, you will see notice it says "These rules also apply to nonresident aliens and dual-status aliens who were married to U.S. Citizens or residents at the end of 1999 and who have elected to be taxed as resident aliens."

    The Bill of Rights, Article XIV
    "All persons born or naturalized in the United States, and subject to the jurisidiction thereof, are citizens of the United States, and of the State wherein they reside."

    Email me at if you want more info.


  • ...

    UPS successfully pulls off biggest IPO in history. Money making lawsuit is filed. The American capitalist Legal system in action.

    from the article
    According to the lawsuit, UPS, registered as a corporation in Ohio and New York, acted illegally as an unlicensed insurance company, which seeks to invoke Ohio's Corrupt Activities Act.

    So they became their own insurance company. Good for them. They still covered you if your package got lost, they just did it in a different way. I wonder how much money they save in paperwork? Silly lawsuit, but still a good reason (like you need another one) to invest in FedEx (no association)
  • There is nothing phony about Bermudan Insurance companies. Many corporations form Bermudan reinsurance companies because the minimum capital necessary to form an Insurance company there is less than that required in the US.

    The Bermudan company was not the direct writer of the insurance. A company, licensed to do business in each of the states, was the direct writer. They reinsured the business to the Bermudan captive. The arrangement is perfectly legal.

    It does appear that they also used this offshore corporation to avoid US taxes. That is illegal, but it dosn't make the entire arrangement fradulent.
  • I wonder where all of /.'s radical capitalists are when a story like this comes on.

    Buying FedEx.
  • Moderators? New York Times?

  • by Wah ( 30840 ) on Friday November 19, 1999 @07:01PM (#1517711) Homepage Journal
    No,no,no he's buying 1000 $1.99 CDs, spraypainting LinuxOne on them, shipping 'em off to China (insured by UPS (wink,wink)), and going for an IPO.
  • by timothy ( 36799 ) on Friday November 19, 1999 @07:15PM (#1517712) Journal
    OK: Let's say that you want to ship a package via Timothy's Overnight Delivery. (Me ;) )

    If I take your insurance money and invest it in a lucrative (or even semi-lucrative) venture, but keep enough in reserve to pay you off if I damage your shipment, guess what? It means I can take less in premium for the same size potential payout than if that money were going to just sit still and do nothing.

    So if 5$ gets you $1000 worth of coverage (or whatever), from whatever carrier, the use the money's put to between when it leaves your hand (you're billed for the level of insurance coverage you select) to when you collect (in the event ot a mishap) is bookkeeping, one way or the other. If it doesn't affect your payout (as in, *all* of the money is invested and they won't compensate you for damage), I don't see what right you'd have to object.

    Take your logic just a step further - would you make the same demand about the shipping fee itself you make about the insurance money? (that is, that all the money you put toward shipping *must* be used for shipping expenses)? Well, UPS has advertising, marketing, brown shorts, brown paint, probably bribes in some places etc etc to pay in order to effect their shipping system as a whole. Not to mention computer systems. If they invest some of the insurance money, it just seems like good business, and hopefully allows them to trim certain more visible costs.

    just thoughts,


  • While their customer service people are delightful, Amazon's shipping people leave a little to be desired. They do not seem to understand that "USPS" is different from "UPS", which is a shame since my instructions to "send it via the US Postal Service, NEVER through UPS" get reduced to "USPS" and the idiots send it via UPS.

    I guess I wouldn't care either if I got paid as poorly as the average line worker, but still.

  • by Jeffrey Baker ( 6191 ) on Friday November 19, 1999 @02:48PM (#1517715)
    Here's why this is important. I'm sure others will add enlightening comments, also.

    UPS and its clones FedEx, DHL, and Airborne are absolutely key to the emerging economy. They are the third leg of the Internet commerce triad. The first leg is the connection between the consumer and the service provider or retailer. Today this is the web. The second leg is the information system at the retailer, including their web site and thier inventory system. The third leg is the delivery of the goods to the consumer. That is where UPS comes in.

    Note that this is basically the same model as mail order commerce, just with a different transport for the first leg. Hence UPS is also vastly important in that sector.

    I think people underestimate the importance of UPS to the Internet. It is absolutely key. Certainly, it could be replaced by another delivery company, but the problem of trust still remains.


  • by webslacker ( 15723 ) on Friday November 19, 1999 @02:48PM (#1517716)
    Wait, where's my receipts? Hmm. $0.70 here, $1.20 there... Somehow I don't think I'll be participating in the class-action lawsuit.
  • by BradyB ( 52090 ) on Friday November 19, 1999 @02:49PM (#1517717) Homepage
    Seems like another group of people trying to make money off of the American legal system. Like an earlier post said if it gets there broke they will replace it. No one said the customer had to buy the insurance on the package. I don't think they push you into buying the insurance, so what if it is used off shore, isn't that legal? If it wasn't I don't think that they would have done it. This will probably fly so that others can make money in the future. I'm going to see Hostess because Twinkies(tm) made me fat. It's absolutly absurd and well that's my 1/2 cent.
  • by Guyle ( 79593 ) on Friday November 19, 1999 @02:50PM (#1517718) Homepage
    Just to start, I believe this story is perfect for Slashdot because I can probably say that good percentage of the Slashdot community has used UPS in some form or another during their lifetime. Anyway, I have one question for UPS: Have you lost your MINDS?? The money that people fork out to insure expensive parcels really adds up, because SO MANY people send stuff via UPS every day! People don't pay the money to finance some other operation - it's a guarantee that if their shipment doesn't make it in one piece, they'll be reimbursed.

    My mother is a clerk with the USPS - been working there almost as long as I've been alive. I've learned a lot about the mail system from her. They also have a similar insurance system for those who send valuables through US Mail. Well, a certain postmaster in a certain town decided they wanted to skim off money, so they took the money paid for insured shipments, didn't insure the items, used the cash to purchase USPS money orders, and flew. They was nailed, though, hardcore. This isn't too terribly different from what UPS is doing, except it's on a corporate level.

    Personally, I'd love to see UPS burn for doing that. The money I pay to insure parcels better go to insure the parcel, and nothing else. Fraud is not a light issue in any sense.
  • Good, a chance to strike back and get those
    4 dollars I deserve! How/where do I join the
    lawsuit. Is it class-action yet?
  • Well, that explains why my IPO shares are only at $65 (from the $50 IPO price). It seems to me the lawsuit might have more grounds IF it was a US company providing the insurance. Being that it isn't, many state regulations become meaningless in practice, due to the interpatria aspect of foreign countries.

    And are we saying that UPS "created" this company or that, after doing business with this company, they decided to buy a controlling interest (aka Controlling a Vertical Industry) so as to gain more control over their business?

  • lhama
  • by Anonymous Coward
    UPS circumvents the insurance problem by calling it a "declared value." When you ship a package it is automatically given a value of up to $100. You can pay a surcharge to have the package declared at a higher value, but this is NOT insurance. The extra you may is in the event of damage caused by UPSs negligence then you can claim up to that amount.
    If you build a PC and send it to a relative in that corrugated box you got with the case and the PC ends up damaged, you will NOT be able to claim because it's considered improper packaging.
    If you build a PC and send it to a relative with a double-box, two inches of packaging between the component and box wall, and it ends up damaged because it was thrown from a conveyor belt unto the back of the package car, you will often NOT be able to claim because UPS will say that there's no visible damage to the box, even though all your components are jarred loose.
    In the event that you receive a package from UPS and it ends up damaged it's best if your refused it outright. Failing that, keep all packaging and call immediately.
  • The whole idea of insurance is that you are paying someone to accept risk that you would rather not bear yourself. If you pay UPS to assume some extra risk beyond what is covered by their normal delivery contract, who cares whether they pass the risk on to someone else-- an insurance company-- or assume it themselves? So long as they pay off legitimate claims, it seems like they should be in the clear on this. Their actual intake/payout seems to say that their service in assuming risk is over-priced, but we are free to assume the risk ourselves or lay it off to some other party. The story of the scamming postal clerk is a different thing entirely. He was skimming from his employer. The money that the USPS received for assuming the risk of loss and damage was being diverted to his pocket and the case is no different than if he had tucked some stamp money in his socks.
  • I havn't insured anything over $100, or insured ANYthing so it doesn't effect me but I think my parnets have. UPS can suck my balls, lying sons of bitches. *cough* sorry bout that when I find out I (or anyone in my family) is getting screwed I get pissed. I always use these guys to ship / get shipments... well, no more. I think my point is: UPS go to hell.

    If you think you know what the hell is really going on you're probably full of shit.
  • Seriously though, look at the numbers on the link " 1984, UPS billed its customers $99.8 million for insurance and paid out claims of about $22 million." which is a large profit margin!

    I have some news for you, my friend. No insurance company is in the game for the sake of "taking care of you and your family" or any such happy, smiley-faced crap that they fill their advertisements with. They're in it for making money. Period. If an insurance company charged equal to what it really cost them to insure their customers, they wouldn't be around for very long.

    Yes, it is a large profit margin. I don't know how it compares to, say, auto insurance, life insurance, or home insurance but I'm sure those folks are raking in a hefty profit, as well.

    Now I don't think that in principle this amounts to insurance fraud. The plaintiffs seem to be claiming that since UPS wasn't legally able to provide insurance, that the money it collected from its customers was fradulently collected. Never mind that UPS actually did come through and pay people for broken packages (as far as how well they did so is another story altogether).

    And what is the solution to this "fraud" problem? Of course! What else? Take 14 BILLION dollars (or 42 billion, even) away from UPS and give it to the plaintiffs and their greedy, scum-sucking lawyers. Never mind that it will cost you, me, and everyone else who uses UPS in terms of higher shipping rates. Who cares about that! All that matters here is that this problem of "fraud" be solved.
  • If an insurance company charged equal to what it really cost them to insure their customers, they wouldn't be around for very long.

    This is incorrect. Auto insurance companies, on average, pay OUT about 101% of what they receive through premiums. Where does the profit come from? Investing the money you pay in premiums. That's why they make you pay all sorts of fees if you decide to go with a monthly plan - to make up for the money they won't make by investing your premium up front. (This is true for auto insurance, I don't know about other lines.)

  • I disagree, and here's why:

    Take your package and RAM IT UP YER ASS
    The majority of the packages sent through ups are too large to be "rammed" up anyone's ass. To do this would be painful at best, and not worth saving a couple of bucks with shipping.

    then bend over and BLOW IT OUT YER ASS facing the package's destination
    The idea that an object can be blown out of anyones ass with anything close to a high velocity is an urban myth at best.

    . It will arrive very quickly. Same day air.
    Only if your sending it directly below your ass.
    sorry i had to burst your bubble.
  • by Royster ( 16042 ) on Friday November 19, 1999 @05:52PM (#1517729) Homepage
    Personally, when I say my money is going to
    insure a package, then I expect it to go insure a package.

    Didn't you get the insurance? You've got the coverage, you saw the premium before you chose to send the package. You must have thought the premium reasonable or else you wouldn't have paid for it.

    You've never been overcharged for insurance? I guess you don't buy much insurance. Have you ever bought an extended warranty? Have you ever bought credit insurance? Have you ever bought insurance in connection with a rental car?

    Whenever you are in a situation where you don't have a choice of insurer, you *will be* overcharged. It's just like walking up to a random pay phone and making a credit card call by dialing 0.

    In a free market, you have the choice to take or decline the insurance or to use a different carrier.

    I wonder where all of /.'s radical capitalists are when a story like this comes on.
  • by Anonymous Coward
    I worked there too :). TSG (Technology Support Group) for several years. Did a few months in operations as a P/T belt supervisor on the preload too. I have some OPL stock purchased through payroll deduction and will probably hang on to it.
    Bringing it back on topic, as a TSG tech I had to do lots of inspections. Many were legitimate but there was a very strong pressure to approve as little as possible. We had many reports showing how much was "saved" on denied computer claims versus the previous method of the Account Executives pretty much approving all computer claims.
    As a technician it was really aggravating because I would sometimes have to approve claims that were clearly false. Someone once claimed $3,000 for a '286 system (price she paid for it) and it was eventually approved (became a customer concern, the division manager got yelled at, etc..) At the same time, there were times when I had to deny claims that I felt should have been approved. E.g., someone neglects to declare for more than $100 and gets a nice fat $100 check for his $2,500 system.
  • I receive more packages than I like through UPS. At least the Grid-Dip Meter* I have on it's way right now (I hope the guy has shipped it) is coming by USPS.

    I have seen UPS as the "Microsoft" of parcel delivery services for years. They have extremely low quality-of-service. They recently (in the last several years) started refusing cash for COD parcels picked up at the will-call desk. They're big, they're stupid, and they've not been doing a good job. And we depend on them for a lot of tech stuff ordered over the net. will be hurting if UPS is damaged by this issue.

    * (uber-geek item most 'geeks' wouldn't know how to use)
  • It looks quite possible that there was an actual fraud, namely a tax evasion scheme against the US government whereby UPS funnelled funds to Bermuda likely avoiding US taxation on such funds.
    A Tax Court judge ruled that UPS set up a Bermuda-based corporation as an insurance company to avoid paying income taxes. The judge found that UPS must pay taxes on the money sent to the Bermuda company.
    That means that the Tax Court considered that they owed the IRS some money.

    The connection to the customers, on the other hand, seems rather more tenuous. Reading the article, it indicates that

    the company was self-insured

    The notion of "self-insurance" is quite common for extremely huge organizations where they figure that they have such a huge number of potential sources of claims that it makes sense to keep the insurance money and pay the costs of claims as they come up.

    For instance, it is reasonably possible that IBM doesn't insure their buildings against fire damage. If they did, they might pay $100M per year for the insurance, and with the diversity of their real estate holdings, they might find that paying for fire repairs out of their own pockets would only cost $70M. Note, that means that it's cheaper for them to pay for repairs after some big fires.

    Similarly, my own employer requires that if employees rent cars when travelling that we not pay LDW insurance; that costs $15-odd dollars per day, and with 120,000 of us, that can add up to Rather A Lot. It's cheaper for them to "self-insure," salting away some portion of the $15/day, and paying collision repairs directly on those occasions when accidents happen.

    UPS appears to have been doing the same thing; they kept the "insurance" fees and paid for losses when losses were incurred.

    It appears that once the case hit the tax court, lean and hungry lawyers noticed the case, and perhaps decided that they could probably confuse a jury into believing that self insurance is effectively a way lf "defrauding consumers."

  • by Anonymous Coward on Friday November 19, 1999 @08:14PM (#1517738)
    I work on the part time midnight shift at one of the major UPS hubs. Since I only work as a package handler, I haven't quite figured out the whole system yet, but I do see how packages are handled, and what shocks me the most is the fact that packages make it through the system in as good of condition that they do. Packages are frequently thrown, kicked, dropped, spilled, knocked open. Every location in the building has several rolls of tape handy to tape up boxes that open up.

    Part of this is certainly related to how they are handled. Boxes obviously containing computers are thrown several feet and land harshly on a conveyor belt. Imagine picking up your computer and your monitor and throwing them as hard as you can against the wall. This happens... hundreds of times a night. Any item shipped through UPS will probably be handled at least 8 to 10 times, and each time it will go through the same level of treatment.

    To compound the problem, customers don't bother, for whatever reason, to properly pack their packages. Any box you ship through the UPS system should be able to handle several hundred pounds of weight without crushing it. Dont' send a half empty box through the system. You'll get a huge wad of tape at the other end. Don't put something that is fragile, mark it as fragile, then put it in a thin cardboard container and expect it to survive the shipment. It won't. Expect that anything you ship may be dropped from 8 feet off the ground and land on a concrete surface. Expect this to happen at least 3-4 times before it reaches its destination. Package accordingly.

    If something absolutely MUST make the trip intact, there are some things you can do to increase the odds of success. There are 2 main categories of packages. Regular packages which get thrown on the conveyor belts, and Irregs, short for Irregulars, which are defined as one of the following:

    - Anything over 70 pounds.
    - Anything longer than 6 feet.
    - Anything wider than your arm.
    - Anything in a non-typical container that is too large to fit into a totebox. Tote boxes are about 2'x2'.

    If your item complies as an Irreg, it will not go on the conveyor belts and will be handled separately. The safest way to ship something fragile is to encase it in a regular box, fill that box with an excessive amount of peanuts, excessively tape the box, then enclose the entire box inside a wooden structure that 3 people can stand on without breaking. This means that your package wont' get crushed, punctured, thrown (too damn heavy) or dropped (won't get far off the ground). This WILL cost more due to the extra weight, but your package will make it.

    I know, that sounded excessive. But I see a LOT of packages packed this way, and they make it intact. Another way to prevent problems is don't put a whole bunch of small boxes inside one larger box, then leave a lot of empty room inside the large box. This has to be the most idiotic thing I have ever seen. You end up with a box that is too heavy to go on the belts, so it gets handled separately, but since its so heavy , it ends up on the bottom of the pile, so it gets crushed and torn, and eventually the items inside the box might get separated and God only knows what might happen to them then.

    Another thing you might wish to consider is the fact that some packages leak. A lot of liquids get sent through UPS in one fashion or another. We have paint, ink, chemicals, lubricants, bull sperm (no, I'm not kidding), and many other mystery liquids in various containers, some more sturdy than others. Sometimes these things leak. Enclosing your items inside a plastic bag INSIDE the box isn't bad idea to safeguard against this.

    Tracking of packages is also an interesting art. Packages get scanned everytime they get loaded or delivered, and sometimes when they're sorted. Customers use this to find out where their packages are. Customer service uses this to help find lost packages, security uses this to track possible thefts, sorters use this to make sure the sorter actually LOOKS at the label to make sure its going to the right place, and loaders do it because one of the above told them they had to.
    Nevertheless, many packages don't get scanned at every point, and laziness is usually the reason. Tracking should be used only as a guide, but not for anything specific.

    As for insurance, which is the topic of this whole discussion after all, I don't really know if this game should be considered fraud or just an elaborate loophole. As far as I'm concerned, if the company they do their insurance through is licensed, then they have that ground covered even if UPS itself indirectly owns the insurance company. And if taxes were incorrectly assessed, well, thats a different issue, but I don't think it affects how people were charged or overcharged for insurance. Insurance is a voluntary thing. Its a gamble. Pay a little or risk losing your package. If UPS doesn't honor its insurance claims, then that too is another issue, but if you ship a package, pay insurance on it, the package arrives intact, then you have nothing further to argue. Just be happy it made it in good condition, believe me, its one lucky package. :)

    -Normally not anonymous, but who knows who's watching.
  • I'm still not entirely sure what it is they say UPS did that was wrong (although I've always thought it was silly to have to pay extra to have a shipping company pay me if THEY break my stuff).

    What I don't get is how the plaintiffs think they were defrauded. They pay the cash, if UPS damages their package, UPS reimburses them. It seems straight forward. If UPS bought a Bermuda company, they insurance was still payed out.

    But......$42 billion (the figure if it becomes a class action suit) for 20 customers? If UPS took in $100 million (as they did in '84) in insurance every year for 16 years, that's just 1.6 billion for ALL UPS CUSTOMERS! How do they figure UPS should have to pay $42 billion to 20 of them. (BTW there's a Bill Gates joke in here somewhere, but I can't quite think of it...)

  • A co-worker of mine has a second job at the Philadelphia UPS hub. (we work for an academic institution, so we tend to collect side jobs). She says that breakage is a regular thing. Re-packing into other boxes, or slapping some tape on the side and claiming that it arrived that way is standard operating procedure. Which is a bummer, because that means one fewer reliable shipper. But after talking to her, I'm never shipping anything irreplacable via UPS.

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