If CO delivered the bag to the bag claim at EWR, they may claim they are not responsibile if another passengr left with it. After all, technically, CO didn't "lose" or misdeliver the bag. Their baggage policy states "Continental's liability is for any form of damage as a result of loss, damage or delay in delivery of customer's personal property....."

I don't see how CO delayed , damaged or lost this bag.

Let us know how this turns out.