Everything You Need to Know About Freight Claims

Everything You Need to Know About Freight Claims

Types of Freight Claims

Starting with the basics, there are four main types of freight claims you are likely to encounter:

  1. Damage- This is one of the more common forms of freight claims. This is when you receive freight with damage that is visible upon delivery.
  2. Loss- This type of freight claim occurs when freight is lost in transit — the cargo was picked up but never delivered.
  3. Shortage- A shortage occurs when you only receive part of the freight you were expecting. Product could have fallen out or pieces have gone missing.
  4. Concealed- When loss or damage is discovered after delivery and reported to the carrier after the driver leaves, it is considered concealed.

The Carmack Amendment

Another fundamental piece of understanding freight claims is the Carmack Amendment. This Federal Law addresses the issue of liability between shippers and carriers. Under the Carmack Amendment, the carrier has strict liability for cargo that is in “its care, custody, and control”.

However, the claimant needs to establish three basic elements in order to meet their burden of proof. The claimant must establish that the goods were:

  1. Picked up in good condition.
  2. Delivered in damaged condition.
  3. Resulted in a specific amount of damage.

Once the claimant is able to prove that these requirements were met, the carrier is held liable unless it proves that it was not negligent as a result of these five exceptions:

  1. Acts of God: This is an occurrence that happens without the intervention of man. This includes natural disasters and unpredictable events like if the driver experiences a medical emergency, or if a flood prevents the truck from reaching its destination. It’s important to note that if the carrier could have taken reasonable protective action against one of these events and did not, they may still be found liable.
  2. Public Enemy: If damage is caused by enemy military forces, the carrier cannot be held liable. This includes acts during wartime. It does not include hijackers, criminals, or rioters.
  3. 3. Act or Default of Shipper: As a shipper, this is an important exception to note. If the carrier can prove that the damage was caused by the shipper, including poor packaging or improper loading, the exception is met and the carrier will not be liable.
  4. Public Authority: This refers to the intervention of a lawful authority. If the government is responsible for the freight damage, the carrier cannot be held liable. This includes government actions such as trade embargoes, recalls, quarantines, etc.
  5. The Inherent Vice or Nature of the Goods: For goods that are naturally subject to defects, diseases, or decay, the carrier can deny liability as long as they prove the deterioration wasn’t caused by its negligence. The natural shrinkage or deterioration of a product is something that a carrier cannot control. However, if the carrier’s own negligence leads to speeding up that natural process, the carrier will be held liable.

Even if these exceptions are not met and the carrier isn’t able to prove it wasn’t negligent, there are still a few roadblocks to look out for. The Carmack Amendment only requires that carriers are liable but their liability may be limited. Therefore, if your freight has a higher value than the carriers stated coverage, you may find yourself underinsured.

The Difference Between Insurance and Liability

Carriers are bound by Federal Law to provide cargo insurance coverage for every shipment that they transport. While each shipment transported by common carriers is insured, many carriers have limited their liability in the event that there is a cargo claim.

Carriers will generally establish their cargo coverage as a set dollar amount per pound, or per package, of the cargo being transported, and their liability may also be determined by the commodity that you are shipping.

Establishing carrier liability is essential to recovering on a cargo claim and requires that the shipper is able to prove that the freight was:

  1. Tendered to the carrier in good condition and that the freight was packaged appropriately
  2. Damaged or lost in transit while in the “care, custody, and control” of the carrier.

Once that has been established, it is then the carriers opportunity to try to prove that they were somehow not negligent and that one of the exceptions under the Carmack Amendment applies.

Supplemental insurance can be obtained and will pay the difference between the cargo insurance coverage provided by the carrier, who is the primary insurer of the goods in transit, and the actual loss incurred by the claimant.

It is important to understand that carrier liability must be established by the claimant for both the primary insurer (the motor carrier) and the supplemental insurance provider to offer a claim settlement for loss or damage that incurred in transit.

Properly Packaging Your Shipment

Preventing loss and damages starts with proper packaging. Shipments must be properly packaged to ensure damage-free transportation. While there are many nuances to the different items that may be shipped, use common sense when packing your specific commodity.

You wouldn’t package ball-bearings the same as you would package glassware. Feel free to consult with a packaging specialist and don’t be afraid to spend an extra couple of dollars on packaging to ensure you’re not spending more after the fact.

If you are palletizing your shipment, the pallet will give the shipment a solid base to sit on and make moving the product on and off the truck easy and safe. When stacking your pallet, be sure your items sit squarely on the skid with no overhang. The weight should be evenly distributed with heavier boxes on the bottom, and packages stacked as closely together as possible. Make sure that the top surface is as flat as possible and secure cartons to the skid with banding or stretch-wrap.

Proper Labeling

Your freight also needs to be labeled appropriately and it should be easy to identify. Always follow these guidelines:

  1. Remove or completely cover old labels.
  2. Place labels on each box and each side of the overall shipment.
  3. Do not place labels over a seam or closure on top of sealing tape.
  4. Indicate the content’s ability to withstand added weight.
  5. Place a duplicate form of address information inside the container for added protection.
  6. Include a full return address

Best Practices for Receiving Freight

  1. Inspect your freight immediately upon delivery. Before you sign the delivery receipt, you’ll want to count your boxes and check closely for any damages. Make sure to clearly state the specific condition that your product was received in on the delivery receipt.
  2. Document any damages or shortage- If you do find damages or a shortage in your shipment, it’s important to document them. Take pictures of the damaged products and notate any damages or shortages on the delivery receipt. Be as specific as possible and note each of the identified issues.

Be sure to use notations such as “boxes were crushed, wet, opened, punctured,” … “stretch wrap was not intact, pallets broken down…”

Writing “subject to inspection, count, verification…” doesn’t protect you in the case of a claim, so don’t skip this important step. Take the time to make sure everything is counted and looks to be in good condition while in the presence of the driver.

  1. Save your damaged freight and the packaging- Even if you document your damages, the carrier may want to send an inspector to your location to inspect the shipment. Be sure to save your freight and all of the packaging in case this situation arises.
  2. Pay your freight charges- It may seem unfair, but paying your freight charges without delay for a damaged shipment is essential. It you refuse to pay the freight charges, it could hold up the resolution of your claim.

Filing a Claim

The first rule for filing claims is to do so as soon as possible. You typically have 9 months from the delivery date, or expected delivery date, to file a claim. If your delivery receipt is not noted as damaged or short, you only have 5 day to report to the carrier that you have discovered a problem with a particular delivery.

Here’s what you’ll need to file the claim:

  1. The original Bill of Lading (BOL)
  2. Proof of Delivery (POD)
  3. Freight bill
  4. Invoice or repair bill substantiating the value of the lost or damaged merchandise
  5. Pictures of the damaged freight (if you have them)

The carrier should acknowledge the receipt of the claim and assign its’ claim number within 30 days of receiving it according to D.O.T. regulations. Every situation is different and the time required for resolving the claim may vary, but the claim should be paid, compromised, or disallowed within 120 days.

If your claim is denied, you have the right to file a lawsuit against the carrier. Should you choose to go this route, you will need to file within 2 years and one day from the date the carrier disallowed the claim. There are some exceptions to look out for which may require you to file sooner. It’s best to file as soon as possible to avoid any potential issues.

Common Reasons Your Claim May be Denied

  1. There is an issue with your documentation. You may be missing some essential paperwork (like the invoice, etc.) or the paperwork contains an error. Luckily, in this case you can re-open the file by submitting the correct paperwork.
  1. You didn’t mitigate the damage. You may not meet the measure of damage set by the carrier’s limit of liability. As the claimant, you are responsible for mitigating the damage within a reasonable amount by having the item repaired or selling it at a discount, for example. If mitigation is not possible, you can submit an explanation as to why it is not feasible.
  1. Your proof of delivery didn’t have any notation of loss or damage. This is why it’s incredibly important to inspect your freight upon delivery and to notate any damages on the delivery receipt. Also, check the inside contents as soon as possible to identify any concealed damage.
  1. Your shipment was not packaged properly. This may be the most common defense raised by carriers. If the shipper does not meet the packaging standards for a particular commodity, the carrier will do everything in its power to prove that it is not responsible.
  1. You didn’t list a piece count. If you ship something that is short a piece, but you only listed the number of pallets, you could be out of luck. Since there was no documentation of the pieces you’re missing existing in the first place, proving loss becomes much more difficult.

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