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Something you shipped or received lost or damaged?  Don’t panic.  File a claim.  Then take action to prevent it from happening again.

click1Damage is an unfortunate consequence of transporting goods.  Carriers do much to prevent loss and damage from happening.  Unfortunately, they also do much to keep from paying claims when damage occurs.  If they don’t pay it is because they have determined they are not at fault…such as a shipper not doing enough to prevent it from happening (eg. packaging).   While technically it is up to the carrier to prove it is not liable for loss, from a practical sense it is often up to the shipper to prove the carrier is liable.

Here are some tips to do in the event of damage or loss:

Report and Retain
Make sure the carrier knows that the product has been damaged.   And don’t mess with the “evidence.”

Inspect Upon Arrival…and before signing..
Count and Inspect the goods thoroughly. before signing the carrier’s receipt.  Open the cartons if necessary.  Check the top and bottom, not just the sides.  Mark down specifically the pieces lost or damaged on the delivery receipt.  Don’t let a driver tell you otherwise.  The chances of getting a claim paid

Report concealed loss or damage
If you detect loss or damage or damage after delivery, report it to the carrier immediately.  Call first and note the date and time and with whom you spoke.  Then follow-it up to them via fax.  The phone number is located on the delivery receipt.  Then you might want to notify the shipper.  Time limits vary by carrier (check their rules…usually found on their website).  But understand that the longer you wait the less your chances are to recover. 

Be careful if you refuse the shipment
Do not refuse unless you are absolutely sure you do not own the product.  Just because you haven’t taken possession of the product doesn’t mean you don’t own it.  Sellers and buyers should confer in advance to determine the FOB point (where title transfers).    In any case, don’t just ignore the situation.  If the shipment is refused and neither you nor the shipper accept it, they can charge storage, and if unclaimed they sell it to cover those charges (and it is almost always for a fraction of the actual value). 

Retain packaging material
The carrier has a right to inspect the product.  How a shipment is packaged may need to be as part of an inspection to help them determine their liability.  If you can, leave the product in the box just as it was when you detected the damage..  If you throw it away you are inviting the carrier to deny liability.    If you can’t retain it, take lots of photographs and provide them to the carrier.

Retain the product
The carrier has the right to the product in the event they accept liability and pay the claim for the full value of the product.  If the product is damaged to a total loss (absolute no value to anyone…even the scrap man), get a written release from the carrier.   Retain the product until the claim has been fully settled .  If this product is usuable and you have a willing buyer, notify the carrier immediately and ask them to agree to the deal if you are going to get less than  full value.  If you don’t do this, the carrier may be able to absolve itself from liability.

File the claim with the Carrier
Claims must be filed timely.  You must also be diligent in your follow-up or it might not get paid

Know the carrier’s rules
It is very important to read the carrier’s rules.  You will find them on their website.  If they don’t post the rules on their webstite, ask them for a copy of their rules (aka “tariff”),. There are many important things in that you will need to know, such as the procedures you are required to follow, deadlines for reporting damage and filing claims, and most importantly their maximum liability.  It is sometimes hard to understand.  But make sure you are familiar.

Determine the appropriate value to claim.
Generally the maximum value you can claim is the value of the product, less any salvage value.  Carriers generally won’t honor additional freight charges (such as expediting a new piece).  Additiionally, the claimant must take action to mitigate the carrier’s liability.  This means if the product has a dent in it, but it is otherwise functional you are not entitled to the full value of the product… even if it is of no further use to you.  Your best hope is for some sort of settlement  that provides  partial value,.  You can bolster your position by getting a repair estimates or two, or get a couple of purchase offering bids in writing. If the product involves a total loss (due to either loss or value), use the guideline that the value of the product is equal to the last invoice in the chain of shipping.  For example, if you are selling the product but having it picked up to deliver directly to another customer, you can use the value on the invoice you sent to the customer receiving the freight.  If you are having it delivered to your warehouse you should use the vendor’s invoice value.  There are some deviations.  Freight charges can be included in the claim value only if the product is purchased FOB shipping point.

Pay the freight Invoice
Most carriers will not pay a claim until the freight charges are paid.  It is necessary because it means you have paid for the service, but not received it.

Know the Carrier’s maximum value
Virtually all carrier’s have a maximum liability.  It is outlined in their rules (“tariffs”), or in some other contract for transportation.  For LTL shipments moving under terms of the NMFC (includes most LTL carriers) Some values are determined by the freight class.  For instance computer equipment’s classification is determined by the released value declared on the Bill of Lading, and the freight class to which it correspondends.   For Truckload carriers it is usually a maximum per truckload.  For air carriers, parcel carriers and household movers the value is very low, but you can purchase additional coverage by declaring a higher value in advance.  Remember though, it is not like life insurance.  Just because you declare a value, you aren’t necessarily entitled to that value if it is lost or damage; only the amount of the loss.

There are some products for which a carrier will assume no liability, such as currency.  The carrier will have a list in their tariff.

Follow the carrier’s filing procedures
Each carrier has it’s own policies on what constitutes a claim.  But understand that a claim is a legal demand for payment because the carrier has failed to perform its obligation as outlined in the contract for carriage (usually the Bill of Lading).  You are taking legal action, and in addition to the carrier’s rules, there are laws and legal precedents that determine liability, and the extent of liability.

Generally the claim is filed using a claim form.  The carrier will usually be able to provide you with one.   However you are not necessarily required to use their form.  Most larger LTL and parcel carriers have tools on their website that allow you to file the claim online.  Unless you are a professional claims manager, it is to your advantage to use their forms or online tools because it covers all the information they require.

If you want to use your own form, it must convey enough information for the investigator to know who is filing the claim against whom, why and for how much.

  • Copy of the original bill-of lading
  • Copy of the signed delivery receipt
  • Copy of any inspection forms
  • Any other supporting documents that might help your case

Submit the claim timely
The claim can be submitted by fax, but should ideally be sent via certified mail (to prove they received it).  Keep a copy of he claim and supporting documents for yourself.  Mail the claim to the address stated in the carrier’s rules tariff or website.  If you are filing using the carrier’s web tools, you don’t necessarily need to mail it (check their rules), but be sure to keep copies for yourself of the on-line receipt.

The amount of time you have to file a claim varies by carrier, but usually it is about 9 months.

Follow-Up and Follow Through
Keep track of the claim date and follow-up

Be prepared to wait.  Be prepared to prove.  Be prepared to be flexible.  The claims process does not move quickly.  It can sometimes take years to get a claim settled.     By law a carrier has a legal obligation to acknowledge a claim within 30 days.  From there it depends upon the complexity of the claim….and the carrier’s policy towards investigation and settlement.   Most open-and-shut cases are fully settled within 60 days. Others can take much, much longer, and some additional information.

A total loss of product while in transit is generally considered an open and shut case. If you have a concealed damage it can take months.  Assume that the carrier will decline the claim stating that the clear delivery receipt is proof that they fulfilled their obligation.  While legally they might not be, from a practical standpoint it then becomes your obligation that the loss could not have happened anytime except while in transit. 

If the claim involves damage (concealed or noted), the carrier may decline liability because of inadequate packaging.  If they do, the burden falls on the claimant to prove the damage did not occur as a result of inadequate packaging.  The carrier has the upper hand in these situations, because there are very specific rules regarding what is deemed to be adequate packaging. 
If you have a damage involving a Full Truckload and you loaded it, the carrier will likely decline liability based upon the rules that it is the shipper’s responsibility to properly load the truck. 

If the loss or damage is due to a natural disaster or similar event, (such as high winds or a snowstorm), the carrier will likely decline it based upon “act of God”.

If the loss or damage occurred by the action of the government (eg. product damaged during a customs inspection) the carrier will likely decline the claim for government action. 

Be Sure to Follow Up
As you can see there are many reasons why a carrier will decline a claim.  Most of the time the delays are due to requests for more information such as providing substantiating evidence.  In any case if they do request more information, don’t expect them to ask twice.  The burden is on you to follow up.  The best thing you can do is check on the claim every few weeks (following the first 30 days after you have filed it).  And if they are requesting more information, get it to them immediately.

Determining Whether to Settle and For How Much
That is a big question, with no easy answer.  If the carrier refuses to accept anything less than full liability for your claim, make sure you understand what they are basing this on.  If they refer to a rule, go back and review and see where they might be misunderstanding (or you might be misunderstanding). 

If they are offering a partial settlement, you don’t have to accept their offer.  But consider their offer against the extent to which they might be liable and the value of your time, and the potential cost for legal litigation.  A settlement can go back and forth several times and drag out for several months…maybe even years. 

How long you have to file suit depends upon the mode of transportation involved, and the corresponding US Code to which it applies.  For example the Carmack Amendment covers truck transportation and it allows 2 years and 1 day.  Some other modes it is less.  The calendar starts ticking the date the carrier declines the claim.

The fact is the overwhelming number of legitimate claims are paid in full in a timely manner.  Another fact is that most claims are legitimately declined.  In between, there is lots of room for negotiation, and if there is some liability on the part of the carrier, they are usually willing to settle.  For LTL carriers they follow different formulas.  One of the most common practices on concealed loss and damage is the “offer of thirds”.  It is based upon the assumption that the shipper, consignee and carrier all share the liability equally.  Thus the carrier offers 1/3 of the carrier’s maximum liability.

Go to their insurance company

  • Prevent
  • Make sure you have a copy of the insurance
  • Packaging
  • Mark handling requirements on the BOL, and on the packages
  • Use the correct freight class
  • Mark the BOL correctly (released value)
  • Choose the right carrier
  • Make sure the product is covered (extraordinary value)