The Basics of Freight Claims

Posted by Benjamin Meskin on Sep 26, 2019 4:46:50 PM
Benjamin Meskin

 

As a retailer, shipping valuable goods can be a hassle, and there are many things that can go wrong. There could be an accident with the semi, an infestation of bugs, or a weather event that water-logs your shipment for days. Freight insurance will protect you in most cases of damaged or lost freight, but not for all.

 

 

Freight claims, also known as shipping claims, are a legal demand that you be reimbursed for damaged goods. But it is not based on whether the carrier was negligent with your shipment. Instead, claims are filed and accepted due to breach of contract.

 

When a shipment doesn’t reach its destination, or is damaged when it arrives, it is an automatic breach of contract, and gives cause for the claim. Where national carriers claims get complicated is that there are different rules for different modes of transport, and many carriers offer very limited coverage. It helps to drive down costs, but it also limits their liability.

 

We’ll cover those exceptions here, as well as the most common reasons for a denial of your claim, and some tips to have a smoother freight claims process.

 

 

Types of Freight Claims

 

When cargo is damaged to the point that it can no longer be sold, it is cause for a claim to recover the costs of the product and the shipping- not including the cost of profits lost, though there are instances where this is considered applicable to the claim. However, be aware of the nuance between declared value end insured value.

 

In the case of damaged goods, you absolutely should file a claim. The net losses in profit for even $1,000 in damaged cargo is too great to ignore. This fact alone should prompt all shippers to understand their liabilities, rules, and exceptions with their shipping insurance.

 

The core business of even the smallest carrier is transportation, and therefore, processing claims is an integral part of their operation. For them, knowing the loopholes and exceptions for getting out of a claim is necessary. Carriers also make it easier for themselves by adding limitations. They’ll only ship certain kinds of merchandise, restrict which countries or states you can send to, and keep their coverage minimal.

 

For small to medium sized shippers, such as e-commerce retailers, it’s just another costly headache. To avoid this, know your claims, and know the process.

 

There are four types of claims you can file when you receive damaged goods:

 

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With these types of claims in mind, it might seem like you’ll be able to recover your entire loss if you do your due diligence. However, as previously mentioned, there are exceptions to the liability of the carrier. In most cases, the liability is implicit in the contract, but carriers of certain forms of transportation are protected by exceptions in what is known as the Carmack Amendment.

 

Reasons For Claim Denial

 

These exceptions in the Carmack Amendment and other filing issues lead many claims to be denied. Know them well, and you’ll be more likely to receive your full amount in reimbursement and endure a less hassling process.

 

Carmack Amendment Exceptions of Liability

 

There are five exceptions, also known as defenses, that can warrant a claim to be denied:

 

  • Act of God- hurricanes, floods, fires, tornados...
  • Act of public enemy- terrorism, or acts by hostile military entities
  • Act of public authority- if the government is the reason for damage due to road blocks, embargos, quarantines, or recalls
  • Act of the shipper- if damage is caused by negligence or act by the shipper
  • Inherent vice of product- when sending items that may spoil, decay, or be inherently susceptible to disease or other similar defects and was not shipped correctly to protect against this damage.

 

 

Delivery

 

If there is no damage noted upon delivery, which is often the case with concealed damage claims, there is cause for reasonable doubt by the carrier. Going back to the carrier after delivery without proof that the damage happened before it reached destination poses the consignee as the only observer of damage, which is why the goods you ship - even more so if they are as valuable as jewelry or electronics - should be properly insured. You should compare the cost of shipping insurance and levels of coverage offered by carriers and third-party providers to avoid nasty surprises in case of damage or loss.

 

Unpaid Charges

 

All charges must be paid in full before a claim can be settled and funds can be reimbursed. This laid out in industry guidelines by the NMFC.

 

Documentation

 

The NMFC also lays out requirements for documentation needed to file a claim. If these documents are not completed or have improper/ inadequate information, your claim will likely be denied. This is one of the most common reasons a claim is denied.

 

Mitigation

 

Shippers are responsible for reducing their own costs when it comes to filing a claim and recouping their losses. If your customer returned the item, you may be able to sell the damaged product at a reduced price, use it for scraps, or repair it.

 

 

Risk Mitigation: How To Reduce Your Chances of Loss/ Damage

 

 

To mitigate your losses, you should first do everything possible to ensure proper shipment. During packaging, make sure that cargo is shipped in proper containers, that there is proper cushioning, no punctures or other damage before shipment.

 

Proper packing is perhaps the most important aspect of a shipper’s liabilities and responsibilities, and extra attention here is the first step to mitigating your risk.

 

Shipping

 

Other ways to reduce your risk include proper shipment labeling. When it comes to labeling and accurate delivery, follow these guidelines:

  • All old labels should be removed or covered
  • Labels on top
  • Only contain one delivery address
  • Labels aren’t covering seams or sealing tape
  • Have a return address

 

Insurance

 

Some goods are generally excluded from coverage by carriers and some brokers. These include items such as jewelry, art, tobacco products, precious metals. The more valuable, fragile or hard to handle the cargo, the more it becomes necessary to purchase shipping insurance.

 

 

Filing a Freight Claim

 

 

If you encounter damage or loss and a claim is required, it is generally anticipated that the notification be granted to the carrier within 15 days. Claims must be filed within nine months. However, there are different deadlines for different carriers, transport modes, and states.

 

Steps to Take When Filing a Claim

 

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1. Immediately notify carrier of damage.


If damage is noticed upon receipt, it should be noted on the delivery receipt or proof of delivery documentation.

 

2. Gather proof of damage.

It must be proved that the product was shipped without damage and arrived with damage. You must also include the correct dollar amount of the loss. Again, know that the amount you get reimbursed may not be 100%

 

3. Documentation.
    1. Original purchase invoice
    2. Proof of payment
    3. Receipt and other recordings of the loss
    4. Estimates or the invoice of any repairs to the damaged goods
    5. Photos from time of delivery

 

It can take months to resolve a claim, but the more prepared you are, the quicker and more likely you are to recoup your losses.

 

 

Eliminate the Hassle with Multi-Carrier Shipping Insurance Software

 

Identify and analyze risks

Cabrella’s proprietary technology is designed to assist you in reducing shipping risk and gain business intelligence to improve your shipping strategy. Thanks to real-time reporting, you immediately benefit from valuable insights and receive important notifications, such as alerts for risky locations or carrier’s exceptions.

 

Our shipping insurance software also makes it easier for you to file a claim:

  • Less administrative headache with paperless filing
  • Less than 60-day processing if your shipments are insured with Cabrella, provided no investigation is necessary

 

Click the button below to see our software in action!

 

SEE OUR SOFTWARE

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