The majority of shipments are picked-up and delivered on-time and intact, but knowing what to do when you need to file a freight claim is critically important.
How to Minimize or Avoid Freight Claims
Choose quality over price when selecting a carrier
Sourcing a carrier based on price over quality of service could result in a lot of pain. If you’re shipping products regularly, do your research to get the highest level of safety and quality standards. Find out what others are saying about their experience with specific carriers. Do this on the front-end and it can really save you a lot of time and trouble.
Package your shipments properly
Proper packaging is critical to preventing cargo damage. If you’re packing items in boxes, make sure your commodity doesn’t exceed the weight limitations of the box. Select a proper box size that allows your item(s) to fit securely inside without excessive empty space. Ensure your product is protected by an appropriate inner packaging material and is stacked on proper sized pallets and shrink wrapped. If items are shipped loose the possibility of damage increases exponentially so make sure to package your items to withstand motor freight transport. Also, it’s important to note that freight claims can’t be filed on packaging damage alone. The purpose of packaging is to protect your goods from damage.
Label your shipments
To prevent cargo loss, make sure your delivery and return address information is listed clearly and accurately on your shipment. Labels and stickers should be positioned where they can be clearly seen and all former labels need to be removed or covered.
What to do if damage occurs
When receiving a shipment, be sure to take your time examining the delivery and paperwork. Using the Bill of Lading (BOL) and delivery receipt, verify delivery address, shipment information, item count on the BOL compared to the quantity being delivered, and inspect the condition of the shipment. If you identify any damage or discrepancies, follow the below tips.
Record specific damage and/or loss details on the delivery receipt
The delivery receipt is a legally-binding document. You must notate all damages, shortages or evidence of pilferage to cartons and containers on the delivery receipt and Bill of Lading (BOL) prior to signing. If a shipment is accepted without exception (i.e., the receiver doesn’t note specific information about what is damaged and/or shorted on the delivery receipt at the time of delivery), then a freight claim will be considered “concealed,” and nearly impossible to resolve in your favor. All damage and loss notation must be clear and specific. Phrases such as “subject to count/inspection,” “potential damage,” and “subject to review,” will not be considered an exception. It’s strongly recommended to take pictures of the damage for documentation purposes.
Retain the freight at either the shipper or consignee location, not the carrier
Before the carrier resolves a freight claim, they will want the shipper or consignee to retain the goods. If the consignee cannot keep the products, then the shipper must ask the carrier to return the shipment. Please understand that a claim cannot be resolved while the carrier is in possession of the goods. Also, keep in mind that the carrier will charge you storage fees if it holds the shipment until either the shipper or receiver takes possession of the goods. Lastly do not dispose of the goods prior to claim resolution or the carrier will decline your claim.
Ask the carrier to inspect the damaged freight
Once the shipper or consignee retains the freight, ask the carrier to inspect the goods. Most carriers will only investigate if the damage is greater than $500 and in some cases may waive their right to inspection. Nonetheless, still make the request. Having the shipment inspected before you submit the claim can help expedite resolution time.
Gather documentation to support your freight claim
By law, you must provide three pieces of evidence to support your claim:
- Proof the goods (pictures) were in good condition when shipped.
- Proof the goods were damaged (noted damage on delivery receipt and pictures) when delivered (or weren’t delivered at all).
- Supporting documentation for the value you are claiming as damaged/missing.
Make sure you complete the appropriate claim form, detailing every item you are claiming. Include quantity, weight, and value. Collect the invoice showing what your cost was (i.e., your vendor invoice or manufacturer invoice) and the sales invoice (i.e., indicating the amount for which you sold the goods). Also, provide pictures, packing list, signed BOL, and signed delivery receipt.
Pay your freight bill
If you don’t pay your freight bill the claim cannot be resolved. Throughout the claim process the freight bill remains valid—the invoice is not put on hold and isn’t voided automatically. If the carrier provides a legitimate declination on the freight claim they are still owed payment on the freight bill. If a claim is approved and carrier negligence is demonstrated the carrier won’t pay the claim if the freight bill remains outstanding.
Common Reasons Carriers Decline Claims
When presented with a claim a carrier must prove they were not negligent. The carrier may decline liability by using one of these five defenses outlined in the Carmack Amendment, a law created for uniformity in rules governing interstate shipping.
- Act of God – Hurricane, weather, driver sustains injury outside of control (i.e., stroke)
- Public enemy – terrorism, armed robbery
- Act, or default of the shipper
- Public Authority – the Government, vehicle impound
- Inherent vice or nature of the goods transported
It’s not often we see claims declined for reasons one, two or four. If a carrier does reject a claim, it’s usually for reason three or five. The following are the principal reasons carriers deny claims:
The carrier will deny the freight claim if the shipment wasn’t packaged according to industry standards, or if it couldn’t adequately protect the load.
The carrier cannot decline a claim because the receiver didn’t notate damages/shortage on the delivery receipt, but if no additional evidence can be provided to prove the carrier caused damages during transit, they will decline the claim. Typically, the carrier will only pay at most 33% of a concealed damage claim.
Carrier delivered precisely what they tendered
The only piece-count the carrier is liable for is the unitized pieces they pick up, not individual pieces found under shrink-wrap or within a crate. Regarding shortage claims, if the driver picks up one shrink-wrapped pallet and drops off one shrink-wrapped pallet, the contract is fulfilled. If the driver wasn’t present while the individual pieces under the shrink-wrap were counted and loaded, they aren’t liable for that piece count. Note: The driver will typically record the actual piece count when signing the BOL.
Tips for a Faster, More Efficient Freight Claim Experience
Give carriers time to investigate
Carriers have 120 days to investigate a claim. The National Motor Freight Traffic Association (NMFTA) also allots carriers additional 60-day blocks of time after the initial 150 days, if they haven’t reached a decision, as long as they provide written status updates.
Provide additional documentation or information if the carrier requests it
Throughout the process, there may be multiple people reviewing a claim, especially for high-value shipments. One person may spot something that another person missed and need information from you to properly investigate. These requests can come any time within the 150-day process, and the clock is paused when the carrier sends an inquiry. Sometimes, a phone call to the carrier is all that’s needed to clarify the inquiry.
Provide all necessary documents
It’s better to collect all the necessary documentation, inspect the goods first, and make sure this shipment is in the hands of the consignee or shipper prior to submitting your claim. You’ll save time by anticipating what the carrier may need during its investigation. Legally, a shipper has nine months from the date of delivery (pickup, if lost) to provide a formal cargo claim to the carrier.
Mitigate the claim
This is a fancy way of saying the shipper must: salvage, discount, or repair the commodity. If you can repair the item you are required to make the repair vs replacing the item. Carriers have rights to the salvage if they pay a claim.
Limits of Liability and All-Risk Cargo Insurance
Unless otherwise stated every LTL shipment will fall under the carrier’s limits of liability. The liability limits may be based on class/weight, product type, and whether the product is new or used (i.e., used is typically $0.10 per pound max). The carrier may pay per a general maximum liability (i.e., $15 per pound) or decline the claim entirely because the products are listed on their “restricted/excluded” list. Purchasing all-risk cargo insurance ensures you are covered at the invoiced value and not limited to carriers’ published tariffs.