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The Importance of How to File a Freight Claim

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NOTE:  Like we said in class, we do not give legal advise, but here is an article that may explain claims.  

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The Importance of How to File a Freight Claim... It’s been said that the one area that most shippers are the least knowledgeable in is that of claims for freight loss and damage. However, this does not mean that an understanding of how to file a freight claim or freight claims in general aren’t vital to running an efficient transportation and logistics department.

 

1). Is financial. Unrecovered freight claims have a direct impact upon the bottom line of a company; and the tougher the economic times and thinner the margins the greater the impact. If your company operates at a 5 percent profit margin, to recoup the net revenues that would be lost by failing to recover a $1,000 freight claim, it would have to generate $20,000 in sales.

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2). Is the knowledge of freight claims and how to file a freight claim, is vital for shippers because they’re often on their own (unless they have a provider who can handle freight claims on behalf of the shipper) when it comes to claims. For carriers, whose core business is transportation, the processing of freight claims is an integral part of their business, and all but the smallest of carriers are quite knowledgeable and very competent when it comes to defending against claims vs. those shippers who still don’t know the first step in how to file a freight claim. For most retailers, manufacturers, and distributors, the transportation function is an unwanted headache….and freight claims represent a migraine.

However, just because something is difficult does not mean that it can be ignored.

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1).  How to File a Freight Claim: What is a Freight Claim.

The first point to know in how to file a freight claim is that a claim against a carrier is a legal demand for the payment of money arising from the breach of the contract of carriage (usually the bill of lading).

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Therefore, the rules governing the filing of claims are founded in law and must be followed strictly. If you remember from our first post, that law, known as the Carmack Amendment, is more specifically transportation law, Title 49, Code 14706. Freight claims are also governed by government regulations, whether intrastate or interstate commerce is involved. If an international movement is involved, the claim may also be governed by international treaties.  Claims rules will be found either in carriers’ tariffs or in their bills of lading, or both. Court decisions interpret these regulations, laws and tariffs, and determine the rights and obligations of the parties.  If a freight claim shipment was governed by a contract, the terms of that agreement will govern the carrier’s liability. Often contracts will adopt common carrier tariff rules, as described herein.

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2). How to File a Freight Claim: What Constitutes a Freight Claim?

No specific claim form is prescribed by law, but four elements are essential in the quest of how to file a freight claim:

     a). The freight shipment must be identified to enable the carrier to conduct an investigation;

     b). The type of loss or freight damage - must be stated and recorded;

     c). The amount of the freight claim must be stated or estimated and  a demand for payment by the carrier must be made.

The shipment identification information must include the carrier’s “Pro number,” shipper’s number, vehicle number, origin date, delivery date, and commodity description.

The claimant’s name must be either:

  1. The entity having title to the goods in transit;

  2. The entity assuming the risk of loss in transit; or

  3. An assignee of either 1) or 2).

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The carrier against whom the claim may be filed is either the originating carrier or the delivering carrier.

It is not recommended that claims be filed against intermediate connecting carriers, although it is permissible to do so if it is definitely known which carrier caused the loss or damage.

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The claim must be delivered to the carrier within the time period specified in the carrier’s contract and/or tariff, or that time prescribed by law, (usually 9 months from delivery). Since the date of receipt by the carrier determines whether or not the freight claim is timely filed, claims should be filed via delivery methods which give some type of confirmation of receipt and guarantee as to length of time for delivery, such as:

  • Facsimile transmission (FAX);

  • Registered or Certified mail, Return Receipt Requested (RRR);

  • Express Mail;

  • Express Courier Services;

  • Electronic Data Interchange (EDI).

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Freight claims should be addressed to the carrier’s claims manager at the carrier’s home office. Personal delivery to a carrier’s representative may be effective if the freight claim is actually delivered in time, but an acknowledgment should be obtained in writing, and a copy sent to the carrier’s freight claims manager.  Receipt by the carrier is deemed to be notice to all connecting carriers as well.  The names and addresses of the consignor (shipper) and consignee (receiver) must be stated, including all stop-off locations for completion of loading and/or unloading. Information on who is liable for the freight charges should be included in the freight claim. (Collect, Prepaid, C.O.D., etc.) Information on any liability limitations must be noted on the bill of lading.

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3). How to File a Freight Claim: Details of a Freight Claim

A detailed description of the freight loss, damage or delay must be stated, setting forth the specific commodities, number of units of each type, extent of loss suffered, the value of each unit, the amount of salvage realized, the net loss, and a description of the events which caused the loss.

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Here is an example of recording the details of the freight claim:

  • 10 cartons clothing water damaged; @ $100 ea. =    $1,000

  •  2 cartons shoes short; @ $500 ea.  =   $1,000

  • 3 cartons china crushed; @ $100 ea. –    $  300;                       

  • Total Cost of damages and lost: ($1,000 + $1,000 + $300 = $2,300)

  • Less Salvage: -$150

  • Amount of Freight Claim: $2,150

Note: See exception notation on delivery receipt dated _______. Confirmed by inspection report enclosed, dated __________.

 

4). How to File a Freight Claim: Amount of Freight Claim

The amount of the claimant’s loss should always be stated in the freight claim. When the extent of a loss is not known at the time of filing, it is not good practice to state that “this is a claim for $100 more or less.” When this is done, some carriers have been known to mail a check in the amount of $100 in expectation that the check will be deposited, thus relieving the carrier of further liability. The better practice is to place the carrier on notice as to its maximum exposure to liability by stating the full potential loss. If a lesser amount is finally determined to be owed by the carrier, the claim must be amended to that amount.

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5). How to File a Fright Claim: Supporting Documentation

When you are filing a freight claim, you must provide the following supporting documentation if available and applicable:

  • The original bill of lading

  • The paid freight bill 

  • Proof of the value of the commodities lost or damaged

  • Inspection reports, if made

  • Copies of request for inspection

  • Notification of loss

  • Waiver of inspection by carrier

  • Special documents when appropriate, such as

    • Photographs

    • Temperature reports

    • Impact records

    • Condemnation certificates

    • Dumping certificates

    • Laboratory analysis

    • Quality control reports

    • Package certifications

    • Loading diagrams

    • Weight certificates

    • Affidavits

    • Carrier’s passing reports

    • Loading and unloading tallies

    • (Facsimile copies are generally acceptable)

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A “Bond of Indemnity” may be filed with the freight claim indemnifying the carrier for any loss it may suffer as a result of improperly paying the claim on the basis of the claimant’s furnishing a copy of the original document. Every claim should be numbered by the claimant and recorded in a claim log or computer system. The carrier should also assign its claim number and acknowledge receipt of the claim within 30 days of receipt, pursuant to D.O.T. regulations. Both claim numbers should be shown on all correspondence and checks.  A separate file should be kept on each freight claim. Important deadlines and dates should be recorded in the claim log and systematically reviewed.

For instance:

  • If a claim is not acknowledged within 30 days, or

  • If a claim is not paid, compromised or disallowed within 120 days, or

  • If the carrier does not provide status reports every 60 days thereafter, it should be notified of its violations of the government’s regulations.

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Repeated violations of D.O.T claim regulations should be reported to the Surface Transportation Board, 1201 Constitution Ave. NW, Washington, DC, 20423-0001 or to the D.O.T. Regional Director in the Region in which the carrier’s headquarters is located.

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6). How to File a Freight Claim: Suit Deadlines

If a carrier denies liability for a loss for which the claimant has reason to believe the carrier is lawfully liable, the claimant has the right to institute a lawsuit. However, such suits must be instituted within strict time limits. The most commonly applicable suit time limit is two years and one day from the date the carrier disallowed the freight claim. The date of mailing the carrier’s disallowance letter usually governs, not the date of its receipt by the claimant.

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However, some traffic is not subject to the Carmack Amendment, and therefore, the time limits vary. For example:

  • on some piggyback traffic, the suit must be instituted within one year from the date of delivery (not disallowance);

  • on ocean traffic, the suit must be instituted within one year of delivery, but the carrier may extend that date upon request received before the expiration of one year. Airline claim limits vary for each carrier.

A system must be implemented to periodically review the status of pending claims to prevent the expiration of the suit-filing deadlines.

Only a written statement declining payment of a  freight claim in whole or in part starts the running of the time period for filing suits.

An offer to settle or compromise a claim is deemed a declination, but it must also state that the remainder of the claim is disallowed. (See 49 U.S.C. § 14706(e)(2)(A)).  Don’t wait until the last day to request your attorneys to institute a suit. Set your review schedule to allow at least 30 days’ lead time.

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Most Commonly Asked Questions we Hear from those trying to learn how to file a freight claim

Q: How do I find the time limits for filing freight claims against our carriers?

A: The carriers’ tariff or bills of lading will specify the various time limits, but they could be different via each mode, or different for carriers within the same mode, particularly on traffic which is exempt from government regulations.

The best procedure is to draw-up a time limit chart listing these key periods for each carrier in your routing guide. This will also help you to select the carriers with the most favorable liability terms and conditions.

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Q: Must we notify our own insurance company of a freight claim against a carrier?

A: Yes, under most shippers’ freight insurance policies, the insurer stipulates that it must be given notice of claims promptly, or within a reasonable time. If you are not able to recover from a carrier, you may be time barred from claiming against the insurer if you have not given it prompt notice of your claim against the carrier.

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Q: Must I use a specific freight claim form?

A: No, any written notice containing the basic elements of a claim will suffice.

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Q: May I include interest, administrative costs, freight charges, loss of profits, attorney’s fees, etc. in my claim?

A: Yes and no. The measure of damage is governed by common law. “Freight Claims in Plain English” reviews the case law on this issue as well as all other legal issues affecting claims.

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Q: Can I recover a claim from a carrier after it files for bankruptcy?

A: Yes. Call the D.O.T. for the name and address of the carrier’s cargo insurer. 202-927-7600. Get the freight policy number in effect on the date of the loss. Then write to the insurer and demand payment under the BMC 32 Endorsement.

What has your experience been in learning how to file a freight claim?

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ANOTHER BROKEN DOWN BASICS

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What are freight claims? When goods go missing or arrive damaged, the basic contract for carriage—agreement to transport goods safely from Point A to Point B—is violated. Since the contract was broken, a shipper can file a claim to recover its lost revenue.

Educating yourself on best practices surrounding freight claims can help reduce related headaches and limit potential complications.

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Reasons for Freight Claims

Reasons for freight claims are different than the reasons for freight rejections. Rejections can interrupt timelines and incur charges, but they don’t indicate a loss of goods. Freight claims occur any time when a product is disrupted/damaged during transit to the point it can no longer be sold.

  • Damage to product or property

  • Contamination – bugs, rodents, filth, water

  • Loss of freight

  • Truck accident

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Best Practices for Freight Claims

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What happens if a delivery truck hits a pole or building at your facility?

How you should handle the situation isn’t much different than how you’d handle a car accident.

  • Act right away

  • Get driver testimonial

  • File an incident report with the police

  • Take photos of the damage

  • Check if there is video footage

  • Don’t let the driver leave until all the above is accomplished

If you wait to file a report and don’t have proof of the accident, you may not be able to file your freight claim and get reimbursed for damages. Just like with a car accident, your insurance provider needs to see proof of the incident and who is at fault.

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What if you receive cargo that is damaged?

This could be water damage, crushing, contamination, etc.

  • Inspect freight for inconsistencies while the driver is on-site

  • Contact seller immediately to inform them of damage

  • Denote damage on BOL with as much detail as possible

    • Damaged Box/Bag Count

    • Lot or Item #

    • Product

    • Type of Damage

  • Only sign the bill of lading (BOL) once damages are included on the paperwork

  • Take clear photos of the damage before the driver leaves

  • Give the driver a copy of BOL with damages noted

If you sign the BOL before denoting damages, you take ownership of the freight as is. If you try to file a freight claim after signing a BOL (without noting damages and fault), there is no sure way for the insurance provider to know who caused the issue. Someone could have received pallets in good condition but had an accident in the warehouse afterward and are trying to recoup a loss unethically. Hopefully, this would never be the case, but there’s no way for the insurance company to verify without proof.  In the images below, freight was damaged during transit. Photos were taken prior to unloading to showcase the condition of goods when received. Highlighting when/where the damage occurred can help with claim resolution. Example of palletized product that incurred water damage while in transit. Example of freight that shifted significantly and fell during transit, resulting in product damage.

What if an order goes missing? It is very rare for a driver to steal goods. Pallets are sealed and there are multiple checkpoints throughout the delivery process. It’s nearly impossible for them to break a seal, repack, and have their actions go unnoticed. 

However, a warehouse could easily misload a truck with the wrong order or too few pallets.

  • Check deliveries for any missing product

  • Only sign the bill of lading (BOL) once quantities are properly noted on the paperwork

  • Contact the seller immediately regarding missing freight, determine if there are any forgotten pallets at the warehouse

Cargo theft could be to blame if there is no explanation for the missing goods. In this case, engage both insurance and law enforcement for help tracking down the stolen freight and recouping lost revenue.

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Freight Claims Process

It can take anywhere from 30-120 days to resolve a freight claim. The sooner you get things moving, the better.

Deadlines differ by mode, carrier, and sometimes state. Generally, the carrier will want notification of the damage within 15 days (sooner is ideal) and filing of the freight claim within nine months.

The claimant must first gather all the needed information to prove its claim. For example, if a product arrives damaged, the shipper must prove that product was in good condition at the origin, that it was in damaged condition at the destination, and what dollar amount is related to the damages. Then the responsibility shifts to the carrier who must defend or comply.

The paperwork you’ll need to file a freight claim:

  • Original purchase invoice for the goods

  • Proof of payment for delivery or service charges

  • Copy of the bill of lading (BOL) with the receipt, waybill, and other records indicating the loss or damage

  • Estimates or invoices for repair, if applicable

  • Photos of the shipment and packaging at the time of delivery

  • Any additional information which supports the claim

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How to Avoid Freight Claim Headaches

Accidents happen, but thankfully there are steps you can take to limit your chance of dealing with a freight claim.

  • Properly pack, wrap, pad, and label your pallets to minimize potential damage

  • Work with reliable 3PLs and carriers who have proper insurance

  • Communicate handling requirements clearly and label pallets (on all sides) with instructions

  • Check freight diligently upon receipt for damages or miscounts

  • Design pick-up and receiving facilities for safe and easy navigation

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EXTRA LINKS:

 

https://customodal.com/blog/freight-claims-101-how-it-works-how-to-fight-it/

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https://www.partnership.com/pdffiles/hosted%20pdfs/Freight_Claims.pdf

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