Navigating Freight Claims: A Guide to Common Issues and Solutions
Facing issues such as missing or damaged goods and navigating through the freight claims process can be challenging for anyone.
As a freight broker and intermediary, Revcon Logistics bears no legal responsibility for loss and damage claims resulting from carrier services we arrange for our customers. However, we extend our support to assist customers in the freight claims processing. In this guide, we outline six common types of freight claims and delve into reasons why claims may be denied.
Understanding Common Freight Claims
If visible physical damage to your shipment packaging is noted by the consignee on the proof of delivery (POD), you can file a damage claim within nine months. The carrier, with proper evidence, may refund a portion of your shipping costs. However, upfront payment of the freight invoice is required, with reimbursement occurring after the claim is processed.
Concealed Damage Claim
When damage is concealed, that generally means it isn’t visible until after delivery, which means it was probably not notated on the POD. Concealed damage claims are the hardest to prove and most carriers only allow a five-day window to file a concealed damage claim. If more than the allotted time frame passes before you file, the carrier that handled your shipment will likely deny your claim.
Every shipment involves three parties: the shipper, the carrier, and the consignee. If there's hidden damage, it could have happened at any of these stages. As a result, usually, only one-third of the claim is offered unless there is clear evidence pointing to the fault of a specific party. Including photos and any other evidence, you have with your claim will increase your odds of getting a partial refund.
If your shipment arrives with a shortage, and it's noted on the POD, you can file a shortage claim within nine months. This can happen if the packaging is not intact and freight is missing. It can also happen if the amount of freight delivered doesn’t match what’s printed on the original bill of lading (BOL). Payment is usually required upfront, with reimbursement to be included in the claim processing.
Concealed Shortage Claim
Similar to concealed damage claims, concealed shortage claims arise when a missing product is not noted on the POD. Timely filing, within five business days or less, is crucial for these claims. These are also one of the hardest to prove.
Sometimes, a shipment is delivered and it’s the wrong freight, the product is damaged, or the shipment is late. Consignees have the right to refuse part or all of shipment if they are unhappy with the condition of their freight. If your consignee refuses the shipment, it’s returned to the carrier’s delivery terminal. The carrier will contact you and ask what you want them to do with your shipment. Your options are to have it shipped back to you, have it sent to another address, or have it disposed of. In most cases, you will not have to pay your invoice.
A loss claim is a worst-case scenario because it means your entire shipment was lost by the carrier. This most commonly happens when shipment paperwork is separated from the freight. When this occurs, the carrier typically has a week to attempt to locate your freight. If the carrier can't locate the freight within a week, charges for shipping are typically waived. A Claim should be filed for the entire value of the shipment.
The carrier must acknowledge receipt within 30 days (49 CFR 370.5). Carriers must pay, decline, or make a firm compromise settlement offer within 120 days after receipt of the claim (49 CFR 370.9). The time period for commencing civil action cannot be less than two years from the date the carrier gives written notice to the claimant disallowing the claim (49 USC 14706e). Since there are legal time limits for filing and processing claims, you must obtain registered mail or other receipts indicating when you filed your claim.
Now, understanding the common freight claim types, let's explore six reasons why freight claims may be denied.
Common Reasons for Freight Claim Denials
When filing a freight claim, shippers should be sure to follow NMFC minimum documentation requirements. Probably the most common reason for a claim being denied is because of incomplete information and/or documentation.
Revcon Logistics offers help as to what documentation should be filed and can assist customers with the filing process.
Per NMFC guidelines, it is the responsibility of a shipper to mitigate the costs of a claim to the least amount possible, which essentially means shippers are required to do their part to help minimize financial loss.
Mitigation is usually done by selling the damaged item at a discount, selling it for parts or scrap, or by repairing the item rather than replacing it completely. If making repairs, the cost of repairing the item would be the amount filed for in the claim.
Freight Charges Not Paid
Even if the freight charges are going to be refunded or credited in their entirety¸ per industry guidelines set by the NMFC, the freight charges for a shipment must be paid before a claim can be settled.
A bill of lading will typically denote having received “x” number of skids/pieces intact (shrink-wrapped/non-shrink wrapped) when a shipper performs their own load and count. When a carrier doesn’t perform the load and count, it’s considered that the number of skids/pieces tendered to the carrier is the quantity shipped, since they aren’t able to perform a piece count of the broken-down shipment before it was packaged to verify quantity.
A carrier is tendered 3 shrink-wrapped skids composed of 25 individual boxes on each skid for a total of 75 boxes for the entire shipment, which the shipper shrink-wrapped and loaded onto the truck themselves. The carrier will likely mark the BOL as having received 3 shrink wrapped skids said to contain 75 boxes. When all three skids arrive at the consignee and a shortage of 1 box is discovered, it’s difficult to prove that the shipment only contained 75 boxes to begin with. The shipper could have packaged the shipment with only 74 boxes by accident. The only thing the carrier knows for certain is that 3 skids were tendered, and 3 skids were delivered, as there was no opportunity for the driver to verify or count all 75 boxes, especially when skids are already shrink-wrapped when a carrier arrives for pickup.
Establishing carrier liability without notation of damage on the delivery receipt can be difficult. In spite of what some shippers may think, writing “Subject to Inspection” on the POD does not serve as sufficient evidence that any specific damage has occurred, because it can create a scenario in which the consignee is the only witness to the discovery of the damage. This leaves reasonable doubt as to who was in possession of the shipment when the damage occurred.
Act of God
Carriers are exempt from liability for things like hurricanes, floods, and fires, which are considered an act of God and beyond a carrier’s control.
Understanding Limited Liability Coverage
You should be aware that all freight shipments come with some sort of limited liability coverage.
This coverage is determined by the carrier or the contract on file and varies depending on the commodity type or freight class of the goods being shipped. Carrier liability covers up to a certain dollar amount per pound of freight. It is not uncommon to find that the included liability coverage is less than the actual value of the goods being shipped.
New goods liability limits generally run between $2 and $20 per pound; while used goods will typically be capped at $0.10 to $0.50 per pound. Also, special commodities also have released-value liability limits. So, if you are shipping a high-value shipment (new or used), you should consider some sort of additional shippers’ interest cargo insurance coverage.
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