If you are in the logistics or transportation space, you will benefit from knowing the basics of freight claims. This article will outline the freight claims process, types of claims, transportation laws, and benefits for outsourcing the claim filing process for your freight to a trusted auditor.
Freight claims management process
A freight claim is a legal document filed by the shipper to the carrier for reimbursement for loss or damage. Freight claims are either managed externally by a third-party service or internally by employees of an organization. An external service, like Share a Refund, lives and breathes freight claims. When a freight shipment is lost or damaged, Share a Refund expertly and accurately files claims using the necessary paperwork and process required by carriers.
Shippers are able to focus more on their core business and less on processing complex cargo claims. Understanding claims management is vital to running logistics efficiently. Internal audits are beneficial for keeping procedures in-house but claim approval rates are lower due to lack of sophisticated technology and time constraints. Unrecovered claims accrue quickly and have a direct impact on the bottom line of a business.
Common types of cargo claims
There are four different forms of cargo claims that shippers should be aware of when managing freight.
Visible damage is noticeable at the time of delivery and should be noted in great detail on the delivery receipt. A lack of information can prevent the claim from being approved by the carrier.
Loss occurs when freight has been documented as picked up from its location, but there’s no proof of delivery to the receiver. The shipper must notate on the bill of lading that the freight wasn’t delivered although there is proof of pick up.
It’s important to verify the pieces of your freight have arrived together. A portion of a freight shipment can fall off the pallet resulting in a shortage upon arrival. If only a partial freight made it to you, you have a shortage on your hands.
There are times when the damage could not have been identified during the preliminary inspection upon receipt of goods. Most carriers offer a 21-day window to file claims for concealed damage.
Freight claims regulations and laws
If you are a shipper, it’s important to know the laws that govern freight processes. Although no shipper wants to experience loss or damage, knowing what legal actions to take if this occurs will potentially return deserved dollars to your business.
The Carmack Amendment
The Carmack Amendment, often called Carmack, regulates the relationship between carriers and the shipper and interstate cargo claims. Under this law, buyers and sellers are protected against unwarranted damage on the part of the carrier. The shipper is responsible for ensuring the goods being transported are in good condition when they were picked up by the carrier, that the items were damaged after they were collected by the carrier and that the extent of damages can be quantified. This makes the carrier liable for the damage incurred.
The carrier could be exempt from damages under certain circumstances like an act of God, shipper’s negligence, government-issued policies or if there’s something inherently unstable about the goods (like highly flammable). This firmly encourages shippers to follow best practices when shipping and to understand proper packaging and avoid processes that might expose negligence on their part.
The Trucking Industry Regulatory Reform Act of 1994
The Trucking Industry Regulatory Reform Act of 1994 (TIRRA) was put into place by the US government to promote competition, safety, and efficiency among interstate motor carriers and to decrease regulation of the transportation industry. This law gives the shipper or carrier six months to challenge a rate after payment is made. It also makes the carrier responsible for maintaining individual tariffs and to make those available to shippers upon request. The tariffs are no longer subject to the Interstate Commerce Commission (ICC) filing and approval requirements.
Carrier liability for freight shipments
There’s a difference between carrier insurance and carrier liability. Usually, carrier liability covers up to a certain dollar amount per pound of freight, but rarely covers the complete cost of the goods being shipped. In March 2011, the Federal Motor Carrier Safety Administration (FMCSA) no longer required most common carriers to carry cargo liability insurance. Some carriers only cover 10 cents per pound per package or $2,500.00 per shipment, whichever is lower.
UPS, for example, states, “UPS Freight Rules Tariff limits our liability on certain commodities and provides for $25.00 per pound per package. Certain shipments may be subject to lower liability limits under the National Motor Freight Classification or specific provisions of the UPS Freight Rules Tariff.” Additional liability coverage can be bought for shipments valued over $25.00 per pound on the bill of lading.
For FedEx, its maximum liability is the actual cost of goods supported by the certified copy of the original invoice not to exceed $25.00 per pound per package or $100,000 per incident, whichever is lower. According to FedEx, “Carrier shall not be liable for any loss or damage to a shipment or for any delay caused by an act of God, the public enemy, the authority of law, the inherent vice of the goods, or the act or default of Shipper. The burden to prove freedom from negligence is on the Carrier or the party in possession. In no case will Carrier be liable for any type of consequential, special, indirect or exemplary damages, including but not limited to loss of income or profits, regardless of whether or not Carrier knew or should have known that such damages might have been incurred.”
Who is required to file the lost or damage claim?
The one preparing and sending the freight bears the burden for preventing loss and damage and following all tariff rules and shipping regulations. The shipper is primarily responsible for correct packaging, proper markings on the packaging, accurate descriptions on the shipping papers and filing a freight claim. A legal acting agent can also file the lost or damaged claim on your behalf.
Considerations when outsourcing freight claims
Who is the claim reimbursement being delivered to? If the claim money is not being delivered directly to you from the carrier, you might want to reconsider who is filing your cargo claims. A third-party service shouldn’t collect the freight claim reimbursement money first.
Is refund information disclosed in detail? If your third-party partner refuses to show proof of refunds through screenshots and a full audit trail of actions and payment flows, you may want to consider switching to a different service. Share a Refund promotes transparency as a top priority. Every shipper should have complete insight into refund credits.
What are the service fees for filing freight claims? Other businesses that manage freight claims charge fees upfront. That’s not the case with Share a Refund. The performance-based fee structure is a split of the refund amount and the per claim filed structure is an agreed upon flat rate.
The Share a Refund Difference
The services built into Share a Refund set it apart from the competition. When shippers enlist the help of Share a Refund they get access to the following benefits.
- Same-day response
- Built-in support for declared value and high-value shipments
- Support for multiple carriers
- Multiple pricing models
- White-label solution
If you frequently ship goods, loss and damage are both inevitable. Gain control of your freight claims with Share a Refund. Managing freight claims can cause a serious headache. The process is tedious and lengthy and no shipper wants to file freight claims. Don’t drain your resources by filing freight claims yourself. Enable freight claims management on your Share a Refund account today.