What Constitutes Freight Claim For Loss Or Damage?

What Constitutes Freight Claim For Loss Or Damage?
In business of shipping sometimes there are cases of losses or damaged goods. This week’s edition of Shippers’ Guide teaches you how to file a freight claim for loss or damage.
A  claim  against  a  motor  carrier  is  a  legal  demand  for  the  payment  of  money  arising  from  the  breach  of  the “contract of carriage”.  Unless you have a formal transportation agreement, that contract will be the bill of lading, which probably will be some form of the “Uniform Straight Bill of Lading”.
There are laws governing the filing of claims.  For interstate shipments there is a federal statute known as the “Carmack Amendment,” 49 U.S.C. § 14706, that governs most loss and damage claims against motor carriers and freight forwarders, and for intrastate shipments there are similar state laws.  If an international movement is involved  the  claim  may  also  be  governed  by  international  treaties,  such  as  the Carriage  of  Goods  by  Sea  Act (Ocean shipments) or the Montreal Convention of 1999 (Air shipments).
There are also federal  regulations, the  Federal  Motor  Carrier  Safety  Administration  (formerly  the  ICC)  has established  “Principles  and  Practices  for  the Investigation  and  Voluntary  Disposition  of  Loss  and  Damage Claims and Processing Salvage” that are published at 49 C.F.R. Part 370.
If a shipment is governed by a transportation contract, the terms of that agreement will govern the carrier’s liability.
Otherwise, the bill of lading and any applicable tariffs that are “incorporated by reference” in the bill of lading will apply.
What Constitutes a Claim?
No specific claim form is prescribed by law, but four elements are essential:
(a) The shipment must be identified to enable the carrier to conduct an investigation;
(b) The type of loss or damage must be stated;
(c) The amount of the claim must be stated or estimated and
(d) A demand for payment by the carrier must be made.
The  shipment  identification information should include the shipper’s bill of lading number, the carrier’s “Pro number”, the name and address of the consignor (shipper) and the consignee (receiver), the  shipping date and delivery date (or expected delivery date, if not delivered), and commodity description.
The  claimant  should  ordinarily  be  the  person  that  has  risk  of  loss  in  transit,  which  is  typically the  shipper  or consignee. Risk of loss is usually governed by the “terms of sale”; if the terms of sale are FOB Origin the risk of loss is on the buyer/consignee; if the terms of sale are FOB Destination the risk of loss is on the seller/shipper.
These  presumptions  can  be  varied  by  agreement  between  the  buyer  and  the  seller.  Other parties that may have the right to file a claim would include the beneficial owner of the goods, or an assignee of the claim.
The claim can be filed against either the receiving carrier, the delivering carrier, or the carrier in possession of the goods at the time of the loss.  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.
Claims must be filed in writing (or electronically, if both parties agree). A phone call does not constitute a legal claim.  The claim must be delivered to the carrier within the time period specified in the contract, bill of lading or tariff. For  most  interstate  motor  carrier  shipments  the  minimum  time  prescribed  by  law  (the  “Carmack Amendment”) is 9 months from the date of delivery, or in the case of a non-delivery 9 months from a reasonable time for delivery.
Since the date of receipt by the carrier determines whether or not the 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  E-Mail  (with  a  return  receipt),  Certified  mail,  Return  Receipt  Requested;  Express  Mail;  or Express Courier Services.
Claims should be addressed to the carrier’s claims manager at the carrier’s home office, not to the carrier’s insurance company.  If a broker is involved, you must still file the claim with the carrier, but you should also send a copy to the broker.
Personal delivery to a carrier’s representative may be effective if the claim is actually delivered in time, but an acknowledgment should be obtained in writing, and a copy sent to the carrier’s claims manager.  In the case of interline or connecting carrier movements, receipt by the receiving or delivering carrier is deemed to be notice to all connecting carriers as well.
Details of a Claim
A  detailed  factual  description  of  the  loss,  damage  or  delay  should  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 that caused the loss.  For example:
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 damages: 2,300
Less Salvage: (150)
Total Amount of Claim: $2,150
Include  copies  of  any  bills  of  lading  or  delivery  receipts  that  show  exception  notations  made  at  the  time  of delivery, as well as any inspection reports, photos, etc.
Amount of Claim
The amount of the claimant’s loss must always be stated in the 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 can be amended to that amount.
Supporting Documentation
Claims should usually be supported by legible copies of the following:
(a) The original bill of lading
(b) The paid freight bill
(c) Proof of the value of the commodities lost or damaged (an invoice)
(d) Inspection or survey reports, if made
(e) Copies of request for inspection
(f) Notification of loss
(g) Waiver of inspection by carrier
(h) Other  supporting  documents  when  appropriate,  such  as  photographs,  temperature  reports,  shock  or impact  records,  condemnation  certificates,  dumping  certificates,  laboratory  analysis,  quality  control reports, loading  diagrams,  weight  certificates,  written  statements  or  affidavits,  loading  and  unloading tallies, etc.
Some carriers may require a “Bond of Indemnity” to be filed with the claim indemnifying the carrier for any loss it may suffer if it pays the wrong party.
Claims should be numbered (BOL number, etc.)  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 FMCSA regulations.  Both claim numbers should be shown on all correspondence and checks.
A separate file should be kept on each claim. Important deadlines and dates should be recorded in the claim log and systematically reviewed.
Unless otherwise agreed upon in a contract, the FMCSA claim regulations require a carrier to acknowledge receipt of a claim within 30 days; the carrier must then pay, offer to compromise or disallow the claim within 120 days or provide status reports every 60 days thereafter.  If the carrier fails to abide by these periods, it should be notified that it is violating the FMCSA claim regulations.
Lawsuit 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  common  time  limit  for  bringing  a  lawsuit  is  two  years  and  one  day  from  the  date  the  motor  carrier disallowed  the  claim,  based  on  the  “Carmack  Amendment”  (49  U.S.C.  § 14706) which prohibits the establishment of a shorter period. The date of mailing the carrier’s disallowance letter usually governs, not the date of its receipt by the claimant.
It should be noted that some traffic is not subject to the Carmack Amendment minimum time limits.  This would include  “exempt”  shipments  such  as  fresh  fruits  and  vegetables,  intermodal  shipments,  etc.  which could have shorter time limits. Exempt rail, international ocean and air freight shipments may also have shorter time limits.
A system should be implemented to periodically review the status of pending claims to prevent the expiration of the suit- filing deadlines.  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.
Many  shippers  use  the  services  of  intermediaries  such  as  brokers  or  3PL’s  to  arrange  with  carriers  for  the transportation of their goods.  Ordinarily a broker or 3PL does not have any liability for loss or damage since it is not a carrier and does have physical possession or control over the shipments.  Sometimes intermediaries will contractually agree to assume liability for loss or damage, but do not assume that a broker or 3PL will have any liability for transit losses unless they specifically agree to do so in a written contract.
Some  brokers  and  3PL’s  offer  to  handle  the  filing  and/or  collection  of  claims  as  an  accommodation  to  their customers.  This should not be confused with an assumption of liability.  Furthermore, it is important to establish procedures to ensure that your claims are being properly filed and diligently pursued.  Make sure that the claims are  filed  in  your  name  (not  that  of  the  broker  or  3PL)  and  request  periodic status reports as to whether the claims have been acknowledged, whether  additional supporting information  has  been  requested,  and  whether the  claims  have  been  paid,  compromised  or  disallowed,  etc.    If there is any question as to whether the intermediary is  adequately  representing  your  interests,  consider  handling  claims  directly  with  the  responsible carriers.

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