Need Suggestion - Claim Status

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44000lbs

Active Member
Sep 20, 2018
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Hi Folks,

I am 3pl broker from Canada, and my first time dealing with a claim situation and would like to seek help and suggestion from my fellow members here.

I moved 3 skids LTL with 3600lbs of fresh produce at 36deg F from Calgary AB to Delta BC. Carrier had a multi-temperature trailer and somehow messed up with the load and while delivery it was all frozen and the product was wasted. The product was worth $11,000CAD.

The carrier accepted the claim and apologized for the mistake. When the carrier invoiced for the run it says '$2/lb for cargo coverage' which was never discussed while moving the load. I am wondering how will the claims process work if the carrier's insurance company will short pay our customer on the claims?
 
I would try to work something out with the carrier, given that they admit to being at fault. If its 2 bucks a pound then the outstanding amount is $3800.00, not an astronomical amount to deal with even in the worst case scenario where you have to pay it out of pocket. Personally, as a broker, I avoid produce.. too much can go wrong with it.
 
LTL temp sensitive is a pain in th a**. Very few carriers that offer it and even less than can do it right. We always try and convince the shipper it is in their best interests to ship as TL if at all possible.
 
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was the value declared on the BOL? Did the customer require you to insure on declared value? Is there a contract in place?
Way too many questions unanswered before you can get reliable advice. Although Freight Broker is correct. Probably easier to pay out to make good relations with customer and move on.

Also, why are you not asking your insurance broker about this??
 
^^^
There he goes again ... blood in the water ... LOL

Outside of that, your carrier is correct. $2.00 a pound if there is no declared value on the bill of lading. The fact that the carrier admitted responsibility has absolutely nothing to do with anything.
The carrier's liability is limited to $2.00 a pound ($4.50/kg), plus the apportioned cost of the transportation (ie. 50% loss = 50% claim for transportation cost) which in this case is 100%, with one caveat ... you have to pay the carrier for his transportation costs first. If you don't, he owes your customer a grand total of ZERO.

Additionally there are strict timelines and procedures in dealing with cargo claims. Step outside them by one iota, and the carrier again owes nothing. My guess is the carrier knows way more about the claims process than you do, and he is not about to help you out one bit. If it were me, I wouldn't either.

My opinion on your culpability in this case is, based solely on what you have consented to share here is this; As a "3PL/Load Broker", trading on the reputations of the professional 3PL's and Load Brokers in this industry, you seriously let your customer down. It was YOUR responsibility to know your customers product and its values so YOU could direct him in the proper methodology of shipping his goods.

If you did in fact follow professional protocols and procedures and your shipper still did not have the good sense to put a declared value on the bill of lading, then that portion of the loss is really on him. Perhaps for him this will be a lesson learned ... the hard way.

The excess insurance lowmiler88 is talking about is called contingent cargo insurance. My guess is you do not carry it. Regardless, that would not even pay out in this case as there is nothing to be paid beyond the $2.00/lb if there is no declared value. Contingent cargo follows the same rules as the carrier's cargo insurance.

Unfortunately, in this case, the only insurance policy you can count on to cover the excess is the "johnnyn bank account" insurance policy ... if the customer is that valuable to you.

My advice, and remember free advice is worth exactly what you pay for it so you can take it or leave it, is simply this ... Be a professional. Know your business inside and out. Know everything there is to know about your customer. Know everything there is to know about your carrier, and you will avoid a lot of these problems. Just don't be a skimmer ... no one has any respect for skimmers.
 
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Michael Ludwig said:
^^^
There he goes again ... blood in the water ... LOL

Outside of that, your carrier is correct. $2.00 a pound if there is no declared value on the bill of lading. The fact that the carrier admitted responsibility has absolutely nothing to do with anything.
The carrier's liability is limited to $2.00 a pound ($4.50/kg), plus the apportioned cost of the transportation (ie. 50% loss = 50% claim for transportation cost) which in this case is 100%, with one caveat ... you have to pay the carrier for his transportation costs first. If you don't, he owes your customer a grand total of ZERO.

Additionally there are strict timelines and procedures in dealing with cargo claims. Step outside them by one iota, and the carrier again owes nothing. My guess is the carrier knows way more about the claims process than you do, and he is not about to help you out one bit. If it were me, I wouldn't either.

My opinion on your culpability in this case is, based solely on what you have consented to share here is this; As a "3PL/Load Broker", trading on the reputations of the professional 3PL's and Load Brokers in this industry, you seriously let your customer down. It was YOUR responsibility to know your customers product and its values so YOU could direct him in the proper methodology of shipping his goods.

If you did in fact follow professional protocols and procedures and your shipper still did not have the good sense to put a declared value on the bill of lading, then that portion of the loss is really on him. Perhaps for him this will be a lesson learned ... the hard way.

The excess insurance lowmiler88 is talking about is called contingent cargo insurance. My guess is you do not carry it. Regardless, that would not even pay out in this case as there is nothing to be paid beyond the $2.00/lb if there is no declared value. Contingent cargo follows the same rules as the carrier's cargo insurance.

Unfortunately, in this case, the only insurance policy you can count on to cover the excess is the "johnnyn bank account" insurance policy ... if the customer is that valuable to you.

My advice, and remember free advice is worth exactly what you pay for it so you can take it or leave it, is simply this ... Be a professional. Know your business inside and out. Know everything there is to know about your customer. Know everything there is to know about your carrier, and you will avoid a lot of these problems. Just don't be a skimmer ... no one has any respect for skimmers.
Click to expand...
 
Mike you are right in a perfect world, but if this load was booked by with one of the big brokers they will deduct all the money from what they owe you. They go by their own rules each carrier signs and sends back to them, it covers instances just like this and it states they deduct from your receivables the full amount plus transportation charges...................the little carrier gets Royally screwed in every claim.
 
It is my belief that the reason why some shippers and larger 3PLs have that deduction clause in their contracts, is not to purposely screw the carrier, but to get the carriers attention and get them to respond to claims in a professional manner. We have all heard of and seen instances here on Inside Transport, cases where carriers just say NO, when presented with a legitimate claim, without any investigation. Maybe they think that this will help keep their insurance premiums in line by not reporting claims to their insurer, or maybe they just don't know how to handle a legitimate claim. One of the best ways to avoid freight claims, is to fully understand how they should be handled AND ensure their customers know as well. I have found that shippers who immediately want to deduct the cost of a freight claim from your receivables is likely a shipper who has been screwed in the past by a carrier who didn't know how to handle a freight claim.
 
I'm not sure why anyone would want to sign a contract with the deduction clause in it. However, to each his own.
First and foremost, reputable brokers do not even include that clause in their contracts any more because a case can be made that it is illegal to arbitrarily contra accounts. The very best the broker can hope for is to be able to contra the funds due on only the load with the cargo claim. The rest can be considered as either theft or fraud ... depending on your attorney's frame of mind. Claim both and let the judge decide. Either way you win.
Additionally, if the freight invoice has NOT been paid to the carrier, the law CLEARLY spells out that the carrier does not need to entertain the claim. Volumes of national, international, and maritime law have been dedicated solely to the subject of cargo claims. They all have one thing in common ... pay the carrier first, collect claims after.
Regardless, it would seem that brokers are better served by careful research of their chosen carriers and a work-together relationship, than by trying to brow-beat their carriers with a big stick.

As for me, ask me to sign a contract with a contra clause in it ... You won't like the answer I will enjoy giving.
 
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Unfortunately, at least in the US, this idea that a freight claim cannot be addressed before the freight bill is paid, is not as clear as some would suggest. There is nothing in either the Carmack Amendment, nor FMCSA regulations that specifically says a carrier can ignore a freight claim until the freight charges are paid. In fact to the contrary, they go to great lengths to describe a carriers legal responsibility when presented with a freight claim from a shipper. Where the confusion exists, is most large US carriers (and I would suspect Canadian ones as well) have in their Rules Tariff, a clause that spells out that there will be no consideration given to a freight claim unless the freight bill for that shipment has been paid. If there is no clause, or no Rules Tariff, the carrier is bound by FMCSA rules to address the claim and if found liable for the damage, could request payment for the shipment before settlement. In most cases however, the original freight bill, or part of it, becomes a part of the loss and asking for payment to only return the same to the shipper seems somewhat silly. In regards to deducting monies from invoices, this type of thing happens daily in a number of industries for a number of different reasons. If it happens to you, as Michael suggests, contact your lawyer, or if the amounts permit, use Small Claims Court.
 
Technically you are correct. Under Carmack, set off is not illegal, it is however fraught with pitfalls;
https://www.joc.com/regulation-poli...solve-claims-improper-procedure_20160321.html
Imagine if you will, a shipper owes a carrier $100K, and the carrier experiences a $100K claim of the shippers goods. The shipper offsets the $100K, but subsequent legal action determines the loss to actually be the shipper's responsibility. In the meantime, the carrier goes broke, and 50 people have lost their jobs. The subsequent lawsuits, which the carrier and its employees will file, will inevitably cost the shipper millions. The reason: The shipper based the offset on the premise the carrier was at fault, but legal evidence showed otherwise. The shipper put the carrier and its employees out of business and out of work causing all kinds of undue stress and hardship. It is highly unlikely the shipper will survive the class action suit.
In addition to your point, if the shipper does not pay the freight bill, the shipper cannot claim freight and other related costs as part of the settlement ... provided the carrier is in fact at fault.
In Canada, a paid freight invoice is however required under Canadian law to further a claim.
 
O
Michael Ludwig said:
Technically you are correct. Under Carmack, set off is not illegal, it is however fraught with pitfalls;
https://www.joc.com/regulation-policy/transportation-regulations/us-transportation-regulations/‘automatic’-set-resolve-claims-improper-procedure_20160321.html
Imagine if you will, a shipper owes a carrier $100K, and the carrier experiences a $100K claim of the shippers goods. The shipper offsets the $100K, but subsequent legal action determines the loss to actually be the shipper's responsibility. In the meantime, the carrier goes broke, and 50 people have lost their jobs. The subsequent lawsuits, which the carrier and its employees will file, will inevitably cost the shipper millions. The reason: The shipper based the offset on the premise the carrier was at fault, but legal evidence showed otherwise. The shipper put the carrier and its employees out of business and out of work causing all kinds of undue stress and hardship. It is highly unlikely the shipper will survive the class action suit.
In addition to your point, if the shipper does not pay the freight bill, the shipper cannot claim freight and other related costs as part of the settlement ... provided the carrier is in fact at fault.
In Canada, a paid freight invoice is however required under Canadian law to further a claim.
Click to expand...
My client had a recent claim similar to this, but his invoices were factored. Now the factoring company is out and taking him to collections. Add a personal indemnity clause and bye bye home and all your nice things!

You don’t need to be a genius to own a trucking company, but it certainly helps.

Under Carmack it is legal to use an offset clause (as Mike mentions above). However, many waive their rights unknowningly(?) when signing a contract (remember my post about TQL???).

If your signing contracts without proper legal advice then you’re playing with fire. Transportation is not for the faint at heart. Understand your liabilities and ask for amendments to contracts. Carriers with capacity and few and far between. You guys own the road, not the shippers. If a shipper or broker can’t agree to your terms, you don’t need them. Move on. If the only way you can book Freight is by signing 1 sides contracts, then you need to work on your marketing and differentiating yourself from the competition.

Mic drop
 
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TRKINSURE said:
O

My client had a recent claim similar to this, but his invoices were factored. Now the factoring company is out and taking him to collections. Add a personal indemnity clause and bye bye home and all your nice things!

You don’t need to be a genius to own a trucking company, but it certainly helps.

Under Carmack it is legal to use an offset clause (as Mike mentions above). However, many waive their rights unknowningly(?) when signing a contract (remember my post about TQL???).

If your signing contracts without proper legal advice then you’re playing with fire. Transportation is not for the faint at heart. Understand your liabilities and ask for amendments to contracts. Carriers with capacity and few and far between. You guys own the road, not the shippers. If a shipper or broker can’t agree to your terms, you don’t need them. Move on. If the only way you can book Freight is by signing 1 sides contracts, then you need to work on your marketing and differentiating yourself from the competition.

Mic drop
Click to expand...

I've factored a few invoices that were the result of a subsequent claim by a shipper or broker. Thankfully, this situation is extremely rare for me, but in cases where the carrier was deemed to be at fault, their insurance compensated the shipper/broker, but the carrier's invoice had to be paid in the normal course.

Isn't this typically how it works?
 
Yes, it is. But in this case, the carrier was not negligent as they picked up a load (of oats) in good condition in SK and dropped off (sealed trailer) in IN.. when arrived the consignee rejected due to 'foreign debris' on trailer floor. The insurer denied the claim under the "Act of Shipper" defence.

The contract prevented the carrier from going after the shipper, consignee & broker. Now he's left holding the bag.
 
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