7 Tips to Ensure Your Transportation Claims Get Paid
Many companies make costly mistakes when handling transportation claims. There is a specific process that must be followed to ensure that the carrier involved pays the claim. If the shipper or consignee, do not follow this process, the carrier will have an "out" and not pay the claim. At Direct Service Network, we coach our clients through this process to ensure their claims are paid by the carrier involved.
1/ Communicate & Digitize
When product is lost or damaged upon arrival, prompt attention is critical. Noting the problem on the Bill of Lading is very important. Don't under estimate the need to be detailed at the onset of a potential claim. Digital pictures and a quick phone call to the broker/carrier can save many headaches down the road. The carrier has a legal right to have the value of the claim mitigated where possible. If you don't give the carrier the opportunity up front to salvage, re-deliver, return the goods, etc. Then some or all of your claim may be denied on the basis that you did not mitigate the value of the claim.
2/ Keep the Goods!
Never discard the goods that have been damaged until the claim has been resolved. The carrier has the right to inspect the goods that have been damaged. Further, the carrier has the right to take ownership of and salvage the goods if full claim value is awarded. Discarding the goods can result in the claim being denied.
3/ Make Every Effort to Mitigate Damages
There is an onus on all parties do what is reasonably necessary to mitigate the amount of potential damages. Simply discarding materials that may have a secondary resale market or that may be consumable again in the manufacturing process is not taking the proper steps to reduce the extent of the loss in relation to the claim. Not working together with the carrier to mitigate the cost of the claim, will work against the claiming party in the eyes of a court when determining the valuation of damages.
4/ Pay the Freight Charges
The same provision which outlines the time-line for quantifying a claim, also states that this filing must be accompanied by a copy of the paid freight bill. Not paying the freight bill (no matter how just this may seem under the circumstances) can work against you when attempting to resolve the claim expeditiously.
5/ Know the Governing Bill of Lading
Claim law differs from Province to Province and State to State. Further, claim law differs dramatically on transborder shipments. Both from a liability amount and a notice period, Canada and United States rules differ considerably. It is critical to remember the point of origin dictates the jurisdiction from which the claim will be settled.
This is also applicable for shipments moving to or from Mexico. Therefore as an example, for a shipment being picked up in Canada to be delivered to a consignee in Mexico, if there is damage or product missing, Canadian claim law will apply in the resolution process.
5/ File the Claim Promptly
The differences are significant in the amount of time you are allowed to submit a written intent to claim to a carrier. Be careful, filing a claim after this period will automatically void the claim.
Canadian BOL's - 60 days from delivery or within 9 months in the case of failure to make delivery
U.S BOL's - 9 months from date of delivery
Notice should include particulars of the origin, destination, date of shipment and estimated amount of claim
Final formal claim must be filed within 9 months of shipment
8/ Know the Maximum Claim Liability Amount
Canada and Mexico- the carrier is liable for fixed monetary base amount per kilogram or pound, unless prior to the shipment, the carrier agrees to a higher amount through a "declared value" stated on the BOL.
- Mexico 2.8 cents US per pound
- Canada $ 2.00 CAN per pound
U.S. BOL's- the carrier is liable for the actual value of the shipment if lost or damaged, unless prior to the shipment, the shipper agrees to a lesser value
7/ You Cannot Profit From a Claim
The value of cargo damage awarded is dependent on a number of variables. One of which is the transfer of ownership of the goods being shipped. Careful consideration must be given to the point at which the title to the goods is transferred. If manufacturer A produces and shipped goods to Customer B and under the terms of their agreement holds title to the goods until completion of the delivery, then, if there is a damage claim, the value of the damages will be limited to the manufactured cost of the goods and not the selling price. If on the other hand Customer B took possession of the goods at the dock of manufacturer A and arranged for shipping, then if there was a claim, the value of the claim would be the purchase price of the goods from Manufacturer A.
Summary
Court time is very expensive, time consuming and frustrating and should be avoided if possible. The more knowledgeable you are about the ins and outs of the claims process, the better equipped you will be to resolve the matter without having to resort to a the courts. Sometimes having an expert in the background ready to provide a helpful tip or opinion on more complicated matters is a bonus. There are lawyers and para-legals that specialize in this area of the law. Claims resolution can be a frustrating process for all parties involved if you don't know the process. Generally, by acting in a proactive fashion and following the tips above, the matter can be resolved in a manner that is acceptable to all parties involved.