Nobody looks forward to dealing with freight claims, but they are a necessary part of doing business. Even though they can be frustrating and time-consuming, the way you process a claim can be the difference between receiving full compensation or kicking yourself because you made an avoidable, costly mistake. If a consignee (or shipper) does not follow proper procedures in the claim process, there is the possibility that he or she will not receive any reimbursement.
"I am thinking about outsourcing my claims management. Why should I do that?"
There are many reasons to consider outsoucring your freight claims management. It can improve your cash flow, capture lost revenue, provide timely resolution, and reduce the loss of valuable resources that might otherwise be tied up tracking down and filing claim information.
By far, one of the most assured ways to optimize your claim's reimbursement is to leave it to the pros. Large shippers who face a significant number of claims or have high dollar amounts tied up in claims will look to their legal department for help. Some will hire a trusted insurance broker, such as Avalon Risk Management, who can effectively coordinate the claims handling process with their reputable insurers.
Alternatively, for mid-sized and smaller shippers, investing in a software service specializing in freight claims management is the best option. It provides the technology needed to process claims quickly and efficiently, usually with consulting options as part of the offering. These are often included in a shipper's TMS platform; however, some companies offer the service à la carte. A spokesperson for Rockfarm said one of his biggest clients uses the claim software without opting for the full TMS package. Here are a few freight claim management companies to explore that offer claim management software platforms.
"How can technology reduce risk?" If you are in the freight game, you know that many different software platforms are available to manage your supply chain. These software-as-service companies can help you avoid risk and more efficiently manage claims when they do happen.
- The most common one is a transportation management system or TMS that allows you to collect and manage data about every aspect of your logistics. Having a robust TMS in place makes filing, tracking and accessing claims easier.
- Using a TMS that provides automation, such as alerts and notifications when there are "exceptions" helps avoid premature claim-filing.
- Utilizing custom digital services that 3PLs offer also can help you be proactive with your claim's management approach instead of reactive. Customer-facing platforms like Choptank's ORBIT TI give accurate metrics that identify historical patterns and trends regarding volumes, seasonality and other criteria.
Claims management software can include valuable reporting, such as the number of total open claims, open claims by origin, open claims by carrier, closed claims, age of claims, claims filed by product type, and claims filed by carrier. This visibility can help you identify trends and problem areas in your supply chain.
"Hey! We have a problem." If getting the most reimbursement on your freight claims is your main objective, rule number one is to speak up as soon as there is a discrepancy. Time is of the essence, and the longer you wait to note or report it, the more chance you have of losing necessary paperwork or remembering the exact circumstances of the claim.
The Carmack Amendment states that a carrier must acknowledge a claim within 30 days of the initial filing, and a final ruling must be given within 90 days and in writing. The claimant has two years and one day to dispute it.
Here is a quick review of Carmack Amendment basics.
Carmack Amendment Basics
When you hear someone talking about Carmack (no, not CarMax), they are referring to the Carmack Amendment, which is a law that was enacted in 1906. The original law, the Interstate Commerce Act of 1877, was proposed to oversee the connection between shipping companies (carriers) and owners of goods being shipped when losses or damages occur. Back then, most cargo traveled by rail and sea. In 1935, Congress expanded the Carmack Amendment’s sphere to include motor carriers, and it has been an important regulatory piece of legislation ever since.
Liability laws were regulated state-by-state before Carmack, which now serves both the interstate shipper and interstate carrier. Under the law, the motor carrier is held liable for the “full actual loss” caused by the motor carrier by reason of loss, damage, and/or delay in the transport of the product. The way it works sounds rather simple, but often is not. That is: at shipping point, the carrier receives the product and acknowledges receipt by their signature on the Bill of Lading. The signed Bill of Lading then becomes prima facie evidence (or proof) of the carrier’s receipt in good condition. If, and when, the product arrives in a damaged condition (or product is short, lost, etc.), the burden of proof then shifts to the carrier who must now prove “freedom from negligence,” meaning that they are not the cause.
Make sure the driver is aware of the issue and be sure you take photos with a cell phone. Ask the driver to inspect the damage too. Also, be diligent about noting any overages, shortages, or damages (OS&Ds) on the Bill of Lading (BOL) and make sure you get the driver's signature on all the paperwork.
Best practices strongly recommend that you retain the damaged goods at either the shipper or consignee's location—and not with the carrier. You should not dispose of it until a disposition has been made.
"Why does it matter how I file the claim if I am due reimbursement?"
Be sure you file the claim using the carriers' or service providers' online claim portal if they have one. Every signed document, photo, and claim form should be uploaded into the program. If the claims process is already a part of your own integrated carrier/shipper TMS, that is ideal because the information will automatically be shared between you and the carrier. Make sure you complete the information required in its entirety. Leaving out a single form can cause delays and denials. The number one reason claims are denied is because of incomplete or missing paperwork.
"Why was my freight claim denied?"
Not providing the necessary documentation is the most common cause for denied claims, but many other factors can contribute to claims being turned down. Here are some instances when your claim may be rejected, depending on the initial signed contract's wording and other circumstances surrounding the claim.
- Act of God
- Cargo missing, then found
- No notation of exception or damage on POD or BOL (must be specific with piece count as well as pallet count.)
- Unpaid freight bill (meaning the freight bill in question)
- Negligence of the shipper (for proper packaging or temp-control, for example)
- No mitigation occurred (no efforts were made to salvage, repair, or reduce the amount of damage claimed).
- Disposing of goods before an inspection or resolution has been determined.
It is important to understand that there is an expectation by insurance companies that every party involved in a claim will do as much as possible to minimize the damage and amount of loss. That includes carriers, shippers, logistics providers and consignees.
Here is a quick checklist to make sure you don't miss filing any important documentation. This is does not cover all the documents that may be requested for a claim, but it does include the primary ones that every shipper should have ready when the time comes to file a claim.
- Bill of Lading (Original Document) containing the original terms of the move, carrier and shipper information, what the commodity is, and how much there is on the truck.
- Proof of Delivery showing that the delivery was made to the destination and the consignee. The signed document will show if there are any problems with the cargo such as overages, shortages or damages. These notes must be part of the POD to be considered for a claim, or there is a possibility that the claim will be denied. This can also be a drop trailer receipt or a simple delivery sheet.
- Claim Statement should define the loss of goods in complete detail. This must include the value of the damaged goods along with an itemized list. It is also an opportunity to explain how the loss happened.
- Supporting Evidence is additional helpful information to validate the value and authenticity of the cargo. It acts as supporting documentation to the primary ones to help further validate the claim. These documents can include a sales contract of bill of sale or a commercial invoice.
- Photos are invaluable when it comes to documenting damage that occurred in transit. Be sure to take close ups as well as full-damage shots when taking pictures.
If the claim involves reefer freight, other required documentation may include temperature-monitoring data from the reefer unit itself or recordings from additional equipment such as temp-tail recorders.
In today's booming freight market, shippers deal with skyrocketing costs and unpredictable fluctuations in supply and demand. Keeping freight claims at a minimum, reducing the time it takes to process them, and understanding why they may be rejected can help a shipper save time and money.