Law Offices of Seaton & Husk, LP

Let Courts Settle Cargo Claims
By Henry E. Seaton
April 2006
Reprinted from etrucker.com

Q We deal frequently with a broker who now has offset a substantial cargo claim against freight charges that are due for loads handled for other shippers as well as the claimant. The cargo claim involves a shipment that our insurer and we believe was rejected wrongfully by the consignee, who failed to mitigate the damages. What recourse do we have?

A The unilateral offset of disputed cargo claims against freight charges, whether by a shipper or a broker, is an abusive procedure that motor carriers cannot tolerate. Freight charges typically are due, owing and uncontested. But cargo claims are not, and these should be resolved in a business-like manner through mediation or through arbitration by an independent fact finder who has no vested interest in the outcome.

It’s true that brokers and shippers sometimes offset freight charges because carriers handle claims poorly, but that’s no excuse. And often, a broker relies on unilateral offset just to keep its customer happy at your expense. Typically there is insufficient documentation on the claim, and your cargo insurer is not about to accede to the shipper or broker’s determination of liability or measure of damages.

Unless you have precluded offset through properly worded contract provisions, your only recourse is to sue for your freight charges – along with interest and attorney’s fees – if your contract or rules circular so provides. Once you have sued for your freight charges, the shipper or broker will be forced to assert the alleged cargo claim as a defense or setoff, and you then will be afforded your opportunity to defend the cargo claim on its merits.

If the cargo claim is within the scope of your coverage, you can turn the lawsuit over to your insurer for a defense. Assuming there is no dispute over the amount of the freight charges, the insurer should bear most of the cost of litigation, and ultimately, you should receive your freight charges, regardless of how the claim is resolved. (Note that some cargo policies have “earned freight” credits that will recompense you for the freight on the damaged shipment in any event.)

Finally, unless you have allowed the broker to trump your right by contract, you may have recourse to its customers who are involved in the offset but not the cargo claim. A property broker does not have legal liability for cargo claims and is required to keep a system of accounts showing who it billed for freight charges, when it received the payment and when it transmitted the freight charges to the carrier. You have reason to question under what basis an intermediary purports to satisfy the claims of one client with funds entrusted to it by other shippers for your benefit.