How to Avoid High-value Cargo Catastrophe
Failure to Limit Exposure Could Cost You Your Business
By Henry E. Seaton

January 1999
Reprinted from etrucker.com


Carrying high-value goods is a big risk for small fleets. Cargo theft is rampant. Fast warehouse counts can leave carriers paying for items drivers listed as received but not actually loaded. All too often, carriers face $400,000 to $500,000 in claims when they have only $100,000 to $200,000 in coverage. Such uninsured losses, or "cargo surprises," can easily bankrupt the small and unsuspecting carrier.
Unlike less-than-truckload carriers, which price according to the value of the goods transported, truckload carriers frequently price back-haul freight with little consideration to the nature or value of the shipment. Carriers will haul computers for the same rate as dog food and often do not appreciate the value of what is on the truck until it is too late.

Under the federal statute governing cargo liability (the Carmack Amend-ment), a carrier generally is liable for the full value of these high-dollar claims regardless of insurance coverage. Seventy-seven percent of interstate regulated freight has an actual value less than $5 per pound, or about $200,000 per truckload. This means that around one out of every four truckloads involves high-value shipments for which you may have insufficient cargo insurance coverage.

Congress and the Federal Highway Administration have repeatedly blocked trucking industry efforts to establish some reasonable statutory limit on motor carrier cargo liability. So it's up to individual carriers to avoid surprises.

Know in advance the approximate value of the cargo you're transporting. For high-value shipments, draft binding agreements with your shippers that limit your liability to the level of your cargo insurance. Under Carmack, it's possible, though not easy, to limit your liability to a maximum "released value" that is less than full actual value. Called "released rates," this process involves offering a lower freight rate provided the shipper accepts a limit on claims in the event of loss or damage. To establish released rates, you must:
1. publish a tariff, or rules circular, with released rates provisions;
2. offer the shipper several pricing and released-value options;
3. obtain a written agreement from the shipper to accept the released value in exchange for the lower rate, and
4. issue a bill of lading consistent with that agreement.

How do you do it? First, obtain cargo coverage which more than adequately meets your customer's needs. Second, establish a standard released valuation in cents per pound that equals this coverage. Third, get professional help putting released rates/released value language in rules circulars, which should be readily available to the shipper and provided upon request. Finally, make sure all contracts, rate sheets and load confirmation sheets note that rates reflect standard pricing and are based on the shipper's agreement to release the goods at the stated released value.

If the shipper wants a higher released value, quote a higher, or "special," rate that takes into account any additional handling and insurance required. And make sure you spell out the special rate and released value on the bill of lading.

Again, be sure that the shipper sees, knows and agrees beforehand to the released value you seek for the rate you quote. Protect yourself by obtaining the shipper's written consent. Remember the old saying, "An ounce of prevention is worth a pound of cure."

info@transportationlaw.net
(703) 573-0700
Copyright© 2006 Law Office of Seaton & Husk, LP. All rights reserved.