Limiting Your Risks in Cargo Claims
By Henry E. Seaton

October 1998
Reprinted from

When it comes to cargo claims, small trucking companies too often face nasty surprises. Understanding claims procedures and liability can help you avoid an unexpected financial blow. For instance, when it comes to regulated shipments, where the liability rests depends on the type of transportation - common carriage or contract carriage.

Common Carriage

For common carriers, liability is determined by federal statute (the so-called Carmack Amendment), by federal regulations (claims rules) and by rules tariffs published by carriers. The liability for cargo loss under federal statute is the actual value of the lost or damaged article, which is most often measured by the destination market value. A claimant must file a written claim, including its invoice or other evidence of value, within nine months of delivery. Claims are handled in accordance with uniform claims regulations (49 C.F.R. 370). Unless the shipment meets the "shipper load and count" requirements of the statute, you are presumed liable upon notice of damage or shortage at the time of delivery. There are five exceptions or defenses that let you escape liability. They are damage caused by an act of God, act of public enemy, act of shipper, act of government (force majeure) or the inherent vice or nature of the goods.

Although the shipper can recover the full delivered price of lost or stolen articles without showing carrier negligence, portions of federal law do benefit carriers. For example, shippers are required to mitigate damages - accept a damaged or short load and take reasonable efforts to reduce the claim by repackaging and repairing damaged items. You are not required to meet particular trains or sailings, and you must provide reasonable dispatch only. Unless you are aware of and accept added responsibility for late delivery, you are not responsible for consequential or special damages such as production interruption.

Finally, as we will discuss in the next issue, a carrier under common carriage can publish its own rules in accordance with the statute and regulations in order to reduce its liability and avoid catastrophic claims.

Contract Carriage

Carriers who transport shipments by contract can, with their shippers, waive the statutes and rules in writing and determine cargo loss by written standards agreed upon by both parties. Many shippers insist on contracts as a prerequisite to handling their freight. There are several potential cargo liability traps in the standard language of most shipper-prepared contracts, however. Watch out for broadly worded clauses that require you to indemnify and hold the shipper harmless from all loss regardless of fault. Do not agree to let the shipper deduct the value of the disputed cargo claims from the freight charges he owes you. This practice, called "set-off" or "off-set," can deprive you of the right to adjust the claim and deny you the ability to recover from your own insurer.

Be pro-active whenever possible. Read shipper and broker contracts carefully! Require that your freight charges be paid without set-off. It's fine to establish a simplified cargo claims resolution method, but do not let the shipper alone decide when and how much you should pay. Don't waive the provisions of federal statutes and regulations that limit your exposure. Know the nature and value of your cargo. All too often, carriers sign load confirmation sheets without knowing whether the shipment is computers or bags of cement, used machinery or dog food. One load can be worth $10,000, the next $500,000.
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