Logistics and Legal Rights: Where Do Shippers Stand?
01/23/2020 — Jen Deming
Every shipper will likely encounter loss or damage and seek reimbursement by filing a claim. In order to navigate this tricky scenario, smart shippers become their own advocates by taking a deep dive into the legal policies that affect shipper's rights and responsibilities. When going against powerhouse national carriers who have every resource in their corner, you can arm yourself with critical information that helps you get the best outcome possible for your business.
The Carmack Amendment Basics
First things first, the term "Carmack Amendment" is frequently thrown around in the industry, but what exactly is it and why should shippers care? Put simply, this law was set in place in 1935 to draw the line between carrier and shipper liability. Prior to that, with the Bill of Lading (BOL) serving as a legal contract of carriage, carriers were almost exclusively held responsible for damage or loss. With the passage of the amendment, it was determined that the carrier should be held responsible unless one of the outline exclusions is met. This change let to a positive impact on the industry, incentivizing both carriers to proactively prevent theft and shippers to more effectively prepare their freight.
5 Carrier Exclusions to Responsibility
The Carmack Amendment clearly outlines five specific instances in which a carrier is not to be held liable for damage, delay, or loss to freight. These events are intended to protect the carrier from circumstances outside of their control. The five are:
- Acts of God: A carrier cannot be held liable for instances of natural disasters or other uncontrollable phenomenon such as severe weather, medical emergencies involving a driver, etc. In order to act under this defense, the event must be notably unanticipated and unable to be avoided.
- Public Enemy: Carriers are exempt from damage liability if the incident was caused during a defensive call to action by the government, or "military force". While there has been relative peacetime on American soil for quite some time, the "public enemy" defense has also applied to acts of domestic terrorism in some recent court cases. It does not include events caused by hijackers, cargo theft, organized crime, or other criminal acts.
- Default of Shipper: This is the most notable exclusion for shippers to be mindful of and indicates any event that the carrier can prove damage was caused by the shipper. This can include a defense of negligence, poor packaging, improper labeling and other mistakes made during preparation. The majority of carriers will try to prove these circumstances if there is any doubt a shipper could have made a mistake. Shippers must properly offset this risk with secure packaging, correct labeling, and maintaining communication with your customer for delivery.
- Public Authority: If the government takes action that results in damage or delay, the carrier is not liable. Government policy cannot be controlled, so road closures, trade embargoes, recalls, and quarantines all exempt a carrier.
- Inherent Vice/Nature of Goods: Some commodities are naturally subject to deterioration over time, and as long as the defect was not caused or sped up by the carrier negligence, they are safe from liability. A common example of high-risk commodities include produce, live plants, and medical supplies. If you are shipping temperature controlled or time sensitive products, be sure that you are taking every precaution to ensure security and viability.
Just as there are five distinct factors that exclude carriers from responsibility, there are three factors the shipper must prove in order to start a damage claim. To begin, it must be demonstrated that the shipment was picked up in "good" condition. This protects the carrier should the shipment have been damaged to begin with. In order to defend yourself, take pictures of your freight before it is picked up proving all is well. Collect invoices, product descriptions, and item counts so that you have a leg to stand on in the case of any loss or shortage.
Secondly, the shipper must prove that the load was delivered in damaged condition. Complete a thorough inspection before you sign and again, take pictures of everything for proof. Concealed damage, hidden and only discovered after the carrier has left, is a tricky area for claims. Open and dismantle your packaging at delivery to check for issues, and don't feel bad for delaying a driver. If there is any doubt at all, make a note on the delivery receipt. If you are not present for delivery, make sure clear expectations are established with the receiver or customer so that everyone is on the same page.
Lastly, the shipper has to prove that the freight damage resulted in a specific amount of loss. It won't work to throw an arbitrary number in a freight claim, so collect itemized receipts and quotes or bills for replacement or repair costs. Be reasonable and accurate in your request.
Fair Compensation Rights for Shippers
Even if the shipper does everything right, claim payouts are rare what would would expect. Carriers do everything in their power to minimize financial losses, so they will look at every loophole possible. So how does a carrier determine a claim payout?
The amount is typically determine by a set dollar amount per pound based on the commodity. It's important to review carrier tariffs and agreement limits before you ship your product. Some carriers will pay nothing on a used item, so be sure to review the fine print. It's also critical to have an accurate BOL. If there are incorrect details, you're likely to see that reflected in your payout. It's also important to note that a carrier claims department will examine the damage, and limit a payout if they feel the product can be salvaged or repaired at a lesser amount than what is requested.
Since carrier liability is limited, a smart shipper will obtain supplementary freight insurance. It's a super smart option for anyone shipping fragile goods or a high value commodity. While most carrier liability only pays out a certain dollar amount per pound of freight, freight insurance can be purchased in the value of coverage you need, and you are not required to prove the carrier is at fault.
It's important to note carrier compensation timelines for payouts. A carrier should acknowledge receipt of the claim within 30 days, with a ruling completed within 120 days. In the event of a denied claim ruling, the shipper has a right to file a lawsuit. Most need to be filed within 2 years and one day, but there are exceptions so it's best to work quickly.
Shipper's Requirements for Proper Claim Filing
It's up to the shipper to follow a precise protocol in filing a claim to increase their chances of a suitable resolution. Collecting as much hard evidence as possible will help your case. Seeking written statements by warehouse receivers and testimonies of loading procedures, as well as video evidence can assist your cause. Being thorough is crucial but working quickly is just as important, so be mindful of deadlines. You have nine months from the delivery date to file, but for those concealed damage cases, you have five days—so get on it.
Documentation you may need to file:
- Proof of delivery
- Original BOL
- Freight bill
- Merchandise invoice
- Replacement invoice or repair bill
- Pictures of damaged freight
Knowing the basics of the Carmack Amendment and how they relate to shipper's rights helps protect your business in the event of damaged or lost freight. the best part is, you don't have to go through the claims process alone. Working with PartnerShip can ensure you have an informed ally looking out for your best interests and your company's bottom line. For a thorough rundown on freight claims, download our free white paper.