Cut the Confusion Out of Shipping Claims
Filing claims is, unfortunately, a fairly standard part of a shipper's job. But, that doesn't make it easy or pleasant. Thankfully, with the right processes and documentation, receiving compensation from carriers can be a fair process that takes minimal time out of your day.
Swinging claims in your favor often depends on how prepared you are before things go wrong. Take a look at our breakdown below so you're ready when shipments hit the fan.
Shipment Claims 101
Let's start with the basics. What is a claim? This is a statement from a shipper or consignee declaring that a carrier breached a contract. A breach of contract boils down to shortages (full or partial non-deliveries) and damages.
The bill of lading (BOL) should define the contract terms between carrier, shipper and consignee. The BOL acts as legal documentation and a foundation for any claim. Make sure the BOL lists all necessary shipment details accurately, including National Motor Freight Classification® (NMFC) and signatures from the shipper and carrier before loading items on a truck. Upon delivery, the recipient should inspect items and document any issues (exceptions) on the proof of delivery (POD). Poor documentation throughout the process leads to declined claims or partial payments, so don't be shy about making carriers wait an extra minute while you check things over.
How to file a shipment claim with carriers
Something went wrong with your shipment – now what? There's a process to follow, thankfully. And with your documentation in order, filing a claim won't take much time or give you grey hairs.
1. Inspect items. The consignee will need to do this, but if the recipient refuses the order, you should inspect items when they return. As said before, the POD needs accurate, detailed notes for a successful claim. Take photos, and don't discard any materials until the claim reaches a resolution. Keep the boxes, inventory, stretch wrap and anything else.
2. Notify the carrier. Before filing a claim, send a Letter of Notice (also known as a Letter of Intention) via fax, email or certified mail (you need a record of receipt). This is not your official claim, but is required before sending an official claim. This letter must state your intent to file a claim and the PRO number of the shipment. You may also provide:
- Carrier and shipper information
- Description of shipment
- Loss amount (the full CIF value or net losses after the lost value is assessed)
- Reference numbers
- Contact information for follow-ups, including carrier inspection
3. Prepare documentation. This includes:
- Shipment invoices, paid by the shipper
- Yes, you must pay your carrier's invoice before filing a claim, but you can include freight charges or replacement freight charges in your claim (not both).
- Proof of inventory value (retail invoice showing cost of goods and original manufacturing or purchase invoice if the claimant is the shipper)
- Itemized losses with exact claim amount
- Salvaged items (if any)
- The claimant is required to mitigate losses from damages by selling the product at a discount, salvaging goods or repairing items.
- BOL documentation
- Delivery receipts
- Notification letter (and proof of notification)
- Photo evidence showing damages to packaging and items
4. Send your claim. This document formally states the claim at hand and the evidence supporting the claim. There is no governmental or regulatory form for this – use company letterhead. Send the claim directly to the carrier – not its insurance company.
One of the biggest causes of declined claims is failure to correctly package shipments in accordance with guidelines from the National Motor Freight Traffic Association. This is solely the shipper's responsibility, so be sure to check (and document) packaging.
Shippers have nine months after the delivery date to file a claim. If it is a non-delivery claim, the nine-months start from the date the shipment was picked up. (File a claim as soon as possible to avoid any discrepancies.) However, if shippers don't declare damages or shortages on the POD at the time of delivery, the carrier requires the Letter of Notice within five days of delivery.
After filing, carriers have up to 30 days to acknowledge a claim, then another 120 days to determine a resolution (a full, partial or declined payment) or request additional information. Keep all materials until the process runs its course. The carrier may request to salvage the goods or inspect the inventory and evidence. If you receive full payment, the carrier essentially buys the items from the shipper. It becomes their property in whatever condition it is in, so do not destroy or discard the items.
How do insurance and carrier liability factor into claims?
Shipment coverage plays a part in the claims process and the amount you're eligible to receive. Carriers offer limited liability for shipments, meaning that they dictate the maximum value of compensation in the event of product loss or damage. This is not insurance, and it's common for product value to exceed carrier liability – meaning that you won't recover the full value of your items.
Liability requires that shippers prove carrier fault and item value, requiring documentation and investigation. Insurance, however, offers extra coverage (for an additional cost) that helps you with full reimbursement of items. With insurance, you still need to establish carrier fault for damages, but the burden of proof is far less strict compared to liability.
Managing claims takes time away from focusing on getting orders ready or tackling other projects. As a third-party logistics partner (3PL), Worldwide Express can file and manage claims for you, offering templates for proper documentation and advocating a positive resolution. Let's connect and see how we can help.