Shippers generally detest dealing with subjects or problems they do not really understand. Loss, damage and delay claims are usually in this category because carrier liability is a legal subject requiring more education and training. When a carrier denies a claim, most shippers accept the carrier�s declination without question. Some make one attempt to contest a declination, then close the file upon receipt of the carrier�s explanation for the declination.
Our experience with carrier declinations, however, indicates that carrier claims personnel may not have a proper understanding of the laws and regulations governing their liabilities. Some carriers even appear to have a policy of initially declining every claim.
This article deals with claims for loss, damage and delay, as well as cargo insurance. Money-back guarantee refund claims (the latest controversy that appears to be brewing) merits its own article. Those interested in this topic may contact the author directly.
Loss, damage and delay claims
This subject is relatively simple for parcel shipments, compared to larger freight shipments due to the fact that all parcel shipments have a very low level of liability imposed on them, such as $100 per package, 50� per pound or $50 per shipment.
The obvious purpose of these historically low limits of liability is to shift the risk of loss of higher values to the shipper. Shippers not willing to accept this risk must weigh the cost of obtaining an insurance policy to cover values over $100. Insurance offered by the carrier may not be the best choice. Fortunately, there are private insurance plans that charge much lower premiums. (See George Pezold�s article �Parcel Insurance� in the November 1996 issue of Parcel Shipping & Distribution or on the Web at www.psdmag.com.)
All transportation agreements and bills of lading governing interstate motor carrier movements are governed by the �Carmack Amendment,� a federal statute that makes the carrier liable for the actual loss while the shipment is in its possession. The only exceptions are when the loss is caused by an act of God, an act of war or a public enemy, an act of the shipper (such as improper packaging), an inherent vice in the product, intervention of a public authority (confiscation) or when the shipper opts, in writing, for a reduced rate in return for a lower limit of liability.
Many years ago, the Interstate Commerce Commission (ICC) granted all package express carriers the right to limit their liabilities to $100 per package in recognition of the fact that they carry a wide variety of small packages and parcels having a wide range of values. The ICC is now out of business, and no federal agency has control over parcel carriers� rates or liability limitations. When a parcel carrier issues a shipping receipt, it binds the shipper to whatever liability terms are incorporated by reference in that carrier�s tariffs or �Service Guides.� Claimants must adhere to the claim rules, time limits, documentation and other conditions specified in those tariffs.
However, parcel carriers are bound by the claim regulations previously promulgated by the ICC and now administered by the Federal Motor Carrier Safety Administration (FMCSA). They are also bound by common law rules governing burdens of proof, measures of damages, rules of evidence, etc. For instance, all common carriers have a two-pronged burden of proof that must be met or they are liable for the losses, damages or delays. To avoid liability, the carrier must prove the loss was caused by one of the five exceptions previously discussed and that its negligence did not contribute to the loss. Our experience with carrier claim declinations for the past 50 years leads to the conclusion that carrier claim representatives have never been schooled in the second prong of this two-pronged burden of proof. Therefore, claimants can increase their recoveries of declined claims, if they hold carriers to this two-pronged burden. For example, when a carrier alleges that the damage was caused by a defective package that arrived in a damaged condition, the carrier must prove how the package failed to meet specifications and explain how it was actually handled in transit. It cannot lawfully presume a package defect � it must prove an actual defect and establish its freedom from negligence.
In sum, claimants should insist on their claims against package carriers being processed in accordance with the governing rules and regulations or find a carrier that is willing and able to do so.
Cargo insurance
All motor carriers and parcel express carriers licensed by the FMCSA (and formerly by the ICC) are required to maintain cargo insurance in a minimum amount of $5,000 per vehicle and $10,000 per occurrence. Evidence of this insurance must by filed with the FMCSA and cannot be cancelled unless the DOT is given 30 days notice in advance of the cancellation. The most beneficial aspect of this insurance is the insurance company is primarily liable to the owner of the shipment for up to the minimum policy amount, without deductibles or exclusions in the policy. Thus, if the carrier is in bankruptcy or fails to pay a lawful claim, the claimant may proceed directly against the carrier. If the carrier is liable, the insurer must pay the claim, even though the policy contained a deductible or an exclusion that otherwise would free the insurer of liability.
Claimants may access the FMCSA Web page through the Internet (fhwa-li.volpe.dot.gov) to obtain the cargo insurance information for the carrier responsible for the loss on the date of the shipment. A demand should be filed, stating that the insured is directly liable for the loss pursuant to the terms of the BMC 32 Endorsement on file at the FMCSA. It has been our experience that many insurance agents and brokers are not aware of this regulation. Therefore, any insurer�s refusal to acknowledge its liability should be reported to the FMCSA.
In addition, parcel shippers and receivers need to become as sophisticated in transportation as their carriers are if they desire to minimize their costs of transportation. Buying transportation services in this deregulated environment is fraught with pitfalls that can be costly to the unsophisticated shipper. The Transportation Consumer Protection Council is ready, willing and able to assist shippers and receivers in learning how to take advantage of deregulation without assuming all of the risks.
History has shown that claimants need technical assistance in both filing and recovering claims for loss, damage and delay. It was for this reason the Shippers National Freight Claim Council was formed 26 years ago, and its role has been broadened to include many other types of claims and transportation problems. The name has since been changed to the Transportation Consumer Protection Council, Inc., but its mission remains the same: to provide education and training for shippers, receivers and claimants in transportation and logistics and to protect their interests in dealing with carriers.
William J. Augello, Esq. is the executive director of the Transportation Consumer Protection Council, Inc. in Huntington, NY, and has been specializing in transportation matters for the past 48 years. His book, Freight Claims in Plain English, has been in print for 20 years. He may be reached at williamaugello@worldnet.att.net or by calling 520-531-0203. Contact the Transportation Consumer Protection Council at 120 Main St., Huntington NY 11743, call 516-549-8984 or visit www.transportlaw.com.
