UNITED STATES CODE TITLE 49 TRANSPORTATION

Freight carriers essentially are fully liable for the actual value of any goods which they may lose or damage. There are several exceptions which relieve the carrier of any responsibility (such as, if caused by an Act of God) or which limit the carrier’s responsibility (so-called released rates, an option which must be selected by the shipper of the goods). Basically, it is the carrier’s responsibility to deliver the goods in the same condition as tendered to it at the point of origin.

Bill of Lading

All regulated common carriers are required to issue a receipt or bill of lading for any property they receive for transportation. Shippers should be familiar with the language on the document, particularly the reverse side which may contain standard clauses, including several on cargo claims. The courts normally will apply all provisions of the bill of lading, which is signed by the shipper and carrier.

When Receiving Goods

A critical time in the establishment of a sound base upon which to build a cargo claim is when the goods are being received. A person knowledgeable about the receiving of freight should be assigned to that task. A shipping invoice, bill of lading, or other documents evidencing the goods given to the carrier and the carrier’s copy of the bill of lading or freight bill should be checked against the goods at time of delivery. Basically, the count and condition of the cartons, crates, etc., being delivered should be verified.

As goods are being unloaded, cartons, crates, containers, etc., should be counted. If there is a shortage, a proper notation should be made on the carrier’s copy and the receiver’s copy of the bill of lading, freight bill, or delivery receipt. The notation should be as detailed as possible. Such detail is necessary since notations to the effect of “subject to further inspection” or “subject to hidden loss or damage,” normally will not be accepted by carriers or courts as an establishment of carrier liability. It is best that the driver initial the document’s notated by the receiver on the receiver’s documents and the receiver initial the driver’s notations on the driver’s documents. Also, the receiver should check the labels on all cartons or containers to be certain that they belong to the receiver. Misdeliveries can occur.

The receiver should carefully check for any visible signs of damage to the cartons or containers, including any unusual “rattles.” If evidence of damage exists, the package should be opened immediately and a joint inventory and detailed description of the results of the examination should be endorsed on both the carrier’s delivery receipt and the receiver’s copy. The courts have generally ruled that a receiver of goods (consignee) may not open the containers and examine the contents before giving a receipt to the carrier, unless the containers indicate the probability of damage.

The law on the subject of accepting damaged merchandise is quite clear. The fact that goods are damaged during transportation does not of itself justify a refusal to accept them. When, however, the damage is such that the entire value of the goods is destroyed, a receiver may refuse to accept them, and hold the carrier responsible for their value. Whenever practical, however, goods should be accepted and all necessary steps taken to minimize the damage, including minimal movement of the goods and retention in original containers to await inspection by the carrier or its representative.

Filing a Claim

A loss and/or damage claim must be filed within nine (9) months from the date of delivery, or in the case of loss within nine (9) months after a reasonable time for delivery has elapsed. A claim must be submitted to the carrier in writing and (1) contain facts sufficient to identify the baggage or shipment (or shipments) of property; (2) assert liability for alleged loss, damage, injury, or delay; and (3) make claim for the payment of a specified or determinable amount of money.

The notation of loss or damage at the time of delivery does not constitute the filing of a claim. Thus, a claim should be filed immediately in writing with the carrier. The carrier may provide a standard claim form upon request but the claim may also be filed in a letter format as long as it meets the above requirements. Most claims must be supported by the original bill of lading (or a bond of indemnity in lieu thereof), evidence of the freight charges, and the original invoice for the goods shipped if it is available. To save time, these documents should be attached to the claim form or letter and copies of the documents retained by the receiver for its records.

Inspection Report

Receivers should also request an inspection of the damage which request may be done orally to save time and then confirmed in writing. Carriers may or may not include an inspection of the goods as part of their investigation. Many times the amount of the claim does not warrant its sending out an inspector. If the carrier requests the receiver to complete an inspection form, the receiver should do so to the best of its ability.

When an inspection is made, it is a “joint” inspection by the receiver and the carrier’s representative. Both sign the report so the receiver should read it thoroughly to insure its accuracy and the receiver should not agree to something which would relieve the carrier of liabilityunless the facts are correct. Examples might be that all of the damage could have been noted at delivery rather than a partial notation, or inadequate or no interior packing, etc. The completion of an inspection report does not comply with the claim filing requirements.

Claim Processing by Carrier

A carrier is required to respond in writingto a claim within 30 days of its receipt of the claim and indicate at that time if any additional documentary evidence or other pertinent information may be required by it to process the claim. The carrier must pay or decline the claim or make a firm compromise settlement offer within 120 days after receipt of the claim. If the carrier cannot process and dispose of the claim within 120 days, it must at the time of the expiration of the 120-day period and at the expiration of each succeeding 60-day period while the claim remains pending, advise the claimant in writing of the status of the claim and the reason for the delay in making a final disposition.

If a carrier pays a claim for the full invoice price of damaged goods, it is entitled to the goods as salvage. Receivers should not release damaged goods for salvage until the carrier has acknowledged liabilityfor the full value.

Concealed Damage Claims

Shipments may be received where there is no visible evidence of loss or damage but after delivery, and after signing the freight bill without exceptions, loss or damage is discovered. This type of claim is called one of concealed loss or damage and presents one of the major problems in the claim handling and settlement procedures. In these instances, the carrier, when it received the shipment, signed the bill of lading as receiving the goods in “apparent good order” without physically opening the cartons and inspecting the contents. Upon delivery, the receiver similarly accepted the shipment in “apparent good order” and made no notations to the contrary on the bill of lading or delivery receipt.

All receivers of freight should inspect the condition and count of the merchandise as soon as possible after delivery. A claimant’s position can only be improved by the prompt reporting of any damage or loss. The receiver should retain the cartons or containers, including packing material, until an inspection has been made or waived.

One of the major problems when dealing with concealed damage claims is establishing which party caused the damage. It is possible that the merchandise may have been damaged prior to, during, or after transportation. In this type of claim the burden of proof ordinarily shifts to the claimant to show that the carrier caused the damage, or, stated differently, to show that others who handled the goods did not cause the damage. Carriers will consider many factors during the course of their investigations of concealed damage claims--factors such as, but not limited to, the nature of the goods, adequacy of packaging,, movement before pickup or after delivery, when the damage was reported, retention and condition of original cartons, etc.

A claimant need not accept a declination of a claim based solely upon the receiver not having made a notation on the receipt at the time of delivery. A claimant is allowed to present evidence to indicate the actual condition of the goods and to support its position that the damage was caused by the carrier.

If it is difficult or impossible to determine definitely when, where, and how concealed loss or damage occurs, and who is responsible for it, there is no prohibition against the carrier offering a compromise offer of settlement. A claimant may accept or reject any such offer. If a compromise offer of settlement from a carrier is accepted by a receiver, the receiver might consider contacting the shipper as an additional source of recovery.

Two or More Carriers

Sometimes goods are transported by two or more carriers from point of origin to point of destination on a through bill of lading. Claims may be filed with either the originating or delivering carrier, even though it may not be known which one may have caused the loss or damage. Connecting carriers may have to confer about various aspects ofliability; but once the validity of a claim is established, they may not withhold settlement with the claimant until they agree between themselves who actually caused the loss or damage.

Insurance Requirement

All motor common carriers of property and freight forwarders are required to maintain cargo insurance for the protection of the shipping public. Under this protection, the insurance company is directly liable to a shipper or receiver for any cargo claim for which the motor carrier or freight forwarder may be legally liable. Thus, it is normal for an insurance company to decline a claim its insured has declined. However, this insurance protection is of primary importance if a motor carrier unduly delays in settlement or is in poor financial condition including the filing of bankruptcy. No limitations in the policy itself, such as deductibles, may be used as a defense by the insurance companies against claims filed under the Federal Motor Carrier Safety Administration’s prescribed cargo endorsements.

The name and address of the insurance company and the cargo policy number may be obtained by writing to the FederalMotor Carrier SafetyAdministration(FMCSA), Section of Insurance, HIA-30, 400 Seventh Seventh Street, SW MC-PA, Washington, D.C. 20590.

Commencement of Suit

A claimant wishing to bring a civil action against a carrier for any claim disallowances must do so within two

(2) years of the date the carrier gives theclaimant written notice that it has disallowed any part of the claim specified in the notice. All motor carriers are required to designate an agent for service of legal process in each state into or through which it may operate. The name of this process agent may be obtained by writing to the FMCSA, Section of Insurance, HIA-30, 400 Seventh Street, SW MC-PA, Washington,

D.C. 20590.

As an alternative to civil action, since January 1, 1996, all household goods carriers have been required to belong to a dispute settlement program which arbitrates loss and damage claim matters. The American Movers Conference (AMC) arbitration program has been accepted by the FMCSA. To qualify for the arbitration program, a claimant must send a letter of notification to the AMC within 60 days after a final offer or denial of a claim. For shipments delivered after January 1, 1996, “the carrier must not require the shipper to agree to utilize arbitration prior to the time that a dispute arises. If the dispute involves a claim for $5,000 or less and the shipper requests arbitration, such arbitration shall be binding on the parties. If the dispute involves a claimfor more than $5,000 and the shipper requests arbitration, such arbitration shall be binding on the parties only if the carrier agrees to arbitration.” 49 U.S. Code § 14708.

FMCSA Assistance

The Federal Motor Carrier Safety Administration cannot arbitrate claims and does not have the statutory authority to adjudicate complaints to a final resolution. If a claimant is dissatisfied with a claim settlement or offer to settle, the claimant must pursue civil court action except that a loss and/or damage claim on a household goods shipment also may be pursued through arbitration through the carrier’s dispute settlement program.