If you have been following our blog as of late, we have been talking about an issue in the freight world not many logistics or transportation managers (or controllers, customers, and executives) really want to deal with: freight claims. You’ve worked really hard as a company to manufacture your product, or distribute to the end customer. You’ve selected the right carrier for your needs. And then…..you hear something has gone awry. Now you must take the first 6 steps of filing a freight claim. You get everything together, you file the freight claim. Then, like those nervously awaiting college acceptance letters this time of year, you get a notification letter stating “Freight Claim Denied!” You proceed now to curb frustration and anger as you now have to go back to your boss and let them know…you are not getting all of your freight claim paid. Cue the trumpets playing “Wah wah.”
If you work in freight, you’ve lived this reality. It’s not a fun reality to deal with in our industry, but it happens. The key to avoiding it (although it’s not always possible to avoid in all cases) is to know the reasons WHY a freight claim declination can occur. Today we will give you the most common 8 reasons why you may receive that pesky freight claim declination.
The 8 Most Common Reasons Why You’ve Received a Freight Claim Declination
Freight Claim Declination Reason #1: Incomplete/Inadequate Documentation
This freight claim declination reason is fairly straight forward. You may receive a letter that says something like this:
“This letter refers to your claim involving the referenced freight bill number and corresponding cargo claim. Our initial review of your claim finds the file to be incomplete. The following indicated documentation is needed:
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- Copy of the vendor’s invoice (billing document from “Seller” to “Buyer”) supporting the cost of the claimed merchandise (Per NMFC item 300110).
- The copy of the invoice is illegible. Please mail a legible copy.
- Copy of the vendor’s invoice (billing document from “Seller” to “Buyer”) supporting the cost of the claimed merchandise (Per NMFC item 300110).
The claim is respectfully declined as filed. We can re-open the file for further consideration if the required documentation is received within the prescribed time period. Please hold all damaged product until the conclusion of the claim.”
As you can see, the carrier is willing to work with you on this declination reason. Simply resubmit the information as requested.
Freight Claim Declination Reason #2: Mitigation
This reason comes along if you have a freight claim that does not meet the actual measure of damage against the carrier’s limit of liability. You may receive a letter from the carrier that looks like this:
“Carrier liability, under the law, is limited to the actual measure of damage. It is the responsibility of the claimant to mitigate the claim to the lowest possible level. This may be accomplished by one of the following manners:
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- Having the item repaired
- Sold at a discount
- Obtaining return authorization from the supplier for inspection and credit.
When filing a revision, please include the necessary paperwork, if not previously submitted such as a copy of the original purchase invoice, itemized repair bill of sales receipt indicating the customer discount allowed.”
If a claimant is unable to mitigate, they do not have to immediately settle. The shipper can instead submit a detailed explanation of why mitigation is not possible (e.g. no scrap value, cost more to repair than replace, etc.) and request the full claim amount.
Freight Claim Declination Reason #3: Clear POD
This freight claim declination may come across if there was signed proof of delivery that had NO notation of any loss or damage. The letter you may receive from a carrier could say:
“When the merchandise was received, the consignee executed the delivery receipt and acknowledged that the freight was received in good condition, except as noted. There was no notation of any loss or damage to the freight or the outer packaging indicated anywhere on the delivery receipt.
We appreciate your business and sincerely regret any freight loss or damage claim that is filed. Unfortunately, we have not been presented with any evidence that the freight was a loss or damage while in our possession. Therefore, we respectfully decline this claim.”
The key here is to make sure that you not only inspect and document the outside of the freight thoroughly, but you also make sure you try and look for any concealed damage that could occur. The more you know about what class and what type of freight you are shipping/receiving, the better off you are at also knowing if concealed damage is more likely to occur or not.
Freight Claim Declination Reason #4: Act or Omission of the Shipper
We all make mistakes. Sometimes a freight claim declination is an amazing time of reflection to see how you can improve internally to avoid freight damage all together or be confident you did everything right on your end, meaning the freight damage is the fault of the carrier and you are owed your freight claim amount. This freight claim declination letter points to a learning opportunity so next time you are prepared:
“In the matter of the above reference claim, our investigation revealed the product was not properly packaged for shipment by a motor carrier. Our decision is based on the National Motor Freight Classification, Item 60680:
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- Batteries or Cells, listed in 49 CFR 172.101, hazardous Materials Table, see Note, item 60702, in boxes or Package 827, see Note, item 60703
Since the product shipped did not meet these minimum requirements, we must return your claim respectfully denied. “
Freight Claim Declination Reason #5: Act of God
This one is a frustrating one and not much you can do about it, according to terms as laid out in the bill of lading contract. Sometimes, none of us can be responsible or at fault for damage to freight. This is known as an “Act of God.” Recently, we received this freight claim declination:
“We have carefully reviewed your claim and have verified that your shipment was lost or destroyed in the Joplin tornado. Section 1(b) of the bill of lading contract stipulates that the carriers are excluded from any and all liability relating to an Act of God (which the Joplin tornado certainly was). Based upon these facts, we must respectfully decline your claim.”
We are not saying if you THINK your freight was lost or damaged due to an Act of God that you should NOT file a claim. But do know that your claim could be declined in these instances.
Freight Claim Declination Reason #6: Freight Bill not Paid
This freight claim declination reason is similar to a tax refund not coming your way (even though your tax software says you are owed one): you still owe money to the freight carrier. This is why it is vital that you pay your freight invoice even though there may be a freight claim involved with that shipment. The letter you receive from the carrier may look like this:
“Your claim has been amended to $373.97 for the reason(s) show below:
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- The freight charges relating to this shipment are outstanding. Please contact me once the charges have been satisfied.”
Freight Claim Declination Reason #7: Shrink-Wrapped Pallet & Piece Count
This freight claim declination is similar to the clear POD, in that you can avoid this one if you make sure you thoroughly inspect the freight when it arrives, and that you also instruct the consignee to do so as well. This takes some proactive work on your part, but it’s worth it to avoid the headache. Additionally, if you are shipping something, and there is a piece count shortage, if all you marked was a specific number of pallets, but not the exact number of pieces, your freight claim for that one piece shortage could be declined. An example letter of declination may look like the following:
“In reviewing the referenced claim, we acknowledge that an exception was noted at time of delivery for a shortage; however, our records show that the subject shipment was accepted from the shipper as 2 shrink-wrapped pallets intact. The attached delivery receipt will show that the merchandise was delivered in the same condition as it was tendered to the carrier, thus the carrier is not liable for piece count.”
If the shrink-wrap looks tampered with or rewrapped, make sure you notate that on the POD. Many customers tell Cerasis this when they are filing the claim, but did not write it on the POD and therefore the shortage is denied.
Freight Claim Declination Reason #8: Freight Found
Ever lost something at the airport and gave up all hope that you’d find it ever again? (Just ask our main blogger Adam about a story he has!) The same can be said for freight. When it’s lost, you assume perhaps it will never be found again. But as is the case with Adam’s story, sometimes the lost freight is found (which is a good thing) and you could receive a freight claim declination like the following:
“We are in receipt of your claim and all pertaining documents. We also have pulled our internal records, and have come to the following conclusion.
A review of the terminal and delivery documents indicates that the shortage in question was located and delivered. Therefore, due to these findings, we must respectfully decline this claim and refrain from any further participation. Please see the attached supporting documents.”
A freight claim declination may seem like a frustrating moment, just like getting audited by the IRS. But, like an IRS audit, if you had known WHY an audit may occur, you could have done something on the front end to save you the frustration. Additionally, when a freight claim declination occurs, you are now more knowledgeable and can handle the news more properly. How do you deal with a freight claim declination when it happens?