Freight damage claims: evidence, timing and recovery

Why damage claims fail

A damage claim is an evidence exercise. The goods are damaged, the loss is real, and yet the claim is refused because the delivery receipt was signed clean, the photographs were taken after the pallet was broken down, or the notice arrived after the contractual time limit.

The other common failure is the liability limit. A carrier's liability is usually capped by an international convention or by its trading terms, and the cap is often based on weight rather than value. A shipment of high value, low weight parts can be badly under insured if the cap is the only route.

The practical lesson is to treat the first hour after arrival as part of the claim. The inspection, the note on the delivery document and the photographs are the foundation for everything that follows.

Inspect before you sign

Check the trailer, the container and the pallet before you sign the delivery document. Look for crushed cartons, wet packaging, shifted loads, torn stretch wrap, broken seals and evidence of a drop. If the outer packaging is damaged, say so on the delivery document at the point of signature.

A clean signature is not always fatal, but it shifts the burden. The carrier will argue that the goods were in good condition when they left its control. A note such as cartons crushed on the near side, or pallet 3 wet, is enough to preserve the position without turning the driver away.

If the damage is severe, consider refusing the shipment or accepting it under protest. A refusal can create its own problems, including storage and a return freight cost, so take advice before refusing a full container. For a parcel, a photograph before opening is often the most useful step.

Do not unpack the whole shipment to inspect one carton. Keep the packaging intact until the survey is done, or photograph each layer as you open it. A claim file with a clear sequence is much stronger than a pile of loose images.

The evidence pack

Build the file in a fixed order so that a surveyor or an insurer can follow it. Start with the commercial documents: the invoice, the packing list, the purchase order and the transport document. Then add the delivery note with the damage note, the photographs and the survey report.

Photographs should show the label, the carton, the pallet, the damage and the goods. Include a wide shot that shows the whole consignment and a close shot that shows the defect. A photograph with no scale is hard to use, so put a rule or a known object beside the damage.

Keep the damaged goods and packaging until the claim is settled. Insurers and carriers have the right to inspect, and a discarded carton can end the claim. If storage is a problem, ask for written permission to dispose of the goods and keep the photographs and the survey note.

Quantify the loss. Separate the value of the damaged goods, the salvage value, the cost of rework or replacement, the freight and the administrative cost. A claim that asks for a round number without a build up is harder to settle.

Who is liable

Liability depends on the contract, the mode and the point at which risk transferred. Under an Incoterm, risk passes at a defined point. If the damage happened before that point, the seller or its carrier may be responsible. If it happened after, the buyer carries the risk.

For sea freight, the carrier's liability is usually governed by the Hague Visby Rules or a national implementation. For road, the CMR Convention often applies across borders. For air, the Montreal Convention applies. Each sets a limit per kilogram and a notice period, and each has exceptions.

The forwarder may be liable for its own negligence, but its trading terms often limit that liability. The insurer is often the practical route, because a cargo policy can cover the full value rather than the convention limit.

Establish the facts before you allocate blame. A survey that identifies the cause, such as inadequate packing, water ingress or a handling impact, is more useful than an argument about which party is at fault.

Time limits and notice

Notice periods are short. The exact period depends on the mode and the convention, and it usually runs from the date of delivery. A claim that is notified late can be refused even when the damage is obvious.

Put the notice in writing and keep proof of sending. Send it to the carrier, the forwarder and the insurer as applicable, and quote the transport document number, the delivery date and the damage note. Ask for acknowledgement and a claim reference.

Do not wait for the survey before notifying. A notice can be sent with the facts you have and supplemented later. Waiting for a full report is one of the most common reasons a claim runs out of time.

Diarise the notice date, the survey date and the claim submission date. If the claim is complex, ask the insurer for an extension in writing rather than assuming one will be granted.

Running the claim

A claim has a sequence. Notify, preserve, survey, quantify, submit and follow up. Each step has an owner and a date. A small internal log with those fields is enough to keep the file moving.

Submit the claim with a covering letter that sets out the facts, the evidence and the amount claimed. Keep the tone factual. A claim that reads as a complaint is easier to park than one that reads as a file.

Follow up on a schedule. Ask for the claim reference, the assessor's name and the next step. If the claim is disputed, ask for the reason in writing. A written reason is the basis for an escalation or a recovery action.

Record the outcome. If the claim is paid, note the amount and the deductions. If it is refused, note the reason and whether the packaging, the route or the insurance needs to change. The next shipment should benefit from the lesson.

• Notify in writing on the day of delivery, not after the survey.
• Keep the goods and the packaging until the claim is closed.
• Quantify the loss with a build up, not a round number.
• Diarise every deadline and ask for extensions in writing.

Preventing the next claim

Most damage is predictable. A carton that is too weak for the pallet, a load that is not strapped, a container that is not lined, or a part that is packed without a separator will fail somewhere on the route.

Ask the supplier for the packaging specification and test it on a sample shipment. If the part is heavy or fragile, specify the pallet pattern, the corner protection and the strapping. If the route includes a transhipment, add extra protection.

Insure the shipment at the right value, and check whether the policy covers the whole door to door move or only the sea leg. A policy that stops at the port leaves the inland leg exposed.

Finally, review the claims history once a year. A repeated damage type is a packaging or handling problem, not bad luck. Fixing it is usually cheaper than another claim.