Mitigating Cargo Claims When A Load is Rejected- A Transportation Attorney's Perspective

From Big Truck TV

Henry Seaton is another pro in the business- a very fine transportation attorney. Although I don't know him personally, I have seen his fine work helping truckers in figuring out how to handle everything from cargo claims, contract language, and insurance legalese.

Note that there are a lot of cases where rejected loads are not covered from an insurance standpoint. First and foremost, an insurance carrier will look to see if there is actual physical loss or damage and if it is, how the claim happened. Spoilage is a common exclusion under the MTC form.

Henry's point of view(edited):

If you are going to mitigate a cargo claim, you need to do it within the first 24 hours of rejection. What we recommend to our clients is, the minute that shipment is rejected, go upstream and get out what is called an on-hand notice. An on-hand notice is a notice from you, the carrier, to the consignee, the consignor and the broker that says you have their load, it’s been wrongfully rejected, you’re going to put it in a warehouse and get it inspected – they need to come and tell you ho to mitigate the damages or its going to be sold; and if it’s sold and brings a distressed market price, that’s not the fair market price – that’s simply the price that it brought because the shipper never put it through the chain of commerce in the ordinary way. So, you issue your on-hand notice and you immediately get the product inspected.

I’ve even gone to the point of advocating that drivers carry digital cameras that have a time and date stamp on it so that when the shipment is rejected the driver can take pictures of the product in the trailer because six months after the fact a notice on the bill of lading that says, Rejected – Wet, doesn’t begin to show to what extent the product was wet. It may very well be the shipper left the doors open and the back two skids of the ice cream shipment melted in the hot Memphis sun and there’s nothing wrong with the product. Documenting the condition of the product at the time of rejection, getting it into proper temperature control and doing all that within the first 24 hours is an important way to resolve the claim.

Also, you have to realize that most motor carriers attempt to insure against that loss by having a policy of insurance. If they have the proper insurance, the insurance company will move in and take over the adjustment. But it’s a sad reality of the refrigerated industry that a lot of the policies are not all-encompassing; they may not even have reefer breakdown insurance, but the policy they do have may be limited to reefer breakdown, which means the shipment is rejected because the product is “hot”. The carrier is liable for the claim but the insurance company says the reefer was working fine so they’re not going to cover the claim. If the insurance company doesn’t have any skin in the game, they won’t be interested in helping the carrier mitigate the damages. And sometimes, with insurance companies that don’t specialize in refrigerated product, they’ll send in an adjuster who wouldn’t know whether tofu was fit for consumption or not and all they can do is a visual inspection, which isn’t worth much if you want to fight the claim.