For decades, carriers have been subject to the Carmack Amendment’s exceptions and statutes that define liability. However, the surge in manufacturing and increasing presence of international shipping have changed the way shippers look at the Amendment. In today’s competitive market, filled with customers’ scrutiny and expectation for quality products, more shippers need to understand what the Amendment does and does not cover, including how it impacts freight claims and third-party logistics providers.
Needing to a file a freight claim is not a process that shippers plan for, but it needs to be an option. Things happen during shipping. Natural disasters, an act of war or other major events can “derail” a shipper’s plans, and the liability may rest with the shipper, not the carrier, as some would assume. Technically, any freight claim can be subject to the limitations within the Carmack Amendment.
The Carmack Amendment holds carriers responsible for damages to freight that occur without proof. But, it limits liability by providing five exclusions, including an Act of God, damage caused by a public enemy, items that are inherently damage-prone, shipper’s failure to properly package products and damage resulting from changes in public policies. Yet, the burden to prove these actions can be difficult. For example, an act of terrorism may not necessarily qualify shipments for an exclusion. So, shippers need to assume that carriers are not liable for damage. Moreover, shippers should consider how minimal limits of liability under the Amendment may impact freight claims.
Freight claims’ insurance, like most insurance policies, follows similar industry standards for deductions, limits of liability and haste of filing a claim. In other words, a shipper may be limited in how much financial restitution that can obtain when a shipment is damaged. This is in addition to the financial limits of liability defined by the Amendment.
For example, today’s expensive products may cost more than the Carmack Amendment allows within its limits of liability. So, even if an Act of God or other exclusion does not occur, shippers may still be on the proverbial hook for any value that exceeds $500. Meanwhile, failure to file claims promptly may still result in the denial of a claim. Consequently, more companies are using 3PLs to handle everything.
3PLs provide every type of service imaginable, ranging from carrier selection to packaging and warehousing. Thus, the Carmack Amendment may impact 3PLs for their role as both a shipper and carrier. However, the Amendment’s limitation also demonstrates how certain 3PL-related benefits can simplify the claims’ process.
Service providers have an option to cover additional damages not specified in the Carmack Amendment. So, even the worst-case scenarios may be covered. Essentially, contracts can overrule any portion of the Amendment, protecting shipments and carriers from liability. The key is making sure that freight contracts clearly define this liability, so 3PLs can help by acting on behalf of shippers in contract negotiation.
Handling classification of bills of lading is another key way 3PLs are useful with respect to the Carmack Amendment. Since multiple types exist, creating and transferring an appropriate bill of lading amounts to having the appropriate documentation needed for claims’ filings and processing. In other words, a claim could be denied on the basis on an inappropriate bill of lading, but a 3PL can handle creating such documents. Thus, shippers are not liable if an accident or error occurs. However, it is important to have any such responsibilities defined in the 3PL-shipper contract as well.
There are people in the world that will make shippers and carriers out to be the “bad guys.” Customers do not see that an Act of God or other event caused damage. They only see damaged product, a failure for the seller to provide goods as promised. So, shippers need to make sure that they have an accredited, authoritative figure behind the whole process, including if a freight claim is filled. This is where 3PLs are most important.
Depending on the level of services used, your organization may have the 3PL defend your liability on your behalf. Meanwhile, you may benefit from freight claims’ protection riders in your policy, allowing your organization to continue operating without disruption because of a claim. Essentially, 3PLs can handle the claims’ process, properly represent your company and keep you in accordance with the Carmack Amendment, including purchasing additional coverage when necessary. The Carmack Amendment is complex, and you need a partner that understands it to help your business grow.
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