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Compliments of the Law Offices of Brusanowski & Veigel Vol. 2 Issue 4
Copyright © 1996, Charles H. Veigel, All Rights Reserved Fall 1996
FILING A CARGO CLAIM WITH AN INSURANCE UNDERWRITER - THE BASIC STEPS BY CHARLES H. VEIGEL, ESQ. WITH MICHAEL MCDANIEL, ESQ. OF THE CARGO LETTER
Modality differences aside, we have made clear in past editions that air and ocean claim theory is similar and both are often controlled by the very same form of insurance policy. One CRITICAL difference between air and ocean claims is the time periods during which claims must be made......and we will cover this important topic next time.
ANY cargo claim is subject to REJECTION unless each of the following steps is correctly taken. A word to the wise.
The Necessity of Notice: When goods arrive at the air or ocean port of destination lost or damaged, the consignee/shipper must immediately notify:
(1) NOTICE TO UNDERWRITER: The insurer's agent or representative at the port of destination who will either arrange for a marine cargo survey or request that the consignee take this responsibility. Some insurance companies may not even request a survey, especially if the value of the claim is small. The immediate notification REQUIREMENT is primarily to prevent further deterioration of the goods upon delivery. The cargo underwriter is not liable for any deterioration beyond the destination point. Request that the insurer's representative evaluate what steps can be taken to preserve or salvage the goods.
(2) NOTICE TO CARRIER: The carriers must also be immediately notified of claim. Often a shipper/consignee will be confused as to which party to notify when a FF (NVOCC or indirect air carrier) issues the ocean bill of lading but does not carry the actual shipment. If the shipper/consignee is aware of the actual ocean carrier that carried the goods, notice should be made to both the FF and the actual carrier of the freight.
(3) NOTICE TO GOVERNMENT: In some foreign (non-U.S.) countries, it may be necessary to notify the authorities at the port of destination/entry to secure rights to a cargo claim.
One may ask: why should a shipper/consignee notify the carrier when one already notified the insurance company? An insured shipper/consignee is under a duty to protect the cargo insurance company's subrogation rights so that the underwriter may sue the carrier to obtain reimbursement for any settlement paid to the consignee/shipper. In addition, the carrier has a right to conduct an inspection/survey of the loss or damage. The carrier may agree to a joint survey or will appoint their own team of surveyors to evaluate the circumstances of loss or damage.
Help from the CHB........In the U.S., it is common practice for many customs brokers to send the carrier an automatic notice of loss to preserve the claimant's rights when clearing the freight through U.S. Customs regardless of whether the shipment is damaged or lost. It is a good practice and all CHB's should follow it.
Talk is Cheap: The consignee/shipper should remember that they can fully protect rights by refusing to provide a clean receipt (i.e., no exceptions for irregularities) for the cargo unless it is under protest and in writing to the carrier. Also note that any communication should be in writing. The notice of damage or loss to the carrier is REQUIRED to be in writing.
If cargo damage or loss is evident at an intermediate port or a port of transshipment, the above steps should be taken. In addition, a shipper/consignee/ FF/Broker/insured should ask the carrier whether the goods will no longer be delivered to final destination and whether the bill of lading is now "frustrated." In other words, you must ask whether the carrier still intends to make final delivery. Be aware that the insurance underwriter's obligation ceases at the transshipment port if the shipment is frustrated. Immediately notify the underwriter of any such event. Steps must be taken BY CLAIMANT to prevent the further deterioration of the freight. This NECESSARY step is often difficult due to communication logistics.
The Necessity of Documents: The following is a list of common documents necessary in effectuating a cargo claim with the insurer as compiled using the informative work entitled Marine Claims Handbook by N.G. Hudson and J.C. Allen. The book is published by the Lloyd's of London Press LTD. By no means is this list exclusive as one is never surprised to learn of new documents being required in support of claims. In any event, the cargo survey often incorporates the following documents into the survey report along with numerous pictures of the loss/damage.
1. Insurance Documents: The original copy of the insurance certificate (often not issued with an air move) evidencing your right to make a claim must be surrendered, along with any supporting documents outlining how the policy is to be valued.
2. Shipping Documents: the bill of lading, invoices, packing list, certificate of origin of the goods and any preshipment survey.
3. Copies of Claim Notices: The WRITTEN notices of claim to the carrier and the port authorities (if necessary)
4. Documents to Prove Loss: Copy of the cargo survey as well as the invoice in payment for the survey. The survey will likely include evidence of the loss but you should provide a statement as to the current state of the goods. Copies of statements reflecting any post claim sale or reconditioning of the goods.
5. Documents to Prove Shortage: The same documents as in #4 (above) and any evidence to support the shortage such as a comparison to the packing list and a cargo survey evidencing the shortage.
When in doubt regarding claims procedure ....... refer to the Certificate of Insurance, where many of these requirements are spelled out.
Michael McDaniel practices transportation law at the Law Offices of Countryman & McDaniel, Los Angeles, CA. Reprinted with Permission from the Cargo Letter.
Harbor Maintenance Fee - Update
U.S. Customs recently released a policy guidance notice regarding the Harbor Maintenance Fee. U.S. Customs again acknowledged that it will collect the Harbor Maintenance Fee pending the appeal the U.S. Shoe case. Also, "Requests for Refunds" will not longer be accepted alleging that the Fee is unconstitutional. Rather, the proper procedure to allege that the Harbor Maintenance Fee is unconstitutional is through the "Protest" process.
I urge all shippers who have not preserved your rights in this area to consider filing suit with the Court of International Trade. If you have any questions concerning this matter, kindly contact Charles Veigel @ (206) 583-2330 or BVLawFirm@aol.com.
Motor Carrier Undercharge Claim: Update
A Federal Judge for the U.S. District Court for the Southern District of New York handed shippers in New York an important ruling. The Court ruled that New York could not enforce the filed rate doctrine in intrastate undercharge claims. The Court pointed to a Federal law, the Federal Aviation Administration Authorization Act of 1994, in preempting state undercharge law.
The Journal of Commerce
Bankrupt Carrier Seeking Full Non-Discounted Rate
The Journal of Commerce recently reported that attorneys for a bankrupt motor carrier, Humboldt Express, Inc., were seeking recovery of full non-discounted rates for hauls that were not paid in time. Attorneys for Humboldt claim that tariffs and credit rules provide for the collection of full rates when shippers do not pay within agreed terms, e.g., 30 days.
The Journal of Commerce