Freight Insurance and Freight Liability - What's the Difference?

What happens when a freight shipment is lost or damaged? Who pays and what is the claims process? These are just a few of the questions we receive on a regular basis from clients utilizing freight shipping. Understanding how the freight claims process works is key to receiving the maximum value from a potential loss.

Keep reading to find out everything you need (and want) to know about freight insurance and freight liability now, then contact the team at Amware for a free quote on your next LTL shipment.

What is Freight Liability?

In 1935 Congress passed the Carmack Amendment, a law designed to level the playing field in interstate shipment. Specifically, the law states that in the instances of damage during transport, the carrier is liable for any damages incurred to the goods they’re transporting. In the industry, this is commonly called “freight liability” or “carrier liability.”

Unfortunately, in some cases, the carrier will not be held liable. However, this is only in instances in which they can prove they were not negligent. In order to hold the carrier liable under the Carmack Amendment, shippers must be able to provide evidence of three things:

1. The good condition of the shipment when received by the shipper
2. The damaged condition of the shipment when they were or were not delivered
3. The cost or amount of the damages to repair or replace the goods

Under the Carmack Amendment, there are several instances in which the carrier cannot be held liable for damages to cargo. These include the following:

• An act of God, such as a tornado, flooding, or health emergency of the driver
• Public Authority, such as government intervention
• Act or Default of the Shipper, i.e. if the shipment wasn’t packed properly
• The Public Enemy, such as an act of terrorism or war
• The Nature of the Goods, such as deterioration or decay of a perishable good

What is Freight Insurance?

Because many instances of freight damage are covered under the Carmack Amendment, and many more are not covered by the law, many shippers choose to lower their risk by investing in freight insurance. Choosing the right insurance policy can be a bit of a challenge since no policy will completely cover all instances in which Carmack does not apply.

However, reading the insurance policy options closely will ensure shippers find a policy that meets the specific needs of their shipment and their business. The best way to ensure you’ll receive the greatest reimbursement is to know what to do with the damaged freight, and maintain a clear understanding of what is and is not covered under the freight insurance policy.

Learn More with Amware

Is the freight claims process still a bit unclear? Check out our article, “How to Deal with Damaged Freight” to find out what to do when your freight is damaged, from where to file the claim to how long to keep the damaged freight. Then get in touch with the team at Amware to learn more about our proprietary software Amrate, which offers integrated claims processing.

Ready to get started? Click below for a free, no-risk trial of Amrate, our industry-leading transportation management system.