Gone are the days of carriers covering $25.00/lb in liability, gone are the days of the NMFC rules being the bible which all follow, and here today are the days in which we need to be transparent and educated regarding carrier liability limits, carrier rules and conditions (Rules Tariff) and options for additional insurance coverage.

The intention is not to take a deep dive into liability and freight claims and all that surrounds that world, yet instead, to focus on a vital step in the beginning of the shipping process that can protect you and your freight. This will mostly apply to LTL freight running with common carriers and air freight running with forwarders, however, we will touch on full truckload briefly. So first, I’ll cut to the chase, then I’ll explore the more …

The Chase

Confirm with your broker the liability limit of each carrier with whom they are quoting.

Have the true value of your goods available at time of quoting (this is the cost to manufacture or your cost to repurchase the goods for resale).

Be sure you are evaluating based on the true class of your goods per the NMFC (National Motor Freight Classification).

Evaluate the need for additional insurance and be sure to factor that into your total freight costs, especially if you are passing those along to your customer.

The More

I have witnessed the decrease in common carrier assumed liability when it comes to replacement value of lost or damaged goods. At one point in time (I refuse to admit how long ago), there was little concern in domestic freight about insurance and liability limits, this was something that belonged to the international arena in the land of Marine Insurance due to container lines’ very low (read: ridiculous) limits of liability on the contents of the containers. On the domestic side, most carriers covered a reasonable level of liability in the event of loss or damage; we rarely dealt with an issue of freight being underinsured. Sadly, this is no longer the reality as more and more common carriers have chosen to reduce their limits of liability, some perhaps less transparently, and some brokers have, too, decided to move forward with little conversation regarding this vital piece to the puzzle.

We lost an account many years ago to another broker who came in and slashed the pricing. It happens; we are all aware of the name of the competitive game. A couple of months into the transition, the customer called as the new broker’s assigned carrier had misplaced a pallet of freight worth well over $60,000. Yes…one pallet. The weight on the pallet, given what I know about the freight, was roughly 1800#. A quick calculation gives you an approximate value of $33.33 per pound on these goods. What was part of our higher rates was the coverage for full value on their freight being in place, this had been in effect for so many years, it was all but forgotten, until this call came through.

So … what’s the best practice for this scenario?

Provide the value of your goods at the time of quoting, ask your broker about the underlying limit of liability on the particular item(s) you are shipping. Once that is clearly communicated, then you can decide whether the presented limit is enough insurance for your product (should any loss or damage occur), or whether you would like to explore additional insurance that will cover the full value of the freight. If you do pursue additional insurance, we can quote you the additional cost to insure full value and generate a certificate of insurance for you at the time of shipping. This, then, gives you piece of mind that your product and your bottom line is protected.

Most online platforms let customers run their own rates, generally if you pay attention to the details as each carrier is listed, there will be mention of the specific carrier’s limit of liability given the class plugged in at the time of quoting. (This part is important, if you have an FAK, be aware and clarify with your broker the true limit of liability, is it the actual class? Or the FAK? Chances are, it is the FAK, and that limit is generally less than the actual class.).

One more place that you need to be aware of this limit is with air freight, most coverage I see out there by default is roughly $0.50/lb. This is essentially what you find in the land of personal property movers, too, horrible… Can you imagine spending $4,000 to air freight something only for it to be damaged, and still technically be liable for the freight bill, all while only recouping $0.50/lb of the value on the damage? This could be a devastating blow for a business.

Lastly, the world of partial truckload and truckload deserves a quick moment. The minimum requirement for insurance coverage in this arena is $100,000 per truckload. If you are shipping a truckload of freight worth more than $100,000 tell your broker and request more insurance. There are many carriers out there that carry up to $250,000, but more commonly the minimum is the carried coverage. In the case of a partial, that entire truckload is insured to a limit of $100,000, this could pose problems if you have about ten feet in the truck worth $80,000, rough calculation, that ten feet is covered to about $18,870. There are many ways this $100,000 can be split and the timing of claim filing has an impact, so in an effort to keep this brief, please contact me with any questions you may have regarding this specific topic.

It kills me that these limits are not clearly communicated to customers. As a broker, we show up in the true capacity of our job, we are the experts at moving freight. Customers coming to Streamline have a direct line into decades of experience, not only of LTL, but air freight, rail, partial truckload and truckload shipping. Our greatest value at Streamline is our knowledge base and the responsibility we feel to provide an unparalleled level of service, communicate concerns along the way and address any pain points effectively and efficiently.

Your freight is your livelihood, make sure proper protection and care is in place to keep your business moving securely.

**For further discussion on this, please always feel welcomed to call me direct or shoot me an email, text, or even zoom (if you haven’t quiet gotten your fill of video meetings over the past few years).

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