‘Trashing’ Freight Claims

Q: About a year ago I submitted the following question to a well-known lawyer specializing in freight claims: For what period of time must we, as a 3PL handling loss/damage claims on behalf of our clients, retain the closed-out claim files?

The lawyer advised that the closed claim files should be retained for one year from the date the claim was closed.

With limited space to store all of the claim files and with our desire to convert to handling almost everything electronically, I find that I now have a follow-up question: If all of the closed claim files have been scanned into our system and are being retained electronically, must we keep the actual paper files/documents?

A: You tell me the lawyer you consulted cited the Code of Federal Regulations, 49 CFR Part 379, Appendix Section F(2)(b), which does indeed require carriers and brokers to retain records on “claims filed by the company against others” for a one-year period after settlement.

I have no idea why; it seems pretty arbitrary to me, but that’s what the regulation indeed says.
However, there’s also a “law of electronic commerce,” which these days says a scanned image is just as good as the document from which it was scanned in the absence of countervailing evidence. In your shoes, I’d rely on that; scan it and pitch the paper.

Still, double-check with the same lawyer you asked to begin with; I’m not one, and I could be wrong.

Contractor Calls the Shots on Cargo Insurance

Q: I have a question to which I cannot seem to find a clear answer. I’d love to say it’s hypothetical, but sadly, it’s not.

We contracted with a West Coast company to provide computer support at a trade show in the upper Midwest. Part of our contract says we are responsible for the freight charges (exact verbiage: “is responsible for the freight”).

When we called the company for specific shipping details, they told us we could not arrange the transportation, but instead they would bill us $7,000 to move 5,000 pounds to the show. We recommended a couple of carriers who charged in the range of $2,500 for the move and would give them exclusive use of the trailer. After numerous discussions, we learned the bulk of the expense was for $1 million in cargo insurance on the computers, not the actual freight, which was in the same ballpark as our rate.

When I asked why the insurance was so high, they explained it was because every shipment has crates falling apart and hardware ends up damaged. As the conversation progressed, it became obvious this contractor uses this as a way to update its equipment.

Nowhere in the service contract does it say we’re responsible for insurance on its computers. The contractor hired the carrier, negotiated the contract and then told the carrier to bill us directly, freight plus cargo insurance. The bill of lading lists us as the payer of freight, and the Section 7 is executed.

If the trailer were destroyed in transit, how would we settle when we don’t own anything we just insured? Am I within my rights to hire my own carrier and pull my own insurance coverage?

I have no issue paying for the freight, but I don’t want any responsibility for his goods, business habits or carriers.

A: And you’ll have none; the insurance will cover that. You’ll just have a very big bill.

You aren’t going to win this one; if you choose your own carrier and insurance coverage, your contractor will simply refuse to tender the shipment. The contractor has already told you it’ll be done its way or no way.

Yes, I think $1 million is pretty high, especially if it’s because “every shipment” incurs damage from “crates falling apart.” I mean, whose crates are they?

You might care to consider that, if the crates do indeed “fall apart” in transit and damage/destroy their equipment, how will the contractor meet your needs at the trade show? How reliable is this company?

Your contract might (or might not) let you dispute this bill with your contractor — it’s arguable whether “freight” includes in-transit insurance coverage, and how much is reasonable. But the amount is too small for litigation.

Whether you stick with this contractor or find another more reasonable (and/or more local) one, take a lesson for the future: Negotiate insurance coverage separately in your contracts.

Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.

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