The Essential Guide to

Freight Insurance, Liability, and Claims

Many surprises are a pleasant experience. "Surprises are the spice of life!" ...Right? In the world of transportation risk management, surprises are the opposite of pleasant. The shipper's dream: goods make it from point "a" to point "b" in perfect condition. The reality: by some estimates, damage, loss, and theft of goods during shipping exceeds $1 billion annually.

With businesses relying on their goods to make it to market, shipping managers cannot ignore this reality. The next question is an obvious one: "When accidents happen, who is responsible?" Carriers, shippers, and receivers all have to understand the complexities cargo and liability insurance or risk bearing 100% of the responsibility for damages.  

What’s the difference between carrier liability and freight insurance?

As stated in the Carmack Amendment of 1906, the carrier is liable for the loss or damage of a shipper's property. Provided by the carrier, every shipment requires some form of limited liability coverage. However, the scope of this coverage is often narrow, and in many cases, the carrier liability coverage may be much less than the actual value of the shipper's goods. This prevents many shippers from being made whole after a shipping incident.

In that case, freight insurance (also known as cargo insurance) can fill in the gaps in coverage for a shipper. It's important to note that most carrier liability plans are designed to protect the carrier, not the shipper. Shippers should always ask about the details of a carrier's liability policy or rely on the expertise of a broker. Logistics brokers understand the intricacies of the industry and will guide shippers through many of the potential pitfalls that can happen during shipping.  

What is the Carmack Amendment?

Passed in 1906, the Carmack Amendment is a revision to the Interstate Commerce Act of 1887, which standardized the relationship between businesses with goods requiring shipping and companies that shipped them. While the amendment initially applied to transportation by rail, in 1935 it was broadened to include motor carriers. Before the Carmack Amendment, all liability standards were set by individual states, which caused a great deal of confusion when state laws conflicted. As interstate commerce grew, a standard set of regulations became needed. Since its passage, courts have uniformly upheld that the Carmack Amendment preempts state law.

What did the Carmack Amendment do?

The primary result of the Carmack Amendment is that it shifted the burden of liability from the shipper to the carrier. Shippers are not required to show proof of negligence during shipping; however, carriers may not be liable if:

1. They prove they were not negligent

2. Exceptions might include damage or loss resulting from:
- An act of God
- The Public Enemy
- Act or default of the shipper
- Public authority
- Inherent vice or nature of the transported goods

While shippers aren't required to show proof of negligence, they are required to show the goods were in good condition prior to shipping.  

What did the Carmack Amendment do?

Cargo Insurance can be applied to both domestic and international transportation and typically falls under one of two classifications:

Land Cargo Insurance

Provides coverage for any goods moving over land, including trucks, smaller utility vehicles, rail, etc. Typically these policies apply to domestic routes and include provisions for collision damages, theft, and other land-related risks.

Marine Cargo Insurance

Provides coverage for any goods moving by sea or air. Coverage might include provisions for the loading/unloading of ships/aircraft, water-related risks, and piracy. Many of these policies apply to international transportation.
A popular choice for shippers seeking freight insurance is All Risk Coverage. While the name implies full coverage, there are still some risks which excluded. Here's what's generally included in an All Risk policy:

- Damages due to inappropriate packing
- Infestation
- Cargo abandonment
- Customs rejection
- Employee's dishonesty

Other types of freight insurance include Free of Particular Average coverage, General Average Coverage, and Warehouse to Warehouse coverage. Due to the complexities of these coverages, we recommend speaking with a knowledgeable logistics broker who can point you in the right direction.

Freight Claim Management Tips:

Shippers, receivers, and carriers alike need to be informed about the potential risks associated with domestic and international shipping. In the case that goods are damaged or lost during transit, here are some action steps to take. 


If goods arrive damaged, do not sign a bill of lading until the damages are included in the documentation. Make sure to document the following on the bill of lading:
1. Damaged box/bag count
2. Lot or item number
3. Product description
4. Type of damage


The process for handling claims varies based on whether or not you chose to invest in freight insurance. If your shipment was only covered by carrier liability:
  - Your claim must be filed within 9 months of delivery
  - You must provide proof of value and proof of loss
  - You must prove carrier negligence (the freight was picked up in good condition and packaged correctly but was damaged during delivery.

If your shipment was covered by freight insurance:
  - You must show proof of value and proof of loss
  - Claims are usually paid within 30 days of filing
  - You are not required to prove carrier negligence.   


Being on the receiving end of a damage or loss claim can be stressful. The worst thing you can do is ignore the claim. Here's what we recommend:
  1. Ask for documentation
  2. Communicate in writing throughout the entire process
  3. Reach out to your insurance provider to make sure the claim will be covered.  


Freight insurance, carrier liability, and making claims are complex topics that require most businesses to seek professional guidance. With the risk of your products not making it to market, we don’t recommend going it alone. The professional brokers at James River Logistics are trained to help you navigate these complexities, giving you peace of mind that your shipments will arrive on time and in good condition.

To learn more about how we can help, reach out to one of our team members.