Cargo Claims – Less than Truckload
August 5, 2016
Author: Jesse Drolema
Less than Truckload (LTL) carriers are an essential part of the supply chain. They are an effective way for shippers to break down and send one pallet or a couple pallets at a time to distribution centers spread throughout a certain territory. In this article we will take a look at what an LTL carrier is, any additional exposures that exist, and how a cargo policy would respond to a LTL claim.
What is an LTL carrier?
LTL shipments typically weigh between 151 and 20,000 lb. Less than Truckload carriers use “hub and spoke” operations where small local terminals are the spokes and larger more central terminals are the hubs. Spoke terminals collect local freight from various shippers and consolidate that freight onto trailers for transporting to the delivering or hub terminal where the freight will be further sorted and consolidated for additional transporting. In most cases, the end of line terminals employ local drivers who start the day by loading up their trailers and heading out to make deliveries first. When the trailer is empty, they begin making pickups and return to the terminal for sorting and delivery next day. Typically, small equipment like box trucks are used for these local hauls. Deliveries are performed in the morning and pickups in the afternoon.
Additional Exposures for LTL carriers:
There are a few exposures that are more concerning to LTL carriers verses a standard motor carrier hauling dry van loads. I’ve spoken with a number of underwriters and claims adjusters on what additional exposures exist to the LTL carrier, at the end of the day, it is still hauling freight with a truck. However, the freight is touched a lot more which can lead to more Cargo claim frequency. Also, loads can be mixed with different types and classes of commodities. This proves it is vitally important to be aware of what is being loaded on your trailers. One suggestion by an adjuster was to be careful of what is mixed in with food products. The smell alone of another product that food is loaded with can cause all the pallets of food to be rejected, or even the entire load.
How do Cargo Policies respond?
You might be thinking, what additional coverages is this agent trying to get me to purchase? The answer is, none. I spoke with Monte Richards, Cargo/Property Claims Specialist for CBCS, who adjusts claims for Hartford and Truck-Pak in our office. LTL is adjusted no differently than any other claim. However, there are several items you should look for. First, since these loads typically include multiple shipments, there can be 10 or more claimants if something happens to a load. Helping with paperwork can insure timely payouts if you are determined to be responsible for the loss. Pay attention to your Cargo policy deductible. Many LTL carriers pay for damaged pallets out of pocket since they are often below the cargo deductible, especially if it is just a single pallet that is damaged.
LTL carriers limit their liability through the use of a tariff. The tariff is typically published on the BOL (Bill of Lading) or it at least shows where to find the tariff. The tariff is used to limit the liability to the carrier which can be good and bad. The limitation of liability helps keep claims under the deductible and loss payouts low. However, it can also create lower rates to take the load and lower profitability. In speaking with Monte, that is the first place he looks to see what will be paid out for the LTL claim. I recommend paying attention and knowing about the tariffs. Even if you are not an LTL carrier and are not using a tariff on your BOL, I suggest you look into it as a way you limit your company’s exposure.