Preventing Claims Nightmares With Simple Proof | Episode 334

A single freight claim can wipe out a month of profit if the basics aren’t handled right. In this episode, we break down why claims spiral—unclear ownership, weak documentation, missing PODs, and insurance blind spots—and share real examples of where things went wrong and how to prevent them.

We also cover the key checkpoints at pickup and delivery, how FOB terms affect responsibility, and why relying on contingent cargo or reefer breakdown coverage can backfire. The solution: tighter carrier vetting, clearer rate confirmations, and a solid claims playbook to protect your margins.

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Transcript

SPEAKER_00 0:19

Ben, we've got frozen onions, we've got damaged lettuce, we've got ripped hospital beds. In today's episode, we are getting into all kinds of horror stories about claims and how they could have been prevented and just different tips and things you can do, uh, best practices when it comes to, you know, the uh, you know, proper loading and and taking pictures and all the good stuff. Um, if you are brand new, this is a a great place for you to learn some operational um best practices as a freight broker. There's a whole back catalog and library of other content on our website and our YouTube channel, so make sure to check that out. Share us with your friends. Um, check out the Freight Broker Basics course. We, you know, we've got a full educational option there. Um, Ben, thoughts on the uh the episode we just wrapped up?

SPEAKER_01 1:06

Yeah, the biggest takeaway is I think you definitely want to listen to it all the way to the end because we really get into the things that prevent these with specific examples. Because I think the biggest takeaway for anyone listening to this episode is that if you're brokering freight and you haven't had many claims, you typically won't learn what you need to do to prevent them until after something catastrophic or really bad happens.

SPEAKER_00 1:29

Yeah, you don't know you don't know, right?

SPEAKER_01 1:31

It's a great episode to get ahead of these things because these are the things that can absolutely tank a business, a book of business, or an entire freight brokerage. So stick with us all the way through.

SPEAKER_00 1:41

All right, let's get into it. All right, we're gonna get into a good episode here today. Ben, how's everything? Uh how's everything going for you down in Florida this fine March afternoon morning?

SPEAKER_01 1:52

In the middle of weather, so it's not super hot and it's not cold. I got no complaints.

Episode Goal And Who Should Listen

SPEAKER_00 1:56

Yeah, we've had uh again, just some pleasant, pleasant, warmer weather. I think a lot of the country has, and it's just it's just nice, no more snow. So well, cool. Um we're gonna have a good discussion today about you know preventing claims and some you know basic processes you can implement at your brokerage to better protect your customers and yourself and your carriers from headaches. We've had, you know, we can share some stories about you know the things going wrong, right? And that's kind of what prompted a lot of this. Uh, this episode is brought to you by Ascend TMS. So if you're looking for a TMS, uh it's the one we recommend. It's they're they're really the leader for the small medium broker, and um, you can get 90 days absolutely free of their premium version, no credit card needed. Just make sure you use the uh referral code in our show notes to get that 90 days free. So um let's you want to start with um, excuse me, a s the story about kind of where this conversation came from.

Preventing Claims With Process

SPEAKER_01 3:09

Yeah, I mean, well we talk all the time about the claims you have, I have, obviously, for many, many years now. And the thing that struck me with the one we were talking about yesterday is that like you kind of get into them, and then when you're going to explain to somebody like what they can or should do, you like almost immediately realize nobody has enough information to make that decision, right? Which is like my big takeaway from it. I'm like, oh, I'm like walking somebody through it. I'm like, well, here's this. I'm asking them questions, and then they're like, well, what should I do? And I'm like, well, like, we don't really have enough information for me to actually say what you should do. I can tell you what you could do, and I can tell you how this can play out based on what information you're gonna know need to get from your customer, because there's just so many different avenues these things can play out. And then the thing that you and I were talking about, I was laughing, is because it's like most people don't learn how to deal with these things until after they've occurred. And then they're like, oh my lord, I didn't know this, we didn't know this, we don't know this about any of our customers. And like, again, the one yesterday was a pretty minimal dollar amount. So, like, not like extreme or drastic, but at the very least, it's pretty interesting because it just brings to light the fact that like nobody ever thinks about these things, right? Which is true with a lot of stuff, insurance values confirming that. I every time I uncover that, it's always after something bad happened to the client. They go, hey, can you look at this? And I jump in and I'll be like, Well, hey, like this carrier doesn't have insurance, at least in your TMS. And they're like, Well, what do you mean? I'm like, well, first of all, your TMS shouldn't have let that happen. Second of all, like, let's go see if they actually have insurance. And then, like, you're down like a whole rabbit hole and you just uncover all of these operational issues that kind of some shouldn't have occurred in the first place, some are for sure preventable. And it's also not just brokers, right? Like, it's also the carriers, right? Because that's the other thing we were talking about, is like in the situation yesterday, had the carrier gotten photos at loading, it then makes it much easier for the carrier to defend it was the shipper's fault for not loading it correctly. But when you don't have pictures from the shipper or the driver at pickup and there's an issue at delivery, it's kind of up to the two of them to argue over who is more likely at fault. And like it just, I don't know, it brings to light a whole lot of things that I think we can talk through as like an example. Um you want to go through this one, or you want to go through another one?

Documentation Gaps And Unknowns

SPEAKER_00 5:32

That came up with um with us in the last month. I think it might have been like late February or something like that. There's a situation where the shipper, so it was a shipment of, I believe it was like medical examination tables, like those things you sit on at the doctor's office when you get like checked out by the doc, right? And they got picked up somewhere, loaded on the the trailer, and it instead of going to like a warehouse for to get received um by the receiver, the guy is kind of a smaller company, so he has the stuff get delivered to a storage facility, like a basically like a U-Haul type place. And um so the driver shows up there and um U-Haul calls the receiver and is like, hey, guy's here, and he's like, Cool, I'll be there in 30 minutes. Driver doesn't want to wait, starts unloading, grabs some random other U-Haul customer to help unload, and unloads the stuff and leaves. The receiver shows up and sees the products all damaged. So now it's like everyone's pointing fingers, like, who's who's at fault here? And the driver's like, when he finds out, he's like, it wasn't damaged. What are you talking about? And the carrier or the receiver is sending pictures. So now we don't know like what was the condition of the product at loading? We don't know what was the condition when the driver offloaded it. We don't know. We know what the customer sent pictures of when he got there, but it so like there's all kinds of hypotheticals came up of like was it damaged when it got loaded on the trailer and we just didn't know? Did it get damaged in route because the driver didn't secure properly? Did the driver it looked like someone like cut with a knife, like just like a razor blade. Did the driver get pissed off that he had to wait 30 minutes so they started cutting stuff up? We don't know. Did the customer um get pissed off and cut it up and then try to blame it on the carrier? We have no idea, right? And a lot of this could have been prevented had there been proper processes in place with you know getting proof of the freight's condition at loading. Um, we've seen this in produce too, where like product gets loaded before it's pre-cooled, and there's a claim, and the driver's like, I didn't do anything wrong. And the customer's like, well, I didn't do anything wrong.

SPEAKER_01 7:53

And well, can you pause for a second? Because like the one question I have is I've never run into that one, right? I'm like, that is a first. So like you have no signature on the there is no POD.

SPEAKER_00 8:06

Like, how do you even think the driver kept saying, I have a POD, I have a POD, and it's like you don't. You have a bill of lading that was signed at pickup and by you at pickup, but not by anybody at delivery. Nobody there was no one authorized to sign for that delivery.

SPEAKER_01 8:21

So, like, even if let's just say nothing was wrong, okay, in that scenario.

SPEAKER_00 8:27

Yeah.

SPEAKER_01 8:27

I guess you still owe the carrier money because they did perform the service, and the beneficial cargo owner received value for said service. So the carrier would get paid. My guess is like it would be like really discretionary as to how long or what you would do. Like, just that point alone, I'm very curious your thoughts on just hey, I left this, it was fine. Receiver says there's no issue, so I guess you would just pay the carrier.

The U‑Haul Delivery Disaster

SPEAKER_00 8:54

But like, yeah, so this is kind of where it came down to is like we because we know that there's damage and they want to claim for it, we go to the customer and we're like, or the receiver, right? We're like, hey, we need you know the following documents from you so we can prepare all of this and submit it for a claim. And the guy starts getting real snippy because like the care the it's just the carrier and the receiver just like you know, yelling at each other about whose fault it is and who has who did what right and who didn't do what right. So eventually we get everything, and we know like we know the insurance company is gonna deny it, because there's like no there's no like empirical evidence that the carrier's at fault for the damage here. Like there's just we even got like surveillance footage from the U-Hawk facility, and like you just not there's nothing to show that um that the carrier was at fault for it. So anyway, we sent you know submit the claim and we're it hasn't gone through yet, but we fully expect it to be denied, and the customer is just gonna be pissed, and they're not gonna pay us. And um, for that reason, we're probably not gonna pay the carrier. We might. I don't I don't know. We have to still work through more details of it, but like normally if there's a claim, like every everyone's pay is frozen, and um a lot of times the carrier just doesn't receive the payment that they were you know originally expecting. Usually because they're at fault for the claim happening.

SPEAKER_01 10:28

Some portion, right. Now, here's the thing that you and I also talked about that I think is really helpful for the audience to understand. And also there's like tie-ins to what the difference between brokers and truckers, right? Like at the end of the day, like per the regulations of the FMCSA, brokers are not responsible for handling a claim. It's technically between the cargo owner, the BCO, and the carrier that moved it, right? Now, that's pretty much like legally it plays out that, like, hey, that's not on us. Like, we just arrange it.

SPEAKER_00 11:00

However, we don't ever take possession.

SPEAKER_01 11:02

Uh but as a value add, in practice in practice, we get in practice, brokers tend to handle these, right? Now, from the shipper's point of view, they look at this and go, well, like you told us when you wanted to work with us that you vet your carriers, you do all this great onboarding work, you have quality drivers. So their perception is like, this is your responsibility. You hired them to do this work for us. Why wouldn't you be responsible for handling the claim? Right. So, like the perception or ground truth, right, between brokers and shippers is very different than what actually the law or the regulations state, which I find is one super interesting and really good to know whether you're a broker or a shipper or a carrier for that matter, right? Because in practice, the other thing we're talking about is like, yeah, like if it goes all the way through the court systems and you're paying attorneys, like that's likely the result. Except what is also going to happen is your shipper is going to say, like, I'm just going to not pay you the other 50 grand I owe you until you get this claim resolved, right? Yeah. Now, unless that's stated in the shipper broker agreement, the shipper also isn't legally allowed to do that either. But that happens every day.

SPEAKER_00 12:15

It doesn't matter if they're allowed to or not, they they will.

SPEAKER_01 12:18

Right. You know the thing I've never asked anybody, and I'm going to be curious to ask this next time we talk to one of the attorneys we work with is like, do you get damages if the shipper does that, isn't allowed to do it, and it goes all the way through the courts and it's ruled that the shipper owes you the money and you get your money when it's all said and done. Do you get the damages? Because like there's massive risk when these things play out for a brokerage, specifically a small one, right? Like that could tank a freight brokerage very quickly if it's a high value load. I am very curious, like, if you can sue that shipper for literally bankrupting your business.

SPEAKER_00 12:51

I'd be willing to bet that if you had the right attorney and uh uh the right situation that you could argue and and win that. Um I don't think it's gonna be I don't think it's a common thing. I think normally like we've we had an episode in the past where we had a collections attorney on. Um and I I think like your main goal as a broker is just to get the funds that you're due and not try to push it further, because litigation costs money and it takes time. And um to try and push for damages, um, you know, I think it's possible, hypothetically.

SPEAKER_01 13:29

I don't think it's probably I actually think I got that answer. I I'm surprised that like I didn't remember that because it is a pretty important aspect of this. I had an issue where I remember literally working through an attorney with one of these, and I think it was, but I don't know. We'll we'll go get that point. But let's kind of like circle back to like we can go through the example that I had with a client yesterday, because I think that's also a good one for us to kind of work through.

SPEAKER_00 13:51

Take it away.

PODs, Liability, And Nonpayment

SPEAKER_01 13:52

Okay, so customer in this instance working with a broker, customer is the receiver. Okay. They purchased product from their vendor, right? Um, 12 pallets and pretty cheap product. I think it was like salt or some spice. So, like, I think in total was like a$6,000 for like 12, 12 pallets, but it was a full truckload, right? Um, no partials, could see from the tracking, driver went from point A to point B. Nothing looks like an issue there. Now, when the driver arrived at the receiver, who also important arranged the transportation to pick up from where they bought their product from, deliver to them, and they go, Wow, half of this truckload was palletized, half of it wasn't, and the half that wasn't is just ripped open and all over the truck floor. Like we can't dispose of this. We have nowhere to take this. We don't want it. We're rejecting half of this. We only want half the product. Okay. So broker calls us. Hey, what can I do in this scenario? Said, well, okay, here's a few questions, right? Went back and said, find out if this happens often when they buy product from that shipper. Like, have there been previous issues of them loading some of it on a pallet and some of it not palletized or floor loaded, and that was damaged? Like, is this a common thing or is this like a one-off? Because the product for this customer is definitely a product they buy pretty frequently, right? Just in what they sell and what they use. So, like, this is not the first time they've bought this product from them. So they're like, hey, we'll go run this down. Customer comes back pretty quickly and says, Listen, it's about three grand for the six pallets that are damaged, we're not gonna take. I'll split that with you, Mr. Broker. The three grand, we'll cover 1,500 of that. You guys can work out the other half. And I'm gonna go talk to the shipper and try to get you an answer to see if this has happened before or happens frequently. Okay. Then right after that, driver goes, okay, well, I'll dispose of this, but I got to drive 200 miles and it's gonna cost me 600 bucks. So, Mr. Broker, you pay me$600 to go dispose of the rejected product at the receiver. That's kind of where I called you as I was getting more information because the other question that I wanted to know, and you also brought up, is we know the receiver arranged transportation, but we do not know the terms that the receiver and customer had with the company they bought the product from. Because there's basically two ways you buy product, right? Is if I buy product from you, I own it when it leaves your facility, or I own it once it hits my facility, I inspect it and sign to receive it, right? Now, oftentimes the person who arranges the truck, right, takes possession of it as soon as their truck loads it, but not always. Like those two things can be different, which you pointed out, and I've not seen them different in many practical examples. Most of the time they're the same, but I genuinely didn't know.

SPEAKER_00 16:55

It's not it's not impossible, but it's not common. So I did some I did some further digging into this after we had looked it up. Um, so normally what happens is if I'm the one, if I'm let's we'll go the the common example. If I'm a shipper and we'll say it's FOB destination, meaning that I own that the buyer of the goods does not actually take possession of it until it hits the destination.

SPEAKER_01 17:18

You're the shipper. I I'm buying goods from you. You arrange the truck. That's the traditional one, right?

SPEAKER_00 17:23

I get a truck in here, it gets loaded, and I send it to you. You don't own it until it gets to your dock. All right.

SPEAKER_01 17:30

So I sign it. Well, until you sign for it. And sign it because if I say half of this is good, half of it I don't want because it's clearly damaged. I'm not responsible for the half that is damaged because I did not receive all of it. I received what I indicated on the bill of lading, which is now the POD, right? And I wanted you to take through the example, right? Because let's just say that happens with produce, right? In that scenario, a standard one. Half a it's a truckload of lettuce. Half of it, right, is just absolutely wilted and is visibly damaged and rotten. So I'm like, hey, half this looks fine. Something is wrong with the other half. I write that down. Okay. Now there's also two scenarios there, right? I can either refuse half or I can receive it under protest and then have my company evaluate if they can salvage any of that value.

SPEAKER_00 18:22

Yeah, you can use the inspection and that exactly.

Broker vs Carrier Claim Reality

SPEAKER_01 18:24

That was the one I wanted you to go then to explain exactly. So, like, let's say I say, I don't want half of this. It's no good. I will take half. Now, what does the broker do in that scenario? Because the the carrier is calling you, Mr. Broker. You arrange the truck and he says, Hey, they won't take half of this. I don't know what's wrong with it. It seemed fine when they loaded. And say the driver says, I don't have any photos and I didn't pulp it. So you want to take it from that one?

SPEAKER_00 19:54

Yeah, I mean, uh, it's gonna I would if I'm telling the broker what to do, I would say call your customer immediately, the shipper, and and have them. Because it in in produce, it's they're used to having a claim, right? And they're gonna have because a lot of times what you'll see is they might say, Okay, um, we know that there's a place you can dump it near that place, the receiver, because we send stuff there all the time. They might say, uh, like we had this with mushrooms one time where like the receiver, it didn't meet their standards, but it was still like fit for consumption. So there was a food bank around the corner that was common. Like anything that got rejected, um, they would clearly get it inspected, documented, so that the claim could be processed, and then they would take the food and either dump it if it was too bad or donate it to a food shelter.

SPEAKER_01 20:40

Who do you call? Who do you call to do that inspection?

SPEAKER_00 20:42

Like literally, if I asked you, and the receiver, the receiver for any major produce type stuff is gonna know a lot of times they're there. Like in a in a large facility, they're gonna have people that are there and available. Um but you're gonna get somebody same day, and these you know, these places they're they have regional um facilities all over the country.

SPEAKER_01 21:01

So, next question. So, okay, same day. Say the guy comes to inspect it four hours later to do the whole thing. Who owes the detention if the FDA says product is no good, it's gotta be disposed of? Who pays the carrier for four hours?

SPEAKER_00 21:17

The truck would get offloaded and be gone. So the USDA would happen at on the dock. So here's what you would do is like if I'm the receiver and it looks, you know, we have an inkling of a claim, we're gonna annotate something on the paperwork, call for the inspection, and get that documentation process started immediately, but we're not gonna hold a driver up in that case. Now, in your case, this is where it gets messy, is because like if like if the driver gets looped into all this, right, and they're like, I didn't do anything wrong, like, and the receiver's like, Well, I'm not I'm not taking it, and the shipper's like, Well, I'm not taking it back, and the driver's like, Well, I'm just gonna go dump it somewhere that and somebody owes me money, that's where it gets messy. So the the way that it happens here is depending on who owns the freight, that is who is responsible to take action on what to do if it's damaged. So, like, if if in your case, if that customer is the receiver and they own it as soon as they get it picked up from the shipper, if it shows up damaged, well, they gotta take it off the truck and and then work through the claims process. Because if they're just saying, like, I'm rejecting it, the shipper's gonna be like, dude, I don't own it anymore. You can't send it back here. You know what I mean? And then the driver's like, what am I supposed to do? Um, so in that really the claim is gonna be between the receiver and um the carrier. So if I'm the carrier in any situation, regardless of if it's origin or destination when the ownership transfers, I want to make sure that I can fully document the condition of the product as soon as I accept it and also after I release it to whoever's getting it, right? So that I can prove that nothing happened because of my time in possession of the freight.

Ownership Terms And Rejections

SPEAKER_01 23:05

So here's a question, right? So this is a really good takeaway for all the drivers, right? Or brokers that like you want your drivers to at least take a photo once it's loaded before it's sealed, as much as possible. Possible or every load if that is feasible. Because then at least as a carrier and a driver, like I've protected myself that it's not the shipper's fault. But here's the gray area, right? Some carriers are like, well, like if I take pictures and it looks fine and then I mess it up, then I can't blame the shipper. And the shippers do the exact same thing to carriers. We're like, absolutely, produce shippers will load product that has not been pre-cooled that they know is not going to make it, that they know will be damaged, just hoping the shipper will take more of it than they thought because they don't want to throw it away. And they hope that it just gets messy and the carrier takes some of that value and they take some because they were going to throw all of it away anyway. So both parties have both an incentive sometimes to go like, well, I don't want a picture of pickup because if something goes wrong, I can at least say it was their fault, or vice versa, right? But as a broker, we want pictures at pickup and delivery because it helps us like isolate where the issue occurred, right? And that's twofold. It's what it looks like and how it's loaded, obviously, but also for sure in produce, like the temperature, right? Because like if I load product that is all loaded correctly and looks fine, if I took, and this is one I had a, I had a couple of these a couple of years ago, where like the shipper took half the lettuce directly out of the field in July and loaded it right onto the reefer. So like this product has literally been sitting in the sun all day. Half of it was pre-cooled the way it should have been in the cooler. So half of it turned to garbage on the way there. The driver didn't do anything wrong. And the driver signed it because the shipper made the driver sign it, but he never actually put the probe in the middle of the product to see like, is this temperature actually what it should be when it went in my truck?

SPEAKER_00 25:05

So when I worked, when I worked at Conway Freight, um, one of the things that we would do that our drivers would do, and I saw this when I rode with them on occasion, but like if the if our driver was not allowed to be on the dock and actually see the condition of the freight being loaded, they would write right on the bill of lading like shipper load and count. So like the driver can't sign a bill of lading knowing like because like it's gonna say how many pieces or pallets on the BOL. And the if the driver is signing that, they're agreeing that that's what they're taking on their truck. But if they don't know, they have to annotate that that like the shipper loaded it and counted it. I didn't do it myself. I will sign agreeing to that, but I won't sign that I'm confirming that it was loaded properly and counted properly.

SPEAKER_01 25:53

Well, that's important, right? Because there absolutely are facilities that they do not allow the drivers to visibly inspect the product before they seal it. So like you can't always do this, but to your point, it's still a very good practice. If I'm a driver, I'm either taking photos in every instance possible and pulping when necessary and indicating when I was not allowed to do it because it's just CYA. Like, I want to cover my basis as much as possible so I don't get blamed for things that aren't under my control or influence, right? Like, absolutely, those are great procedures. I lost my train of thought in the middle of that.

SPEAKER_00 26:28

Um no, I mean, it it's a very good point. So I think the whole takeaway here is like there's there's things that can be done from all parties to protect all parties, right? So depending on, you know, it so as a broker, right, you can give guidance and advice to your shipper to help protect them. You can give guidance and advice to your your carry partner carriers to help protect them, right? Because what you want to do here is make sure that if someone is going to try and be a bad actor or pull something over, like pull a quick one on you, that everybody that's not the bad player in this can protect themselves from being gotten by the bad player. So, like in your example of the cabot or the lettuce that didn't get pre-cooled properly, um and produce, this is like you know, a huge thing to talk to your carriers about. It's like, hey, uh, make sure you um get a proper pulp and pictures of the pro of the uh product once it's loaded. Um because we know in fresh produce, those are more prone to a claim than you know, raw lumber or steel, right?

SPEAKER_01 27:34

Yeah.

SPEAKER_00 27:34

Um it's just the reality of the product. So the same thing. Like think about your commonly excluded commodities, like your fresh or frozen seafood, certain types of berries, um, electronics, you know, things that are worth a lot of money have a higher propensity to be damaged in transit or in loading or unloading. Those are the ones where it's like, hey, if there's a higher chance of a claim, let's go ahead and make sure we're doing double, triple checking, whatever we can to make sure that the the count is there, that the condition of it is verified, pictures are great, videos are even better. Um, what a lot of companies now too, I've seen this with a lot of shippers when there's claims, like they have CCTV at their facility, so they can they can show like the the condition of the freight. Like even like think about Dockware, those guys that we've we talked with, where they're starting to get like um cameras, like really cool AI type stuff. Um, and that's the future, right? But like still even now, like just having footage like of a closed circuit TV that you could see, all right, this was loaded safely, right? We don't have a forklift tying getting shoved into the side of a pallet, because that gives that gives the um in the event of a claim, like the customer is gonna be um protected that we didn't do anything wrong here.

unknown 28:56

Right.

Produce Claims And Inspections

SPEAKER_01 28:57

You know what I mean? Now I'm gonna I'm gonna go back to the scenario that happened yesterday we talked about, right? Because we talked about what could have been done, but like what is practically probably happening? Like I brought I bought product from you, okay? It gets to me half of its garbage. Say it's three grand in value. So I call my broker and go, hey, I'll just take half this loss. It's probably partially the carrier's fault. So it's three grand, I'll cover 1500. Well, to the broker, that just meant that Raycon call it 2,500 bucks or call it three grand for real numbers. I'm paying the broker half the money that I owe the broker. And the broker goes, Well, wait a minute. You're only gonna give me half the money I got to pay the truck for the transportation. The carrier then says to the broker, Well, I didn't do anything wrong. And the broker goes, Well, like you didn't take photos. And the and the carrier goes, I I know I didn't take photos, but like I didn't do anything wrong. This isn't my fault. The shipper must have loaded this incorrectly. So I one paid my full three grand. And the broker's like, Well, I'm only getting$1,500. You didn't prove there was no damage at pickup. I can't give you your three grand. And then the last piece is the company that bought the product, the receiver, who's the customer of the broker, goes, calls you, the supplier, and goes, Hey, Nate, three grand of that product's no good. So can you just knock three grand off my bill? And you go, sure. So I didn't even pay you the three grand, and I didn't even incur a loss because you're like, Yeah, don't worry about it. I think we loaded it wrong. I don't tell the broker, I tell the broker, well, I'm just gonna cover 1,500 of it. So as the receiver and the customer of the broker, I made$1,500. And now the broker is in a position of like, well, I still owe the carrier three grand, and you're not paying me$1,500. So now what do I do? Right? Because it's like the practical versus.

SPEAKER_00 30:43

Okay, so you're saying the receiver is the customer and they're not gonna pay you the full rate.

SPEAKER_01 30:48

I'm saying this is what the customer said to the broker yesterday. Our client said, Hey, listen.

SPEAKER_00 30:52

That's not how it should work, though. Like the correct, but the reality is like, so yeah, in practice, I'm trying to put myself in the if it were to happen at at my brokerage, how would that pan out? So if the receiver is the is the actual customer.

SPEAKER_01 31:08

Make it me. I'm the receiver, I'm the customer, Pierce Arranged Transportation. I call you and go, hey Nate, three grand, six pallets were garbage. I'll just eat half that and split it with you, the 1500. Work it out with the carrier.

SPEAKER_00 31:20

And I would say that's not how this works. Like we did it, we did the job for you. And then I would make a business decision. Like, if the customer's really gonna short me half the money because of a claim that they didn't even go through. And first of all, the receiver should be accepting it and noting that it's damaged, and we would file a claim on their behalf with the carrier's insurance company. And the case in the case that you gave me where there's a lack of evidence, the carrier's insurance company is more than likely going to deny the claim. And then the customer, you're gonna have to go to the receiver and say, Hey, claim got denied. So, and then carriers gonna be like, All right, we're just not paying you the full amount, and I'm gonna still pay the truck because they did their job right. Um, and I gotta make a decision of if I'm going to send that to collections and lose the customer, or if I'm just gonna be like, All right, cost of doing business, we're gonna learn from this one and we're gonna fix it moving forward.

SPEAKER_01 32:15

Um, that was we don't yeah, and we don't actually even know in the scenario yesterday. Like, did the driver drive recklessly and cause the damage to the product, or did the shipper load it incorrectly, which created the damage? Like, we don't know the cause and effect of who was responsible for the damage, right? So it's like basically the broker's put in the position of like, I just kind of have to pick the lesser of two evils. How much is the customer worth to keep them happy? And the customer didn't do what you like you pointed out, what they should have done, which is receive, and they go, Well, like, we gotta can't put it anywhere. I'm not taking it.

SPEAKER_00 32:49

Is there any chance that the customer damaged it while they were unloading it and tried to blame it on the carrier?

SPEAKER_01 32:55

And that's why they're like also possible.

SPEAKER_00 32:57

Yeah, like there's just a lot of unknowns here. It could have been that they like, you know, they drove a forklift onto the truck and like I said, put a time through the side of the pallet and they're like, oh, it's damaged. We're not taking it, we're setting it back. Like, this is where this is where like everybody you really need to like have your your ducks in a row to make sure that you can't be blamed for something that wasn't your fault. And if that so based on which party you are in the in the transaction, it's gonna look different. If I'm the receiver, I'm gonna want a picture as soon as that door opens up, right? Before we get a pallet jack or a forklift on there. If I'm the carrier, same thing, right? At loading and unloading. If I'm the shipper, it's gonna be at the loading end. If you're the broker, you don't ever own the freight. You don't ever, you're not the beneficiary beneficial cargo owner owner. Um you get we get looped into it a lot, right? Because customers are like, well, it's your fault, and it's like, it's not, you know, it's not our fault. Um I've even seen it where like a claim happens and the carrier doesn't have the right insurance or any insurance, and the and the and the shipper's like, well, this is your fault. And it's like, yeah, I mean, like, we have some ownership in that, but like, legally speaking, no, like we it's not our fault. And which is you know, it's kind of weird to say it that way, but like that's that's the reality. And we've I've seen situations where like the claim just you know, we the broker just has to say, like, hey, the claim was denied because the carrier didn't have the proper insurance, and the customer's like, well, then you owe us. And it's like, no, that's that's the other business.

Photos, Pulping, And SL&C

SPEAKER_01 34:39

So there's two, there's another fork in the road at that one that is super interesting because, right, like I've seen customers, right, and shippers that don't want to work with brokers because they don't want to deal with what we're pointing out. That legally, if there is a claim, it's not the broker's responsibility to work through it or to make them whole. So they choose asset companies because it's a little more straightforward and you're directly verifying the trucking company's insurance without an intermediate. They are, right? Now, correct. Now, the whole other side of this, I've seen shippers that only use brokers because they believe, right, that the broker's responsible for all these things and liable when they don't go right, which is not correct, right? But they absolutely treat brokers that way, and that's why they want to use them. And why I'm saying there's like two different types of shippers that view brokers and carriers very differently. It's like, this is relevant to prospecting. So understanding how your shipper and customer looks at these issues is really important because I would say like 99% of shippers, and this is not just small and medium companies, these are like Fortune 100 companies, absolutely believe that brokers' contingent cargo insurance is the insurance that covers the cargo. And they're gonna go, well, why do I care in your instance? Why do I care the truckers don't have insurance? Like you got a half a million in contingent cargo or you got 250 in contingent cargo. You guys said your insurance was good. Why do I care about the trucking company's insurance? Then the broker's like, well, it's the trucking companies. And they're like, Well, when you prospected me and you told me you wanted me to do business with you, you said you had this huge contingent cargo policy and this umbrella policy that was protecting my freight. Was that not true? And I don't think one, for sure, most shippers don't understand the difference in insurance, and I don't think a lot of brokers do, because most of them are trained by their manager that goes, No, you got a million-dollar umbrella policy and 200 grand and contingent cargo. You're good to move whatever you need under that number, which absolutely also is not true, right?

SPEAKER_00 37:45

Yeah, agreed. I was actually talking with an insurance broker yesterday about contingent cargo. And I was like, I was like, Yeah, because uh the the question was like, um, why would you have 250 versus 100? And it was like, Yeah, it's usually just based on what the customer asks for, and they usually don't even know what it what it's for. And he's like, he's like, Yeah, contingent cargo is pretty much just fake insurance. That's what he called it as an insurance program. He's like, it's fake insurance. Um, he's like, but you know, it's part of doing business that people like they want you to have it. But it's fake insurance.

SPEAKER_01 38:20

Here's the funny thing. It's even worse than fake insurance because you, as a shipper requiring me for it, what that insurance actually covers is when you sue me. It's literally insurance to protect me, the broker, if something goes wrong with your stuff. It doesn't make you whole, it pays for my attorneys to argue with your attorneys to say that you're not getting paid. So it does not only does it do nothing, it does the opposite. You're basically requiring your brokers to have better legal protection when something goes wrong, which is not in any way an advantage as a shipper.

SPEAKER_00 38:52

Yeah, for sure. Um, I'm trying to think. I've told the like the horror story of the propane tanks that tipped over. This is like years ago, but like um, like how to prevent a like a claim, like as simple as when everybody involved knew what was happening that was wrong, and nobody took ownership in it. Like, in that case, so to recap the story, this was like instead of sending a reefer in, I think it was like onions, instead of sending a reefer in and having the temperature set at the proper warmth in the wintertime so it didn't freeze, they're like, Oh yeah, just use uh like a propane heater, like to keep it warm. And but those things have a safety mechanism where if they tip over, like they automatically shut off the fuel supply. So the shipper literally sees that they're using a propane heater on the truck. The broker is the one that's okay with the the vented van or van, and I think it was a vented van instead of a reefer. Um, like it's okay with the carrier with a vented van and just putting a propane heater in there, and the carrier's okay with doing it too. And it's like all three of you are complete idiots for thinking that like this is going to go well. And eventually, it can work well a few times, and eventually, when it goes wrong, and the receiver sees like all of our onions are frozen. You guys don't don't have a reefer unit on this trailer. Um then it comes down to like, well, who's that fault? And it's like, well, an insurance adjuster is probably uh for the carrier is probably not gonna find full fault on the motor carrier for that situation because of who's in, you know. It's kind of like when you have a car accident and they're like, like I remember I got uh I got into a car accident when I was younger because someone ran a red light, and I I got assigned to like two percent blame because I was there basically. But that's how adjusters work, right? They're trying to find like who's at blame for what, blah, blah, blah. And that's how it's going to pan out in a in a claim situation. Like a straightforward one, if the reefer unit was used in that onion case and the reefer unit broke down, and the carrier has reefer breakdown insurance, um, and the correct cargo coverage, it's a pretty straightforward claim, right?

High‑Risk Commodities And CCTV

SPEAKER_01 41:10

So that is another rabbit hole that I learned a lot about actually in the past year. Um, digging into this with insurance companies, is that like reefer breakdown, I was always taught, increases your coverage if something goes wrong. Okay. But actually, the way those policies are written, okay, like it only covers the reefer breakdown if they do, it was something like somewhere between 10 and 15 things that are required with reefer breakdown that exclude the common things.

SPEAKER_00 41:43

Yeah, make sure the fuel levels, everything's right, though.

SPEAKER_01 41:46

Yeah, the crazy one is like mostly why these happen is like, you know, the reefer has an issue or something, right? But in the ones I've actually had to work through, they most of all of them are denied, and they're denied for like some very obscure, unrelated issue, like you said. Like one I had drivers like, yeah, like I had a um, it was like a fuel alert, right? Because of a fuel filter on the engine, had nothing to do with the reefer. He's like, it went and it beeped, and I had it checked by a local service station, the only one close to that farm, right? And they're like, Yeah, it's no issue. The mechanic turned it off. Then they get loaded. Then actually, in that scenario, the shipper loaded the product hot, which is what created the claim. Not actually the reefer unit, right? But the insurance, right, denied it and said, we saw from the download there was a maintenance alert on that truck before they loaded. And we responded, yeah, driver confirmed this was a location that serviced the power unit. The insurance company came back and went, they're not an authorized maintenance vendor that is able to verify that it was in good working order, denied. And the driver's like, I he was in the I remember he was in the middle of Colorado at a lettuce field. He's like, This is the only maintenance place within like 700 miles of like where I had to pick up. Did you want me to not pick your load up? I went to the mechanic.

SPEAKER_00 43:05

That's an important thing when you're selecting insurance as a carrier, though, is to understand the fine print. Like people think just because the accord form that COI states what it states, there is way more um fine print that's that's not listed on that page. There's a ton that goes into it.

SPEAKER_01 43:23

Yeah, and like I want to review this. I think we're gonna have Cameron on again to even just talk about that one because I'm like, other agents I've talked to are like, you're better off not having reefer breakdown than having it. Because most of the reason these claims occur isn't that it broke down, it's that like something happened and you would have been covered like nine times or ten times more without reefer breakdown than with it. Because it's such a narrow use case for reefer breakdown. It's like it basically makes your chance of recovery much narrower than it would be without it. I I have that article somewhere. I'm gonna see if I can find it. Because I was shocked. I'm like, this is something I learned going back to TQL that I've always just operated under. And I was like, that absolutely it made more sense to me when I learned it, but I'm like, that's crazy.

Contingent Cargo Myths

SPEAKER_00 44:09

There's another one I'll give you too that I saw recently, and I've seen it a ton. And there's actually, I forget the guy's name. There's a there's a guy on LinkedIn, a trucker, that like posts pictures a lot of like his you know, his trailer all swept out and clean, and then his all of his stuff get loaded properly. And it's the what comes up is the condition of the trailer when it shows up. So um obviously if you're in a niche like bulk, there's a that your wash it, your washout process, or what's it called? Your wash out. Washout, yeah. Like is is pretty standard, but like when you're dealing with dry van or reefer, um, I have seen way too many times um where product gets delivered and they're like the trailer, like they try to file a claim because the trailer is dirty, and it's like that's the condition of it was when it got loaded, and it's like should have never loaded it um with that condition. Like, and this is why on a rate confirmation, very often I see brokers put trailer must be swept and cleaned at before pickup, right? Because the customer will either a um reject that trailer coming in if it's not swept out and clean, or you get some lazy, like I saw this recently, and the lazy shipper doc kid like loads it and then the customer is like trying to reject it when it gets delivered because there's crap all over the thing was like flour all over the floor from a previous shipment. Um, it's wild. And you think about like the different kinds of commodities that go into these trailers to give you perspective, like New York City literally hauls its trash out in trailers. Like there is a business behind hauling trash out of New York City. That that is a real us a real customer that I have seen in the past. Um, so it is very important for like you know, any kind of waste material or you know, even if it's like um damaged parts that are getting returned or going to a scrap yard or whatever, you know, scrap metal. Like you want that crap out of the trailer before you put some you know brand new, nice finished product onto a trailer. You don't because you don't want it to get damaged or you know, contaminated with whatever the old product was. So very important to make sure you look at your customers' requirements and clearly communicate. That to your carriers to prevent these issues.

SPEAKER_01 46:28

Yeah, two things, right? Because like I had a claim. We don't even have time to go into it with the tanker one we did on the show like years ago, where like the shipper and the receiver, different requirements, okay, for equipment, and it was FOB origin, which meant the receiver bought the product. They owned it as soon as it left the shipper's property. It met all of the shipper's standards, all their criteria, certified. And it was also like not only an FDA product, it was a product going into pharmaceuticals. So like the documentation on this load was like more than I've ever seen of certifications, what they needed to do before it left the property, met all of them. But when it got to the receiver, it didn't. And then there was the question of like who owned the product, which was clearly the receiver. And they're like, well, we're just not taking it. But it was like it was theirs. You can't just not take the thing that is yours, which created all these other issues. But I found I found this article. I'm just going to read like the end of this. Um, it was an attorney talking about the reefer breakdown that someone sent me. If you are brokering reefer loads, a motor carrier certificate of insurance showing reefer breakdown coverage should be a red flag. The motor carrier's insurance will likely deny coverage for many refrigerated cargo claims. If you are a motor carrier shopping for cargo insurance, understand that a policy with optional reefer breakdown endorsement will likely deny many of the claims for damage to reefer loads. If you present, if your present policy has reefer breakdown endorsement, understand that your insurance policy likely does not cover many claims for damage to reefer loads. The burdensome requirements of reefer breakdown endorsement, and then licit, right? It says they contain terms and requirements that make coverage very unlikely. Even if there was a reefer malfunction or breakdown, here's some of the common terms and requirements under that endorsement. The reefer unit cannot be older than 10 years. This is a good one. All manufacturers' recommendations regarding repair and maintenance must be filed where is this article from? Um, I'll give it to you. It's from a law firm in Texas that somebody sent to me.

SPEAKER_00 48:39

Um I literally like in carrier vetting, like I check for reefer breakdown if it's a reef for So do I.

SPEAKER_01 48:46

Until this is literally when somebody sent this to me like a year and a half ago, I started looking at this. I'll put this in the chat so you can see this.

SPEAKER_00 48:54

That's absolutely wild to me.

SPEAKER_01 48:56

Yeah, here's the other one. Um, all repaired documents must be retained. Okay. The cause of damage must be conclusively proven to be from reefer malfunction or breakdown. Conclusive proof is typically very difficult, especially when there are any various factors, which we just discussed in the whole episode. Certain parts of the refrigeration system are also not covered, even if they malfunction or break down, like sensors, valves, seals, or air chutes. Breakdowns arising from improper refrigerant, fuel or oil levels are not covered, and faulty defrost cycles are typically not covered.

SPEAKER_00 49:39

I don't really know what to say about that. That is uh that is interesting. I'm I mean, I'm still gonna continue to look for uh I but the at the very least, right?

SPEAKER_01 49:49

Like that article is worth looking at. I reached out to this attorney, I don't think they ever got back to me, but I want to discuss this with some insurance folks on this to get some other takes on that because I mean it is definitely written by a law firm in Texas, so it's definitely not like a random YouTube or TikTok video. However, like everything else, the devil's in the details and the subjectiveness.

SPEAKER_00 50:11

Yep. Agreed. Um well, cool, man. Good episode. Good question, or uh, I almost said good questions. That's our QA. Good uh good ex the good stories and like you know examples that we gave here. So let us know what you guys think. If you've got a horror story or a tip on you know what you do to prevent the claims and all that stuff, let us know in the comments or send us a message on our website. But final thoughts, Ben.

SPEAKER_01 50:37

Whether you believe you can or believe you can't, you're right.

SPEAKER_00 50:41

And until next time, go bills.