If you ship goods, sooner or later, something is likely to go wrong. A leaking freighter damages your merchandise, fragile goods fall off the back of a truck, thieves make off with whole pallets of valuable items or boxes arrive crushed.
Fuel-additive exporter Bell Performance of Longwood, Fla. had a pallet of small plastic bottles of gasoline additives valued at $2,400 dropped in transit last year, en route to the company’s hardware-store customers. Many of the bottles were dinged or shattered, making the goods unsalable, says spokesman Max Stewart.
If this happens to your small business, how will you recover from the loss? Surveys of the number of claims filed are rare, but the trade group the American Institute of Marine Underwriters’ membership, which encompasses 90 percent of that industry, reported $800 million in claims in 2012. And that’s just for mishaps on waterways, excluding all ground shipping.
Fortunately, Stewart says, Bell had a cargo insurance policy through the carrier that picks up its shipments and procedures in place to quickly pursue and receive payment on its claim. How can you be confident your claim will get paid? Here are five key steps to take:
1. Know your policy. Before you ship, be sure you have adequate cargo insurance to cover the full replacement value of your merchandise, says George Butler, a business-development vice president for insurer The Travelers in Hartford, Conn. For instance, some policies cover damage from vandalism, but some don’t. Your goods may be covered while they sit in a warehouse en route awaiting transfer to a delivery truck, or not, depending on your coverage.
Know the contact name and information for your insurance agent, independent broker, or third-party shipper, if your insurance is through the latter. Beware of using overseas insurers that may be hard to reach if you have a claim, warns Butler. Talk to your shipper or third-party logistics firm and learn what they are responsible for if they damage your merchandise in transit, and what situations might require private cargo insurance through a major insurer or specialty cargo-insurance provider.
“Know who’s responsible and how you get paid if something goes wrong,” says Butler.
2. Pack well. If there is damage or loss to your goods, insurers will examine whether you packed the merchandise securely, says Steve Klinger, operations director of independent logistics firm Cargo Services in Indianapolis. Work with your shipper or third-party logistics company to learn the best packing methods for your type of goods, especially if they’re going overseas. Don’t leave a loophole where insurers could claim you’re at fault due to using inadequate packing materials.
“One of the biggest complaints I hear from buyers in other countries is that American companies don’t pack well,” says Klinger. He adds that it’s common to see shipments packed the same way for international or domestic destinations without consideration for distance or the amount of handling involved.
3. Document what you ship. Bell photographs its international shipments as they leave the company’s warehouse, with the pallet number and a date-and-time stamp showing. This hard evidence that goods were properly packed and departed the company’s facility intact is key to winning your cargo insurance claim, says Stewart.
Bell’s shipper initially claimed that the fuel-additive bottles were damaged at Bell’s warehouse, prior to shipment. Our shipper “showed us a picture of the cracked pallet,” Stewart recalls, “and said, ‘We know we did that, but maybe you packed it improperly, and that’s why it dropped.’” Stewart says Bell’s photographs of the shipment departing the warehouse intact refuted that claim.
4. And take photographs where problems occur. If loss or damage occurs in transit, have drivers and others on the scene take photographs at the site of what’s occurred, says Klinger. Move a damaged shipment from a vessel to a warehouse without documentation, and you won’t be able to prove where the damage occurred. If you only find the damage after accepting delivery and opening crates – known as “concealed loss,” notify your insurer immediately upon discovery of the problem.
5. Monitor your claim. Many major insurers handle the claims process online, streamlining the process. Through its carrier’s web-based tool, Bell could upload evidence and add any additional information to the case file. Bell manually checked the claim weekly until it was resolved, in this case within approximately 30 days.
In the end, Bell’s shipper paid not only to replace the spoiled merchandise, but for the shipping cost on the replacement pallet. “It was pretty fast, and you could see the claim go through online,” Stewart says.