Does a Claimant Have a Duty to Mitigate Loss or Damage?

As a business owner, you’ve likely experienced the frustration and disappointment of having your shipment arrive damaged, short, or not show up at all. As the claimant, you certainly have the right to recover damages, but you also have a responsibility to mitigate further damage.

Navigating the legal landscape in these scenarios can be confusing. Freightclaims.com is here to help you understand your rights and obligations as a claimant, protect your business interests, and maintain your reputation. In this article, we’ll explore the legal implications of a claimant’s duty to mitigate loss or damage, providing you with a solid foundation to make informed decisions when faced with similar situations. 

Understanding the Duty to Mitigate

In the context of freight claims management, the duty to mitigate refers to the obligation of the claimant to take reasonable steps to minimize the loss or damage caused by another party’s actions. This duty arises from the principle that a party should not be able to recover damages for losses that could have been reasonably avoided.

Mitigating freight damages is essential in the transportation industry, as it can significantly impact a company’s reputation and financial standing. The concept of mitigation is based on Common Law, which derives from case law and the Interstate Commerce Act found in 49 CFR. Various cases and legal references determine the mitigation of claims since no specific federal statute outlines it.

One such reference is “Miller’s Law of Freight Loss & Damage Claims,” which provides insight into how courts address mitigation issues. Per the Carmack Amendment, carriers are liable for the shipper’s actual loss or injury if they have not limited their liability. Measuring damages is done by comparing the property’s market value in its intended condition to its value in its damaged state, subtracting any collected salvage.

Courts determine market damage by examining the effect of the damage on the cargo’s marketability. For example, if a carrier successfully repairs damaged cargo, but the consignee still rejects it, the carrier may be held liable for the full market value of the damaged cargo. The case of Oak Hall Cap & Gown Co., Inc. v. Old Dominion Freight Line, Inc., demonstrates this when the consignee rejected a load of graduation caps and gowns with smoke damage even after the carrier removed the damage. The court ruled in favor of the shipper, emphasizing that the issue was not the carrier’s ability to repair the damage but whether the damage impaired the cargo’s marketability.

However, this standard does not allow a consignee to fabricate a loss. Mitigating freight damages is crucial to maintain trust between carriers and shippers, and failure to do so can result in significant financial consequences and reputational damage.

Example: Failure to Mitigate Damages in Orange Juice Shipment

A retail business receives a shipment of orange juice, which is boxed, palletized, and wrapped. Upon arrival, the receiving team notices that three pallets have water damage. They properly notate the damaged goods, take pictures, and document damage. However, instead of placing the pallets in a refrigerated storage area, they quarantine them in a non-refrigerated space until they can notify their supervisor.

Hours later, the receiving team informs the supervisor about the damaged shipment. Upon inspection, they determine that less than 20% of the contents are indeed damaged. Unfortunately, due to the lack of refrigeration during those hours, the orange juice was exposed to higher temperatures, causing all three pallets to spoil and become unsellable.

In this example, the receiving party’s failure to store the damaged orange juice in a refrigerated area resulted in the spoilage of all three pallets. While the receiving company can still file a claim for 20% of the damaged product, they are responsible for paying for the remaining unusable goods.  

The Role of the Claimant in Mitigating Loss or Damage

The Carmack Amendment mandates that all parties involved (consignees, carriers, shippers, etc.) engage in good faith to minimize losses and lessen the impact of claims. All parties must take appropriate measures to mitigate loss or damage. In many cases, the consignee is also the claimant, meaning they are responsible for filing claims in case of damage, loss, or other issues with the shipment. The claimant is also accountable for mitigating further loss or damage. Key responsibilities include:

1. Proper packaging: Shippers should utilize appropriate packaging, using suitable materials to protect the goods to prevent damage during transit. 
2. Salvage efforts: In cases where part of the shipment has damage, carriers and shippers should work together to salvage the undamaged items, potentially reducing the overall claim value. Salvaging may involve separating damaged goods from the unaffected ones or finding alternative uses for the damaged items.
3. Carrier selection: Shippers should choose carriers with a proven track record of reliability and professionalism, minimizing the risk of damage or loss during transportation.
4. Inspecting goods upon arrival: The claimant should thoroughly inspect the shipment for any visible signs of damage, tampering, or loss. The claimant is responsible for checking the packaging, seals, and labels and examining the contents for any discrepancies or instances that could cause further damage.
5. Documenting evidence: Any party discovering damage or loss should promptly document it with photographs, written descriptions, and other relevant evidence. Proper freight claim documentation will be crucial when filing a carrier or insurance company claim.
6. Reporting issues promptly: The claimant must report any damages or losses to the carrier and/or shipper as soon as possible, adhering to the deadlines specified in the shipping contract or terms and conditions. Timely reporting allows all parties involved to address the issue quickly and efficiently.
7. Condition of Goods: Communicating the status of the goods to the carrier is essential, as it can impact the handling and transportation process. Inform the carrier whether the items are new, used, or repaired, so they can take appropriate measures to ensure safe transit and avoid potential damages.
8. Cooperating with investigations: In the event of a damage or loss claim, the claimant may need to cooperate with the carrier, shipper, or insurance company during their investigation. This might involve providing freight claim documentation, allowing access to the damaged goods for inspection, or answering questions related to the shipment.
9. Proper storage and handling: Proper handling includes following specific instructions provided by the shipper or manufacturer, such as temperature and humidity requirements or safe handling practices. The claimant must ensure that the received goods are stored and handled correctly to prevent further damage. 
10. Maintaining communication with the shipper: Open communication between the claimant and the shipper can help identify potential issues early on and facilitate a smoother resolution. Sharing feedback on packaging quality, handling concerns, or recurring issues can help the shipper improve their processes and reduce the likelihood of future damages. One way to enhance communication between carriers and customers is to leverage technology for a more efficient claims process.

By taking these steps, the claimant can significantly reduce the likelihood of additional freight claims arising and help minimize the impact of any losses or damages that do occur.

Legal Considerations in Mitigating Loss or Damage

As the claimant, you may be required to demonstrate that you made reasonable efforts to mitigate the loss or damage. Failure to do so could limit the damages you are entitled to recover. Factors to consider in assessing the reasonableness of mitigation efforts include:

• The nature and extent of the loss or damage
• The available options for mitigating the loss or damage
• The costs and benefits associated with each mitigation option

Know Your Role and Responsibilities in Mitigating Loss or Damage in Freight Claims

By adhering to the requirements of the Carmack Amendment, carriers and shippers can promote a fair and equitable resolution to claims while ensuring that all parties fulfill their responsibilities in mitigating loss or damage during transportation.

FreightClaims.com offers a comprehensive solution for managing freight claims, from initial details through settlement. With features such as single-platform organization, deadline tracking, and analytics, businesses can reduce the chances of freight claims before they happen.

Don’t let freight claims derail your business. Book a demo with FreightClaims.com today and discover how our user-friendly software can help you manage and mitigate loss or damage in your freight operations.