Understanding the rights and obligations of a carrier is a critical factor for shippers and consignees involved in freight transportation. One of the significant aspects to keep in mind is the carrier’s right to salvage. When goods get damaged during transit, stakeholders face two options: 1) salvaging parts of the shipment or 2) disposing of the entire shipment if it is beyond recovery. Ensuring your business’s financial stability and maintaining its reputation relies on having a solid understanding of the implications associated with damaged goods after resolving a claim. 

FreightClaims.com is uniquely positioned at the convergence of technology and expertise. We want to emphasize the importance of businesses seeking expert guidance and leveraging our freight claims management software to simplify the freight claim process and reduce risk. This article aims to provide insights into freight claims management, the carrier’s right to salvage, and its impact on everyone involved in the shipping process. 

Demystifying the Carrier’s Right to Salvage in the Freight Industry

“Salvage” refers to goods that have been damaged or are potentially damaged, rendering them unfit for sale or use in their original condition. If the damaged merchandise still holds some value as salvage, the carrier or insurer can deduct that value from the claim payment. Though carriers or insurers may dispose of damaged goods as a courtesy, it is not a matter of right. Nonetheless, the shipper retains ownership of the damaged goods and reserves the right to dispose of them as they see fit, including destruction.

Salvage Rights in the Freight Industry

Compensation provided by carriers or insurers is for the actual damage to the product, minus any remaining value the damaged goods may still have as salvage. This deduction, known as a “salvage allowance,” represents the retained value of the damaged goods and directly affects the final payout you may receive as the insured party. If the damaged product retains some value as salvage, the carrier or insurer has the legal right to deduct that amount from any payment made to the claimant. 

Subrogation refers to the legal principle that allows an insurer to recover the amount paid out for a claim from the responsible party. Salvage rights are the rights to take possession of damaged goods to reduce overall loss. In freight claims management, these concepts are crucial in determining the liabilities and responsibilities of carriers and shippers.

Carrier Liability and the Right to Salvage

Carriers must deliver goods in good condition, but if goods suffer some type of damage during transport, they cannot claim the damaged goods as salvage, even when they only pay for a portion of the loss. There are several reasons for this limitation:

1. Protect Intellectual Property: Damaged goods may still contain sensitive information or unique designs that belong to the original owner. Claiming these goods as salvage could lead to unauthorized access to intellectual property and potential misuse.
2. Ensure Proper Disposal: The original owner or manufacturer often has specific guidelines and procedures for disposing of damaged goods. These guidelines ensure that hazardous materials or components are handled and disposed of correctly, minimizing environmental impact and potential legal issues.
3. Protect Brand Reputation: Damaged goods bearing a company’s logo or branding can negatively impact the brand’s image if they end up on the market or in the hands of unauthorized individuals. By not claiming the goods as salvage, carriers help protect the reputation of the businesses they serve.

Instead, their liability is limited to the economic value of the damage, and they are obligated to make the claimant whole by paying the equivalent amount for what they lost. It is also important to note that all parties involved are responsible for mitigating loss and damages. 

Full Liability vs. Limited Liability

Full liability refers to a carrier being liable for the entire economic value of the damage caused to the goods during transport. In contrast, the carrier’s liability is limited, and they only pay the actual value of the damage, which the limit caps. However, if the consignee can demonstrate that the damages were due to the carrier’s negligence and resulted in indirect losses, they may be entitled to special or consequential damages.

Calculating Actual Damage and Salvage Allowance

Actual damage is calculated by taking the net worth of goods in pristine condition and subtracting the value of damaged goods. Factoring in salvage value is possible; however, the carrier cannot take possession of the goods. Even if a company does not want the damaged merchandise on the market, it must still provide a salvage allowance.

Carrier Obligations After a Freight Claim Payout

Carriers are required to dispose of property in a way that protects the best interests of all parties involved. They must remit net salvage proceeds to the owner of the goods and keep records of the salvage sale. If the owner chooses not to allow a salvage sale, the carrier is entitled to a reasonable salvage allowance against the claim. The carrier is not buying damaged goods by compensating for the claim; they are fulfilling their obligation as the de facto insurer.

Simplify Freight Claims and Salvage Rights Navigation with Freightclaims.com

Managing damaged freight and freight claims is a complex process that requires a clear understanding of the intricacies involved. FreightClaims.com offers businesses an easy and efficient way to manage damaged freight, file freight claims quickly and accurately, and receive the compensation they deserve. Our Freight claims management software can significantly reduce liabilities and effectively manage claims, facilitating seamless communication among carriers, insurance representatives, and logistics experts.

FreightClaims.com offers a user-friendly, cloud-based freight claims management software that enables users to oversee claims from inception to completion. Key features include:

• Providing valuable analytics such as open claims, claim age, settled claims, and claimed products data
• Easy document management with fill-in-the-blank templates
• Presenting a convenient dashboard for quick analysis and informed decision-making on claims
• Incorporating tools such as direct email claims, one-screen quick actions, and built-in task management

Take advantage of these comprehensive services by requesting a demo with FreightClaims.com today. Equip yourself with the tools and knowledge needed to navigate the world of freight claims and salvage rights with confidence and ease.