Have you ever signed off on a contract with a client and you didn't read it or have you ever had a legal issue and you really didn't know which way to turn?

Today we're sitting here with transportation attorney Rob Hasman from Burns and Hasman, and we're going to go over several different scenarios within the legal realm where brokers make the biggest mistakes and sometimes they don't really know where to turn to or how to handle that.

So, Rob, thanks for coming on the show today.

Really appreciate it, man.

Thanks, Brian.

Thanks for having me.

Really appreciate it.

And I'm glad to be here.

Thank you.

Yeah, I think, you know, this is kind of a.

We were just talking about this off camera a few minutes ago, but I think there are so many things from the legal side of it where, you know, brokers and shippers, they, they just don't know.

Right.

And I think there's so many different use cases where if you run into a legal situation or you have a challenge with a cargo claim, you know, what do you do?

And so, you know, with that, like, I want to ask you a couple questions around cargo claims and what to look for, how to combat those, if it happens already, then what to do in the back end.

So, sure.

Cargo claims, man, those are, those are always, you know, high stress.

Those are, you know, everybody's pointing fingers at everybody.

What are some of the mistakes that brokers make on cargo claims that you would, you know, likely address?

Well, first of all, backing up a minute to the point you made a while ago, it's, you know, I've been practicing in the transportation arena for a long time and I have, you know, many different broker, shipper, transportation clients and it's almost universal, with the exception of some major, majorly large clients that, you know, people new to this industry just, they just don't have really the training or really any knowledge or quite honestly, any, any real grasp of any of the legal issues that, you know, brokers are facing.

Yeah, most people that I represent have worked, you know, at a TQL or something like that and broken off onto their own.

Yeah.

And, you know, they just go by these policies that they, they thought that were the law but basically were put in place by a former employee or something like that.

And, you know, a lot of times they're not compliant whatsoever when it comes to cargo claims.

I would say, you know, the biggest, the biggest thing is as soon as you find out that there is going to be a claim, whether it's damage, delay, you know, temp issue an accident first and foremost, you know, you need to find out the total extent of what's happened and then you need to be in touch with the cargo owner regarding, you know, all of the issues of what has happened and obtain their specific instructions immediately.

In terms of, you know, how do they want it salvaged if they don't want it salvaged?

You know, do they want it disposed of?

If they want it disposed of, how do they, you know, how do they want that to go?

Do they need a destruction receipt or whatnot?

When you say, real quick, when you say cargo owner, what do you mean?

Well, you know, your shipper is not necessarily always the owner.

Right.

You might have Joe's, Joe's Crab, you know, farm in Alaska that has a truck or, you know, a shipload of.

Of crab.

Yeah.

But they don't move things, so they might put it in, you know, Acme Storage, cold storage, and Acme Cold Storage is shipping it.

But Acme Cold Storage doesn't own the cargo.

They don't really have any rights to determine what's going to happen with it.

So you need to get with whoever it is that has the authority or the ownership of the actual commodity to determine what they want to have happen.

The first and foremost goal should always be to minimize losses for everyone involved.

Yeah.

So to the extent that anything is still in good and perfect condition, you know, you might have an accident where one pallets damaged.

Right.

You see that often.

Right.

And oftentimes, you know, shippers or want, or customers will want to reject the whole load when that's not really the way that a claim should go.

But your goal should always be to find a way to make the losses the least they possibly can be for everyone.

Try to mitigate the risk or mitigate the loss as much as humanly possible.

Now with that, like, if I'm a, if I'm a broker and I'm listening to this show and I've had a couple cargo claims recently and I'm saying shit, Okay.

I need to come up with some processes, right, to figure this out.

Is it do in a court of law?

Is it pictures?

Is it documentation?

Is it a rejection stamp on the bill of lading?

What's kind of the final truth?

I guess that kind of runs the game.

Okay, so there's some nerdy lawyer book, technical.

Are we going to read it?

Are we going to read it from top to bottom?

I can actually see it out here in real time.

But you know, to prove a cargo claim, you need to prove three things.

Okay.

What's that tendered to the, to the motor carrier in good and acceptable condition.

Okay.

Delivered with, in damaged condition or, you know, less than full or, you know, out of temperature shortage or something.

And then you need to be able to quantify the extent of your losses.

Now, how you meet all three of those elements can be hundreds of ways.

Sure.

But once you meet all three of those elements, it creates a rebuttable presumption that the carrier.

It's almost strict liability.

Yeah.

You know, when somebody gets in a car accident.

Yeah.

If they want to recover from the other side, they have to show that the other shot side caused the accident.

Right.

Well, in a cargo claim, when you produce your three elements of the claim, you don't have to prove what the carrier did or that the carrier was negligent or that the carrier, quite frankly, did anything wrong.

Right.

It's the opposite.

The carrier, if they don't want to pay the claim, has to affirmatively prove that they did not cause it.

We don't have to show.

All we have to show is it was given to you in good condition, it arrived damaged, and the value of our, of our loss.

With that, I'm going to back.

So number one, good and acceptable condition on loading.

What if we run into a situation where, you know, you hear it all the time, drivers not allowed on the dock.

So, so what do you do then?

So the first way and easiest way, and this comes from the US Supreme Court on down.

Yeah.

A carrier signing a bill of lading without noting damages at loading creates a presumption that the commodity was in good and acceptable condition at loading.

However, if the trailer was loaded and sealed before the load is given to the motor carrier, you cannot rely on the bill of lading that creates what's called shipper load count.

Okay.

If that happens, in order to get over element one, the motor care.

I'm sorry, the shipper has to affirmatively prove the condition that the goods were in.

Now, if the, if the trailer's open or quite frankly, they hand them the seal and say, hey, look at it if you want, and they just slap the seal on it and just fail to look at it.

That's their fault.

Yeah.

So there is responsibility on the driver's side to make sure that this product being loaded on that trailer is in good condition.

Correct.

So it's driver responsibility whether that's getting on a dock or they hand him the bill and the seal that he gets in there, he looks at it.

Okay, it looks good.

Airbags are good.

Load locks are all Set.

We're signing off on this.

Correct.

Is that right?

That's correct.

Okay.

And quite frankly, I do hear it all the time.

Why wasn't allowed on the dump?

Always a lot of finger pointing.

Right.

Yeah, I get it.

In the real world, you know, you might show up to Walmart and they say you can't come on the dock.

But the technically, the motor carrier has the right legally to say, I'm not taking this, then sure, let me in that trailer.

I have a duty to make sure it was loaded in good condition.

Additionally, you know, you'll hear all the time, you'll see a load of widgets show up and they'll be strewn all over the trailer and they'll say, well, the shipper loaded this incorrectly or it was improperly braced or improperly palletized.

Yeah.

There is law all across the board that says shipper instructions or shipper loading or whatnot.

Unless you sign something that says motor carrier has no responsibility for loading and securing.

If the load was, if the cargo was loaded and secured by someone else, the motor carrier still has the duty.

Yeah.

From the time they take possession of the time they the deliver it to make sure that it doesn't, you know, that it was loaded correctly, that it was braced correctly.

So just because someone else put it on their trailer and didn't brace it.

Right.

That's not a defense to the carrier.

Yeah.

And I even think, like you said it just a few minutes ago, but I think like even with the driver being responsible and you know, that might come over in a shipper broker agreement or a shipper carrier agreement, which is something we'll talk about here in a few minutes.

But I think that's huge where you know, the expectations going in and you know, how they can load it or what the parameters are.

Right.

Which you know, we see it all the time.

Shriver checks in, he never looks at the load.

They might not put.

The shipper might be at fault.

Right.

Where you know, when it gets to the receiver and stuff's, you know, for some reason I always think of this, I always think of like watermelons.

Right.

I've had numerous watermelon rejections where they're just all over the place.

Sure.

And you know, heavier products or what have you.

And you know, 99% of the time the drivers.

Oh well, they didn't load it.

Right.

So even with, you know, watermelons being thrown all across the, you know, the floor of the trailer, we always encourage our drivers to take pictures.

Sure.

So it didn't mean to get you off track there, but go ahead.

Well, I mean, if you stick with just the original premise that all you have to do is prove your three elements of the cargo claim.

Yep.

You know, if you just always keep that in mind.

Unless the trailer was loaded, shut and sealed before the carrier ever showed up and didn't, and the carrier was absolutely prohibited whatsoever from getting in that trailer, if they pick it up, they didn't look at it, they didn't put more braces on it, they didn't make sure that it was stacked correctly.

That's on them.

Sure.

Again, unless they sign something specifically in the bill of lading or some other shipping document where the shipper or loader agrees, the carrier has no responsibility for that.

It's their duty.

I mean, they're the ones being hired to take it from A to B.

And if it's not on their trailer.

Right.

Yeah, that's on them.

So you can get over that hurdle by either, you know, if you have a trailer that they were able to get in, if they signed the bill of lading and didn't note any damages, you're over hurdle one.

If the trailer.

And there's a lot more scenarios, but I'm just going to deal with the two.

Love it.

Love it too.

Most normal.

Yeah.

If you have a trailer that was sealed and loaded prior to the carrier getting there, your shipper or loader is going to need to overcome hurdle one.

Sure.

So hopefully they've taken pictures or they have a loading report or something to show.

Yeah.

All this.

And if it's food, that it was pulping at the right temperature camera when it went on the trailer, this is how it was.

And then you can get over hurdle one.

Yep.

Hurdle two is usually pretty easy.

Okay.

There's hundreds of ways to per.

To prove element 02.

Yep.

Notation of damage on bill of lading.

It's pretty important.

Right.

It would be the best way.

And I hear all the time from insurance companies and motor carriers, I have a clean bill.

Yeah, well, a clean bill isn't the be all end all.

If I take photos at the very second you arrive, that's the same thing.

Yeah.

If I have a USDA inspection before you leave, that's the same thing.

Right.

Quite honestly, if I can prove 10 days later that there is damage and I can also prove that that damage existed when you got there.

Right.

I don't care if your bill of lading was signed clean.

The easiest way, though is to have right on your bill of lading.

Look, it was damaged.

Yeah.

I think I've dealt with you on this scenario a couple times where driver picks up, or driver is supposed to pick up on Monday, deliver to Nashville on Wednesday.

Well, he picks up on Monday.

His truck breaks down Tuesday.

He doesn't deliver that load until it's supposed to be due.

It's fresh goods.

It's 34 degrees.

His original delivery date's Wednesday.

Now, he's not gonna be able to make it there till Saturday.

Right now the customer says, well, you know what?

We're just gonna claim this product.

It's not good anymore.

It's three days late.

Technically, they can't do that.

Is that.

Is that accurate or.

So the standard is delivered within reasonable dispatch, and that's a moving target.

Yeah, yeah.

You know, that can.

You know, a load of metal moving from Arkansas to California might be reasonable dispatch, given the weather conditions a month.

I don't know, a load of, you know, watermelons.

Watermelons might need to go from Ohio to Indiana in a matter of hours.

It's a moving target.

Okay, okay.

But to your point, unless there is a guaranteed delivery date in some shipping document, which a lot of times we don't see, and this goes to all claims, by the way.

Yeah.

A customer doesn't just arbitrarily have the right to decide I'm claiming something.

Right.

As I said, element two is proving damage.

So recently I had a load of, let's just call them widgets, where one pallet of 15 pallets was damaged and they showed pictures of that.

There was 14 pallets that looked perfect.

And quite frankly, the widgets within the boxes were perfect.

They tried to claim the whole load and they rejected the whole load.

Not only can a customer technically not make a claim for something they can't prove is damaged by law, they're technically, quite honestly, supposed to and required to accept anything that is undamaged.

So they can't just arbitrarily say that, I'm not accepting this.

So if something's going to be late or if it's potentially a food quality issue, you're going to want to get an inspection before the driver leaves, before the customer, you know, decides it's going.

To make a claim inspection from usda.

Correct.

That would be great.

On food, it can be anyone.

It can be local health department.

Okay.

So local health department, usda.

A lot of major cities, a lot of major produce markets have those literally on site.

You're gonna have them almost within 60 miles of anywhere in the country.

Right.

So you would rather pay the 3, $400 to get the report done, pay for that, whatever that is.

Out of pocket versus paying for a $40,000 load of watermelons.

Correct.

Because it does a few things.

If your customer's trying to reject something that's perfect, you have a document to where you don't look like the bad guy.

Hey, you know, I wanna work with you, but you really put me in a bad spot.

I can't win a claim.

And by the way, the government says this is good.

Yeah.

On the other hand, the client relationships.

I mean that's, that's like the hard part.

And it's like so much validity in that client relationship.

Like, are they that good of a client if they're kicking lows all the time and you know, pitting them against you?

Like.

Right, well and then, you know the old adage, he who holds the gold makes the rules.

Right, Right.

Customers know even though they have no legal right to do so, that when they owe you a bunch of ar for sure, they'll just set it offset.

Yeah.

And if, if not, you know, you don't make a claim.

Right.

They may just not pay you.

Because there is general law in claims other than food claims.

Right.

That a broker is just, is not liable for damage to widgets on the road.

Yeah.

But you know, if you get the inspection and it does show damage, it's pretty much, you know, a silver bullet to prove.

Element two.

The other thing is the USDA will be able to help you.

You know, you're always going to fight a battle with insurance and motor carriers, even if you have a claim.

Sure.

That again, let's say you have.

Why is that?

So let me ask you a question, why is that?

You said, well, I'm going to say I was going to get to an issue with the claim.

Yeah.

You know, when I said a while ago, you always want to make the claim dollar wise, the least it can be, you know, if you have a, if you have a load of berries or let's just say you had a load of frozen chicken or fresh chicken.

Yeah, fresh chicken was worth $12 a pound or whatever it was.

Yeah, yeah.

And now it's frozen because they ran it wrong.

Well, you know, your customer sometimes will say, well, it's not fit for human consumption.

Dump it.

The motor carrier and its insurance is going to say, we need to sell this.

You know, if we could get $6 a pound, that reduces our claim in half.

So if you have a document that says completely unfit.

Hey, insurance.

Hey, motor carrier.

The government's saying we have to that takes that off the table and you don't have to fight that battle.

On the other hand, if your customer is trying to tell you that it needs to be dumped, you can say, well, it doesn't.

And that, you know, it just is.

There's just a lot of help and utility in that kind of document.

So say the load is $30,000.

Example you just used with the chicken.

Right.

I have fresh chicken.

It's supposed to be raining at 26 degrees.

It shows up at 10 degrees.

The reefer malfunctioned or what have you.

Now we need to go back, like as a broker, I need to go back to the customer and say, listen, we got this inspection.

We can salvage this.

And by salvage, I mean we can get some sort of return.

So now I can go to a secondary market.

Right.

And say, you know what?

I can sell this for 15 grand.

Right.

So we have a $30,000 load.

We're taking the loss, some of that loss away by selling it for 15 grand to some.

A market or a different wholesaler.

Is that kind of the route that it is?

Obviously, that's the best case scenario because first of all, it reduces the claim right off the top, which is a good thing.

Yeah.

Second of all, if insurance doesn't pay the claim for whatever reason, you're not.

You know, a lot of motor carriers don't have the ability to pay an $80,000 claim.

So if you get 45 of it back, it helps.

Sure, that helps.

And the third thing, probably the most important thing, not only is that a good course of action, quite honestly, the law requires that.

The law.

The law requires.

No, the law requires when any claim, all parties involved being the shipper, consignee, consignor, broker, and motor carrier, to mitigate the loss.

Yeah.

And what that means is make the claim the absolute least amount it can be.

Okay.

So when your customers say, well, you know, I don't want to be involved and helping, I don't, I don't, you know, I don't want to salvage this, which never happened.

It's never happened, obviously.

But, well, quite honestly, there's a.

There's a legal duty to do so.

Okay.

And a lot of, you know, these things end up in court sometimes, but sure.

Not the kind of court case that's going to create actual law we follow.

That's going to be $1 million claim.

Yeah.

But you know, there are.

There's definitely.

There would be case laws out there.

Say an entire ocean liner of Michael Jordan's, for example.

Yeah.

Worth 50 million.

Yeah.

Pretty value, you know, value there, you.

Know, you might have, they might not be perfect condition when they, because something happened, but you could sell them for 80 cents on the dollar.

Shippers will be like, you deal with it.

They actually have an affirmative duty to help in that.

And if they don't, the court or the insurance company has the right to say tough.

We're taking that off the top.

Yeah, that's, I mean that's a good thing to know like, especially for those who are listening today to understand the law.

And obviously you hear this man talking like he is extremely detailed.

He knows what he's talking about.

You know, having somebody in your corner like this that can walk you along the process, I think is, sets you apart from the other brokers out there.

And actually knowing and having those, you know, which I think are hard conversations to have with customers.

Right.

The people that pay your bills today, I need to have a hard conversation with you and help them understand what the law actually states.

Right.

You know, two little dovetails from this, from this claim issue.

You know, there's a thousand different scenarios I run across that we won't get into today.

We could talk for hours.

This is like a three part episode.

But you know, there's thousands of things that happen in real time.

You know, hostage situations.

Oh yeah, what can I pay and not pay to get, you know, my customers requiring me to take its label off?

Well, there's so many things, but these are the main down the middle things, you know, down the fairway issues that come into claims.

But the other, I think another thing that is very important to know when it, when you're dealing with claims is, you know, at the end of the day your job should be in your industry to make the customer happy, but they also have to work with you.

Yeah.

And you are going to need to get lots of information and documentation from the customer.

And if they're not willing to provide that to you, not only on this claim, but over and over and over and over and you're gonna keep getting claims with this one customer.

It might be time to look at that relationship because you know, at the end of the day, as I said the word relationship, both sides need to work together to resolve things.

We had, God, this was years ago, but we had a melon customer.

And that's probably why it's so like ingrained in my mind.

But like a lot of their loads were getting tipped over.

Right.

And then there were like four or five in a row and we're like, hold on A second like, this doesn't seem right.

Right.

What are your, like, what are your packing processes and how do you wrap the product?

And what do you do for airbags?

And how, like, what kind of material are you using, you know, for this?

You know, I think it was, yeah, it was a melon customer, but we had like four or five in a row.

And those are things to.

Okay, how do we go back to the customer and how do we have that conversation?

So, you know, a couple things that you mentioned and I'll.

I'm gonna go over these real quick with the cargo claims.

Good and acceptable loading condition, signed bill of lading.

Right.

That's the good and acceptable condition at origin.

Okay.

And your easiest way to prove that is signed bill of lading with no notation of damage at origin, provided the trailer was available to be inspected.

Okay.

Second piece is having some p.

Or having some form of rejection at the.

Receiver, proof of damages at the time it.

It reached receiver.

Okay.

And I think even, you know, brokers listening to this show or claims managers that are listening to the show.

I highly encourage pictures, pictures of the product.

Pictures.

Like everybody has an iPhone or everybody has a camera phone these days.

Take.

Have the drivers take pictures.

It reduces so much finger pointing.

Correct.

And ideally with a timestamp on that.

Because to the point we were talking about a while ago, when you have this clean bill of lading and insurance and your murder carrier says it was clean when I dropped it off.

Sure.

I have this photo that says March 28, 1152.

That's when you were there.

Right.

That helps a ton.

Hold on.

And then the last piece that you mentioned on the cargo claim is the cost of loss.

Okay.

So what is the value of this load and what is the value that's being damaged?

Just like you mentioned with the 15 pallets of widget widgets, one pallet was damaged.

Now they would just want to go and say, oh, this is a $20,000 claim.

Well, hold on a second.

It was just one pallet here and one pallet at, you know, 1200 bucks.

Right.

That's an easier loss to stomach than a, you know, $20,000 claim overall.

Absolutely.

And there's so many tentacles of proving damage.

Yeah.

But the 50,000 foot view is generally the motor carrier will be liable for destination retail value.

Okay.

That doesn't mean the insurance policy will pay for that, because insurance policy, some say we only pay wholesale.

Yeah.

The idea is you want to put the shipper in the same position it would have been in had there not been A claim.

So had there not been a claim, it would have sold its product for X dollars.

So therefore that's what it should be entitled to receive right now.

With that said again, sometimes insurance policies don't pay that.

That doesn't mean the carrier is not still liable for it because insurance policies just, they kick in for only what the policy covers.

We can have a separate episode only on the insurance side of it.

Right?

Right.

If there's a replacement load sent.

Yeah.

Then you drop the wholesale because they, if you paid retail, it'd be like they had two sales.

Sure.

And to prove your damages, you actually need an original PO or invoice pre shipment or at the time of shipment.

To the extent you're trying to get replacement value or sale value or let's say it's damage to a backhoe.

Yeah.

You need a repair estimate quote from a third party or repair invoice.

So you have to have bona fide valuation documentation.

I see all the time.

Here's my screenshot from my customer's computer.

That's not gonna fly.

And you'll never get a check.

So what I'm hearing correctly.

So I'm gonna try to lay this out in layman's terms on the broker side because you know, brokers like myself, we're not the smartest.

Okay.

So you get, you know John Deere, they sell a full size tractor to a dealer or a local Moline in Illinois.

Right.

John Deere, they're sending a tractor out that's valued at $50,000.

They might be selling it to that dealer at $60,000.

Correct.

What the claim is originally for is that original $50,000 a product.

That's incorrect.

It's incorrect.

Okay.

So it's the 60,000 that they're selling it for had there not been a claim.

So remember, if you keep the premise, the law, and this is not unique to transportation.

Yeah.

You're basically looking at what the damages should be for a completed contract.

Okay.

Okay.

And contract damages, the premise that we learned in nerdy law school is you want to put the party, it's called expectation damages.

You want to put the parties in the same position that they expected to be.

So in your scenario, John Deere sells its tractor and it gets paid 60 grand.

Okay.

Therefore it expected to receive 60 grand, so it should be paid 60 grand.

Now again, some, as I said five times, sometimes the insurance policy says we only pay costs.

Sure.

Now, but this gets into the last thing we should probably talk about on cargo claims before we go to other issue is the freight fees.

Okay.

So again, keep in mind, the law wants to put everyone in the same position.

Expected expectation damages.

Your customers will always say, why would I pay you freight?

Yeah.

I paid you $4,000 to move it from Moline, Illinois, and it didn't get there.

Yeah.

Okay.

So.

So keep this in mind.

Yeah.

We have a cargo claim.

For your example, the 60 grand insurance writes a check for $58,500.

Motor carrier kicks in, it's $1,500 deductible.

Your customer has received it.

60,000.

Yeah.

Made it.

What did it expect to do?

Reduce the freight cost as well.

It's what it thinks it should be.

Yeah.

But had there not been a claim, what would it have done?

Not shipped it.

No.

Had there not been a claim and it arrived, what would it have done?

It had.

Just cut you a check for the four grand.

Sure, sure.

Again, so the law should put everyone in the position they expected to be in.

Yeah.

If they expected to ship it, have no claim, they would have gotten their 60 and given you your four.

Yeah.

Now that they've gotten their 60, if they don't pay you, they pay you the four.

They're in a better position than they would have been had there been no claim.

And the law does not allow that.

I think there's so many scenarios like that, and I hear just different people in our sales teams where the customer never wants to pay for the freight.

Right.

So that is something to keep in mind, especially, you know, for those brokers out there that even if the there is a claim and we need to, you know, resolve it with insurance, the customer still needs to pay that freight invoice and go ahead.

The reason being, I understand completely the concept of you, the broker, saying, you know what, let's not deal with that because I don't want to rock the boat.

And quite frankly, it's one load.

Depends on the reason you're going to want to try to collect.

That is because, say, you're dealing with Landstar.

Sure.

They're going to be saying, give me my money.

And if you don't get paid by your customer, you're writing a check to the motor carrier, who, by the way, is legally entitled to be paid because the claim has been paid.

And then.

And then your customers got you coming and going because you have to pay a motor carrier 3800 bucks.

Right.

And you're not getting paid here.

Yeah.

So again, I understand that.

Let's not ask the customer because there was a claim, but then you're putting yourself at risk, too.

Yeah.

Just do what's right or do what's by the law.

We've seen a million times before where shipper sends over details to a load that are inaccurate, right?

Then we go back and you say, hey, listen, we can't do this.

This is 900 miles overnight.

Then the shipper might say, well, all my other brokers do it, right?