Claims Corner: Handling a Claim When Shipment Has Been Prepaid

Dianna Whitby | Deer Park Consulting, LLC

Picture this: It’s Thursday afternoon, you’re sitting at your desk daydreaming about the weekend when the phone rings and it’s one of your agents advising you that there’s been an accident. A truckload of freight from your least favorite customer was completely destroyed in a trailer fire. Your first thought is “Oh, no. Why did I come to work today?”


Over the next few days, you begin to gather the necessary information. You get the signed rate confirmation and, best of all, the carrier calls and gives you the name of his insurance adjuster and the claim number. You then get the claim and supporting documents from the shipper. A red flag goes up – the claim is for the full invoiced amount. Why the red flag? Because the shipment is prepaid.

Now, the fun begins. The insurance company politely informs you that “freight charges aren’t recoverable in the claim unless the carrier is paid – in full.”

You start with the operations manager who, when you ask if the carrier was paid, suggests that you have taken leave of your senses, or words to that effect. “Why would we pay the carrier if the load wasn’t delivered?” The bulging veins in the operations manager’s forehead suggests you may be on shaky ground.

At this point, you send an email to the shipper and ask them to deduct the prepaid freight charges from their claim. You use the amount shown on your rate confirmation. Naturally, you tell them that they aren’t going to be invoiced, but this amount must be deducted from their settlement.

Within 30 seconds of hitting send, the sales manager is doing a dance on your desk. “How dare you upset this customer! Pay the claim and be done with it! And if you don’t pay in it the next three days, not only are they cutting us off, but they aren’t paying other freight bills until this is resolved! Do you have any idea how much they owe us?”

Let’s come up with a workable game plan, and it starts within seconds of being notified about the accident.

Is this enough drama for you? Let’s come up with a workable game plan, and it starts within seconds of being notified about the accident.

First, advise operations not to cancel any freight charges or payments to the carrier. Don’t allow them to put the carrier’s money “on hold.”

Second, email the shipper and tell them that there’s been an accident and their recovery will be the invoiced amount less any prepaid freight charges. If you have had time to find out the amount, include it in your email. Advise them that this amount is not recoverable from the carrier’s insurance company and give them a choice: either your company can bill them or they can deduct the amount from the claim they file against you. Be sure to include your sales manager on this email because sometimes giving them fair warning allows them to prepare for the angry shipper phone call.

Please keep in mind that if the shipper agrees to pay you, then the carrier must be paid, no matter what the operations manager says. You must be able to prove payment to the carrier’s insurance company. Let your accounting department know if the shipper threatens to hold payments, or worse yet, deduct from outstanding payments.

Stick to your guns! When the operations manager and sales manager come down to your office to question your sanity, remind them that the insurance company isn’t going to reimburse your company, and the difference between what is paid to the shipper and what is received by the insurance company will have to be written off. Let them know that your shipper isn’t “losing” any money. Had the shipment been delivered, this is the amount they would have paid. Chances are, if your sales manager understands the freight charge question, he will be able to assist you in getting the deduction.

Working out the freight charge issue applies to almost every phase of your business, from operations to sales to accounts receivable. It’s your job, as claims manager, to keep all parties involved, so that no one loses and everyone stays on the same page.     

For more information about the services offered, visit Dianna’s website at:

Deep Desert Photography/