Question: Can You Profit From A Freight Claim?

Answer: The short answer is, “Sometimes”.

Most carriers emphasize in their filing instructions that you cannot profit on a shipping claim, and that your claim should only include your cost, without any profits. The rationale is that the carrier is reimbursing you for your freight damages, so that your financial position is the same as if the carrier had completed their duties as stated on the Bill of Lading Contract.

However, in some cases, you are allowed to profit on a freight claim.

Case #1: Ownership During Shipping

In this case, it depends on who owned the product during the shipping process. Suppose that you are a retailer, shipping your product to a customer. If the terms of your agreement state that you hold the title to the shipment until it is received by your customer, then in the event of freight damages, you would only be able to claim your cost – not the retail price.

If, however, your agreement stated that your customer took ownership of the shipment when you released the product to the carrier, then the value of the product during transit now takes on the  full retail value. Your customer would file the freight claim in this case, so you wouldn’t profit directly by filing the claim. However, if they ordered a replacement from you (hopefully they would!) then in this way you are profiting, because you have made two sales instead of one.

Case #2: Proven Loss of Profit

The carrier usually only pays for the shipper’s cost of the product because it is assumed that you, the shipper, will replace the damaged shipment by sending a replacement. Therefore, you would profit on the second shipment, as in the example above. The logic is that because no sale is lost, you are no worse off if you are only reimbursed for your cost.

However, if you can prove that sales were lost due to the carrier’s negligence, then you may be able to claim the full value of the shipment, with profit, thus profiting from your shipping claim.

For example, in Eastman Kodak Co. v. Westway Motor Freight, Inc., 949 F.2d 317 (10th Cir. 1991), Kodak showed evidence that it sold nearly all of its product soon after it was produced – therefore, it was losing sales when its shipment was damaged. In this case, Kodak showed that it was entitled to the full invoice price of the shipment, including profits.

 

Disclaimer: The information on this blog is for personal reference only. This is not official legal advice. We accept no responsibility for consequences resulting from the use of this information. For official legal advice, talk to a certified professional.