File a Freight Claim: Full Market Value & Profit LossWritten by Neal Willis
Cargo claims are not intended to be a profit center, and including profit in a freight claim is not often warranted. The goal of any cargo claim is to restore a claimant to their original position, as though no loss and/or damage occurred. However, there could be instances where anticipated profit was lost due to carrier negligence. When that’s the case, including profit (assumed) in the freight claim filing can sometimes be acceptable.
An example would be a situation where time was of the essence. If there isn’t enough time for the consignee to wait for a replacement shipment to arrive from the original shipper, and a replacement is required immediately and must be obtained from another vendor, then a claimant may have a case where the sale (original) along with its inherent profit was lost due to the damage or shortages.
Courts have held the opinion that carriers would be unreasonably burdened should the seller’s invoice always be allowed as a value guideline. It’s presumed that when damage occurs, the shipper would send a replacement to the consignee, and the shipper’s profit would be secured as originally intended with the replacement shipment.
With the assumption that the intended profit is secured through the replacement shipment, a double profit could occur if the profit loss from the original damaged shipment could be included in the claim filing as remedy along with the profit from the replacement shipment.
Keep in mind the goal of a cargo claim is for the claimant to be restored to their original position as though no loss or damage occurred, which means for the claimant to be made whole, they would need to recover full market value. It’s important to note that full market value includes the value of the freight at the time of shipment.
If the product had been delivered to the consignee with a clear proof of delivery without loss or damage as originally projected, the claimant would have been paid full market value for the agreed upon price of the item(s) at that time. When an entire sales order is lost without the shipper being able to secure the profit (originally intended) with a replacement shipment, then loss of profit could potentially be suffered and may be eligible for reimbursement through a claim settlement.
When submitting documentation with a freight claim, claimants must include the invoice for their damage or shortages (loss) with the cargo claim submission. The invoice, which can either be the manufacturer’s invoice or the seller’s invoice depending upon the situation, is a requirement necessary for several reasons, including to show the value of the product being claimed and to help with determining and satisfying the mitigation requirements. Per NMFC guidelines, the parties involved with a cargo claim have the duty to mitigate the cost of a claim.
Determining which invoice to include in your claim filing can depend upon whether full market value was lost, and making that determination can depend upon whether profit (loss) is being assumed or included in the cargo claim filing. When claimants file a freight claim, the manufacturer’s invoice is commonly used for proving the actual costs of repairs and/or replacement.
When completed, repairs naturally tend to restore the claimant to their original position and make them whole, meaning they can recover full market value of the product as it was at the time of the shipment once the sale is complete and the profit secured as originally planned. However, if the claimant did indeed lose the original sale and profit from that sale was lost because of freight carrier damage or shortages (loss), a claimant may wish to consider including profit loss in their cargo claim filing.
To have any chance at successfully recovering profit in a cargo claim settlement, a claimant must provide proof of the loss of sale in the claim filing. When claiming loss of profit in a claim filing, a claimant should consider including a copy of the original seller’s invoice along with a copy of the invoice for the replacement that was purchased from the alternate seller.
If obtaining the invoice from the alternate seller is not feasible, in order to help prove the claimant did indeed lose the original sale and profit from that sale as a result of freight carrier damage and/or loss, the claimant may wish to consider obtaining and/or including a statement from the alternate seller. The statement can indicate something to the effect that they have sold the same merchandise to the same consignee within the same specified timeframe that is being referenced in the claim filing.