Cargo claim loss mitigation evidence

What is Loss Mitigation?

The legal definition is as follows: the principle that a party who has suffered loss (from a tort or breach of contract) has to take reasonable action to minimize the amount of the loss suffered.

In layman’s terms of a cargo claim, this means that the cargo receiver has a duty and responsibility to the carrier to ensure the claim value is kept to a minimum.

Let’s explore various ways cargo receivers can mitigate their losses.

Cargo Segregation

Cargo segregation is the action taken to separate or segregate damaged cargo from intact cargo. Regardless of the type of damage or the type of cargo, segregation must be carried out and evidenced. However, depending on the type of damage and the type of cargo, there are several methods to segregate cargo.

1. Water Damage
In the case of water damaged cargo, for example, cargo in sacks or cardboard boxes, where water from one sack or box can transfer to other cargo or packaging causing further damage, it is important to separate the wet cargo from the intact cargo as soon as possible. Where a cargo can continue to deteriorate by remaining within the wet packaging, the cargo should be removed from the wet packaging immediately, such as in the case of electronics.

Water damaged electronics remove from wet packaging immediately

2. Rot Damage
Where fresh cargo has become rotten, separation or segregation of rotten cargo from the rest of the cargo must be carried out as soon as possible to avoid further spread of the rot.

Separate rotten goods from rest of cargo

3. Physical Damage
When your cargo has become physically damaged, perhaps from mishandling of the container during the voyage, the damaged cargo should be separated and a record made of the quantity of damage.

During the segregation process photos should be taken in order to prove that loss mitigation efforts were carried out.

Subsequent to Segregation

Once you have separated your damaged cargo from the other cargo, there are still further mitigation efforts to be undertaken. Let’s explore some of these:

1. Salvage Sales
Salvage sales are the sale of damaged cargo, generally at a price lower than the purchase value of the cargo in order to avoid incurring additional costs, such as disposal fees, and to lower a claim value.

2. Repairs
Where damaged cargo such as machinery can be repaired, these repairs should be carried out in order to avoid complete destruction and/or disposal of the cargo. The cargo can then be sold as planned, or at a reduced value, constituting a salvage sale.

3. Repackaging
Where only the packaging of the cargo has become damaged, the packaging should be replaced and the cargo sold.

If part of the cargo has become rotten, sorting and repackaging the cargo for sale purposes should be carried out.

Conclusion

Additional expenses incurred for segregation, repairs and repackaging for the purpose of salvage sales are claimable, and so your claim value should be calculated as follows:

Cost of damaged goods as per the Commercial Invoice value

ADD: Segregation, repair and repackaging costs

LESS: Salvage sale values

EQUALS: Claim value

Remember to document and photograph all your loss mitigation efforts and present this evidence in the claim process.

If in doubt, contact us here and we can help!