What is LTL carrier liability?

Shipping can be risky business. Freight can be damaged, lost, or even stolen, and recent reports indicate that cargo theft accounts for losses of around $1 billion per year. 

This can be a particular concern for businesses using less-than-truckload (LTL) shipping.

LTL shipping consolidates multiple freight shipments into one, with items from different businesses sharing space in a trailer. As a result, freight makes multiple stops and changes hands several times on the road, creating more opportunities for damage, loss, or theft.

Do shippers lose money if any of these issues affect their shipments? Not necessarily. Carriers offer some coverage to reassure customers, but it’s usually limited. 

That’s why you need to understand carrier liability before you use an LTL shipping service. 

Below, we’ll explain how LTL carrier liability works, why it’s so important to businesses, and why it’s not the same as cargo insurance.

What is LTL carrier liability?

LTL carrier liability refers to the financial responsibility that a carrier has for in-transit shipment damage or loss. But carriers have liability limits, and the coverage offered is usually outlined in the Bill of Lading.

These limits are based on the National Motor Freight Classification (NMFC) freight class of the goods being shipped. Freight class ranges from 50 to 500 and is determined by the four key characteristics of a shipment:

• Density: How much space the freight needs on a truck
• Handling: How easily goods are to handle (the harder it is, the higher the class)
• Stowability: How simple it is to stow freight based on its size and shape
• Liability: How hazardous a shipment may be (e.g., harmful or flammable chemicals)

However, standard carrier liability often doesn’t cover a shipment’s full value, so it’s crucial to check the carrier’s liability terms and conditions to find out if you need extra insurance.

Why is understanding carrier liability important?

Carrier liability may be limited, but it still provides businesses with a basic safety net. Specifically, it helps cover part of the cost if shipments are damaged or go missing due to negligence. Liability also encourages carriers to handle freight responsibly at all times and avoid shippers filing claims.

However, you should be aware of liability limitations before you use an LTL shipping service. These include:

• Certain occurrences (e.g., acts of God, inherent vice, and improper packaging) are excluded from carrier liability.
• Payout caps may not reflect the actual value of goods in a shipment.
• Claim processes can be slow and restrictive.

Unfortunately, businesses may assume they’re fully covered if they’re unaware of these limitations. And that can lead to expensive surprises if something goes wrong.

LTL carrier liability vs. cargo insurance

At first glance, it might seem like LTL carrier liability and cargo insurance are the same. However, there are key differences between carrier liability vs. cargo insurance that you should be aware of. Understanding these will help you make the right choice for your shipment coverage.

Coverage basis

• LTL carrier liability is usually covered on a dollar-per-pound basis and freight class. As the class increases, so does the coverage.
• Cargo insurance can cover up to the full value of a shipment.

Exclusions

• LTL carrier liability has many exclusions that can prevent shippers from filing claims after damage or loss.
• Cargo insurance offers broader coverage for shipments

Claims

• Liability payouts can take longer to process, and various restrictions apply. 
• Cargo insurance payouts tend to be processed more quickly and are more comprehensive.

Cost

• Carrier liability insurance is included, yet limited. In some situations, shippers may struggle to get a payout and need to cover the loss themselves.
• Insurance is an added cost, but it provides more protection for added peace of mind.

Get the right advice to protect your shipments

LTL carrier liability provides shippers with some protection, but coverage is limited and not as comprehensive as cargo insurance.

To avoid expensive surprises, it’s important to understand what’s covered under carrier liability and where gaps may exist. DTS can help you navigate liability coverage and choose the right coverage and insurance for your cargo. Get in touch with our professionals today for personalized logistics advice.