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Freight Forwarder Liability: How Technology Can Help You Manage Risk

Nov 18, 2021 9:00:00 AM

When freight forwarders take possession of freight, they generally assume the legal liabilities of acting as a carrier. But what exactly are the liabilities of a freight forwarder, and how serious are they?

Too many freight forwarders are under the false impression that their insurance will shield them from all liabilities. The truth is, even with insurance, you won’t be covered 100% of the time. Additionally, filing claims takes up valuable time and resources, so it’s vital to mitigate risk as much as possible.

In this post, we’ll go over some common freight forwarder risks and liabilities and explain how technology can help mitigate these risks.

Physical loss or damage

If freight is damaged, lost, or stolen during transport, the freight forwarder may be liable, even if a third party does the actual transport. The degree of liability depends on the contract in question, relevant laws, insurance coverage, and the particular circumstances of the loss or damage.

In the event that an insurance claim needs to be filed, mobile applications are an excellent tool for providing documentation. Some applications allow truck drivers to submit geo-tagged and time-stamped documents, photos, and videos as proof of physical loss or damage. When drivers can capture and instantaneously transmit this information from the road, insurance claims can be filed and processed faster — and robust documentation increases the chances that claims will be approved.

Extraneous insurance claims are also an issue. Without sufficient visibility into their shipments, freight forwarders often waste time and resources to track down and file claims for freight that is not genuinely missing. Real-time tracking technology can prevent unnecessary claims from being filed by increasing your team's visibility. For example, if a shipment has not arrived on time, tracking can alert your team of a weather-related delay and confirm the freight is still on its way, so there's no need to file an insurance claim.

Paperwork errors

Paperwork issues are the bane of the transportation and logistics industry. Here are just a few examples:

Errors and omissions (E&O) insurance will cover some paperwork errors depending on the circumstances, but it’s best to prevent the mistakes from happening in the first place.

Technology can help significantly reduce human error. For example, mobile apps with intelligent image capture can enable drivers to transmit BOLs without the need to manually key data. Artificial intelligence and machine learning solutions can catch missing or incorrect information while processing freight bills, reducing lost revenue, and increasing efficiency. 

Driver safety violations

Freight forwarders bear some responsibility for driver health and safety and can face fines and/or legal action if they don’t do their due diligence.

Freight forwarders can be held responsible for driver accidents in cases of negligence, such as failure to follow regulations for Hours of Service (HOS) or vehicle inspections. Depending on how the truck driver is classified (employee or independent contractor), the freight forwarder could also be responsible for workers’ compensation.

GPS tracking data can be used to track HOS and ensure drivers aren’t driving for prolonged periods. Software is also a powerful tool for vehicle inspections — some systems can prompt drivers to perform vehicle checks with time-stamped images and automatically transmit that information to their truck inspection reporting system. 

Conclusion

In some cases, freight forwarders may assume liability for issues like lost or damaged freight, paperwork errors, and safety violations. Insurance doesn’t cover every scenario, and filing claims takes up valuable time and resources, so it’s important to mitigate risk as much as possible.

Technology helps mitigate risk by:

  • Providing documentation for insurance claims
  • Preventing unnecessary claims from being filed in the first place
  • Catching paperwork errors via machine learning
  • Improving driver health and safety

By leveraging technology to improve visibility and automation, freight forwarders can reduce their overall risk and optimize their operations.

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