Known Loss: A Critical Concept in Freight Liability and Insurance

Key Characteristics

Discovery Timing:

Loss must be identified ​prior to or during delivery (e.g., visible container damage, torn seals, or wet packaging).

Example: A consignee notes "crate crushed" on the delivery receipt before signing.

Documentation Requirement:

Requires immediate written notation on the ​Bill of Lading (B/L) or ​Proof of Delivery (POD).

Failure to document may void claims under the ​Hague-Visby Rules.

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Legal and Operational Implications

Carrier Liability:

If a carrier delivers goods with a known loss, they may be deemed negligent unless proven otherwise (per ​COGSA in the U.S.).

Example: A trucking company delivering a pallet with visible water damage risks liability for spoilage.

Insurance Claims:

Insurers may deny coverage if the loss was known but not reported before transit (e.g., hidden damage during pre-shipment inspection).

Example: A shipper knowingly ships electronics in a leaking container; subsequent water damage claims are rejected.

Shipper Responsibility:

Shippers must disclose pre-existing damage (e.g., via ​Incoterms® 2020 clauses like CIP or DDP). Concealment constitutes fraud.

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Procedural Best Practices

1. ​Pre-Delivery Inspection:

Conduct joint surveys with carriers and third-party inspectors (e.g., SGS, CCIC) to document condition.

2. Documentation Protocols:

Use standardized remarks like "Carton #5 breached – contents exposed" on B/L.

3. Mitigation Actions:

Isolate damaged goods to prevent contamination (critical in pharmaceutical or food shipments).

Case Study: Frozen Seafood Shipment

Scenario: A reefer container arrives at the destination port with a broken temperature recorder. The carrier’s log shows the malfunction occurred 72 hours prior.

Outcome:

The known loss (temperature breach) shifts liability to the carrier for spoilage.

Insurer requires the carrier’s incident report to process the claim.