Why Should We Care?
Refrigerated cargo claims are on the rise since the COVID-19 pandemic.
Mutual marine insurance company, The Swedish Club, identified a 270% increase in refrigerated cargo claims over the COVID-19 pandemic, mainly due to increased delays at ports. However, refrigerated cargo claims should be on the radar of any driver, motor carrier, transportation company, logistics provider, and insurer.
Why? Because they are costly due to the cargo transported and the size of the loss. Typically refrigerated cargo consists of meat, vegetables, fruit, dairy, plants, and pharmaceuticals. Pharmaceuticals traditionally are the most expensive cargo to transport, however, you need not be a transportation industry expert to know the cost of grocery items are increasing. As the retail cost of these items increases so does the value of such items in transit. A claim for refrigerated cargo usually involves loss of the entire load. With non-refrigerated cargo, only a portion of the cargo may be damaged. In refrigerated claims, if the meat or cheese arrives out of temperature, then the entire load is lost.
Why do Refrigerated Cargo Claims Occur?
The primary reason a refrigerated cargo claim arises is due to temperature variation in transit. When cargo is loaded, the temperature of the cargo can differ significantly from the chosen set-point temperature.
Refrigerated containers are not designed to cool cargo. Containers are designed to maintain cargo temperature by circulating and adjusting air throughout the container. As a result, if cargo is above the desired temperature when loaded, it may take days for the core of the cargo to reach the appropriate temperature.
The second reason a refrigerated cargo claim may arise is due to incorrect conditions, like set-point temperature. Often, the set-point temperature is incorrect due to a miscommunication or misreading of the shipping documents. For example, the temperature may be specified in Celsius but then set in Fahrenheit or the negative symbol is misinterpreted as a dash.
A third reason for a refrigerated cargo claim is issues, malfunctioning, or failure of the equipment, including the reefer, container, trailer, or tractor. An equipment malfunction in transit delays delivery, which increases the likelihood of a claim as refrigerated cargo tends to deteriorate over time. A reefer issue could result in the load traveling out of temperature or in improper conditions.
A fourth reason for a refrigerated cargo claim is delayed loading or unloading. If cargo is allowed to sit on the dock while waiting to be loaded, then the cargo likely will not be at the desired temperature when loaded. As mentioned above, refrigerated containers are not designed to cool cargo, but rather to maintain the cargo temperature.
If the cargo is loaded out of temperature, then the cargo likely will remain out of temperature. Similarly, if the container has to sit open on the dock while awaiting loading, then the reefer unit can overreact to the uncontrollable conditions as the cooled air escapes out of the trailer doors which likely will negatively impact the cargo once loaded.
How to Avoid Refrigerated Cargo Claims?
Inspect the Equipment
One of the simplest ways to prevent a refrigerated cargo claim is something your drivers and agents already (or should already) do—inspect their equipment. A pre-trip inspection for a refrigerated load should include inspection of the reefer, the trailer, and the tractor. The reefer must function properly as this controls the conditions in transit. The trailer should be checked for cracks, deteriorating gaskets, or poor door seals—all of which could alter the internal temperature and conditions of the trailer and impact operation of the reefer.
Lastly, if required by the shipper, the trailer should be precooled prior to loading. Typically, this is disfavored by drivers and with good reason. Once the trailer doors are opened to load the cargo, the cool air escapes the trailer onto the dock. Since our goal is to avoid refrigerated cargo claims, the best practice is to comply with the shipper’s requirements, including precooling of the trailer.
Precooling provides an opportunity to ensure the reefer is functioning properly.
Inspect the Cargo
In addition to inspecting the equipment, the cargo should be inspected. Though, drivers often are not allowed on the docks during loading. If the driver is not permitted on the dock, then they should note this on the bill of lading. This notation is vital not only for claims related to the condition of the cargo but also claims related to count or other shipper-related issues.
If the driver is permitted on the dock, then the driver should check for several items. First, the driver should check the cargo’s temperature. As discussed above, the cargo must be loaded within the desired temperature, so it remains at the correct temperature during transit. Drivers should have a good quality pulp thermometer to check the temperature of the cargo during loading.
Second, the driver should inspect the cargo’s condition. The cargo’s condition is especially important with perishable items. The driver should consider the color, odor, presence of mold, deterioration, and presence of ice or frost.
Third, the driver should note the dating of the cargo. Since refrigerated cargo often concerns perishable items, the cargo likely is stamped with a “use by” or “best by” date. The driver should ensure the date is current and within the delivery window. Additionally, when dealing with loads of fruits or vegetables, dating should be checked on several packages. Mixing of harvests can cause the premature ripening of younger produce when in proximity to older produce.
Fourth, the driver should inspect the packaging materials and the loading method. Both the packaging and the loading should promote air flow throughout the cargo. As noted above, the reefer maintains temperature by circulating air throughout the cargo. The packaging should have symmetrical air holes to allow the air to circulate throughout the cargo. The loading must consider air flow and ventilation, which is necessary for removal of moisture and gases. A space of four to five feet should be left between the trailer doors and the cargo to allow the air to circulate properly.
When handling a refrigerated load, communication is key. Clear communication can avoid simple, but costly mistakes – like the temperature specified in Celsius but set in Fahrenheit or a negative sign misunderstood as a dash. The conditions of carriage as specified by the shipper or receiver need to be clearly communicated. While the conditions may be stated in written materials, it is vital that they are verified to whomever actually will be setting the conditions on the trailer.
To the extent multiple documents are generated for a single load, the conditions must be identified consistently across these documents. Lastly, any conditions or other requirements must be communicated all the way to the end driver or agent since they will actually set the conditions. This is of particular importance in brokered loads.
Similarly, a method of communicating issues experienced while the load is in transit must be established pre-trip. For example, if the tractor breaks down in North Dakota while transporting a load of cherries to New York, then how will the status be communicated to the receiver, and how should the cargo be handled during this breakdown period.
Once the proper conditions have been set, the conditions must be monitored while in transit. The driver should maintain a log indicating when conditions were checked and what the conditions were when checked. This log is in addition to the data logger on the reefer unit. The data logger is an integrated part of the reefer control unit. The data logger records date, time, set point, supply air temperature, and return air temperature. The data logger can be downloaded. The information recorded by the data logger is indispensable when a claim occurs, because it offers objective evidence of the conditions during transit and in a multi-modal shipment, will identify where in the transport chain the issue occurred.
Address the Presence of a Shipper’s Data Logger
Shippers often place their own data loggers in the cargo when loading. Like the reefer unit data logger, a shipper’s data logger can record temperature, humidity, light exposure, and carbon dioxide levels and provide location data.
The shipper may be able to access the data in real time and can be downloaded at the time of delivery. The data recorded by the shipper’s data logger likely will not match the data recorded by the reefer. The question then is – in the instance of a claim, which data will control?
This question should be addressed pre-transit. Our recommendation would be to have the data recorded by the reefer unit control in the instance of a claim. The cargo’s conditions can be impacted by a myriad of factors outside of the reefer’s settings, including the cargo’s temperature when loaded, the age of the product, the packaging material, and the loading of the cargo. If the shipper’s data logger is buried in the middle of the cargo, then it is likely the conditions recorded by the data logger will not comply with the shipper’s requirements, even though such conditions are outside of the control of the driver and trucking company. Therefore, the reefer unit’s data logger should be the controlling data set in the instance of a claim.
Living in a Mad-Free World
Refrigerated cargo claims are on the rise due not only to changing global conditions but the increased value of refrigerated cargo as evidenced in the rise of retail grocery prices. These conditions create the perfect storm of claims for drivers, motor carriers, logistics companies, and their insurers.
However, implementing “best practices”—as outlined above—can help stem future refrigerated cargo claims and lay the groundwork for an effective defense should such claims arise.