Delayed Payment

    Payment of carrier claims delayed

    The Problem: Payment of carrier claims delayed.

    The Key Point: It is improper to delay payment of carrier claims as a matter of course.

    The Solution: Payments should be made in good faith within a reasonable timeframe given the relevant circumstances.

    QUESTION:
    We are a truck broker with offices in the United States and Canada. Recently we’ve had a couple of instances where fresh produce shippers (customers) have complained about the timeliness of our claims handling, saying they’re entitled to payment of their claim within thirty (30) days. Typically, when we receive a completed claim packet from a customer, it may take us a week or two, depending on volume, to get it reviewed and processed with the carrier. Then, by contract, our carriers have ninety (90) days to pay the claim, deny it, or make a settlement offer. Ideally, we’d like to hold off paying the claim until we collect from the carrier, but sometimes a ‘business decision’ needs to be made to maintain the relationship. We just don’t want this to be the norm. Does Blue Book Services support this approach?

    ANSWER:
    We cannot fully support your approach here, but we do not agree that carrier claims must be paid in thirty (30) days either.

    Produce shippers are accustomed to payment terms of thirty (30) days or less (usually less) due to the PACA trust and its definition of “prompt pay.”

    Additionally, our Transportation Guidelines provide that “Carrier claims should be filed with the Carrier [or truck broker], in writing, as soon as practically possible, usually within thirty (30) days.” So it’s probably not surprising that your customers are suggesting they are entitled to be paid on carrier claims in thirty (30) days.

    In fact, however, we are not aware of any specific days-to-pay requirement applicable to carrier claims involving exempt (nonregulated) commodities, such as nearly all fresh fruits and vegetables. Of course, a days-to-pay provision could be specified between you and your customers by contract; but in the absence of such a provision, we would simply ask if the delay in question was reasonable, and expect you, as the truck broker, to act in good faith.

    Generally speaking, carriers and truck brokers should be actively working claims to conclusion, and should communicate a specific reason for any delays. For instance, we would expect disputed claims or those involving extensive factual investigation to take more time.

    We would not, however, consider a blanket ninety (90) days-to-pay policy for payment of claims involving fresh produce to be reasonable. Given the availability of government inspection certificates in the United States and Canada to quantify the extent of damage within days of arrival at destination (often the same day), and given the need to rapidly salvage highly-perishable product, we believe that routine claims should be paid sooner.

    Of course, you can agree to a ninety (90) day provision with your carriers, but this provision cannot be properly ‘passed through’ to your customers in the absence of a similar agreement with them.

    Your questions? Yes, send them in. Legal answers? No, industry knowledgeable answers. If you have questions or would like further information, email tradingassist@bluebookservices.com.


    Doug Nelson is vice president of the Special Services department at Blue Book Services. Nelson previously worked as an investigator for the U.S. Department of Agriculture and as an attorney specializing in commercial litigation.