Breaking Down the Freight Claims Process with FreightClaims.com | Episode 49

Hey, everybody. It's Patrick Escolas with another episode of Banyan Technology’s Tire Tracks podcast. I am joined with a very special guest. I got to spend some time with him recently at Atlanta. at our Users Connect conference in 2024. If you weren't there, I'm very sorry, you missed out on a great time. But I've got Mike Schember of FreightClaims.com. How are you doing, Mike? 

I'm doing great. Thank you for having me.

Hey, all right. Mike, FreightClaims.com, I have to say, probably the most original name in all of the websites. Before I get into where you're from, where do you come up with such a brilliant name?

Well, thank you for that. You know, I've been doing freight claims since I was 25 years old. So, it's always been in my heart. I bought the URL 10 years ago with the hopes of using it someday, and now, we can. So, it's fantastic.

See, I like that. That's some good foresight. I would say, 10 years ago, I probably have an AOL name that doesn't make any sense anymore. I couldn't even – there's probably a MySpace page with some punisher logos, and probably some AFI on it. That's what I've got from 10 years ago.

Back then, you didn't have to add a bunch of numbers after the name you wanted.

No, you didn't. When that all started, you're like, "What's the point? If I have to add all these numbers, then I'm not unique. I've got to find a weirder name now." Okay, so here we go. We'll start with this. What would Freightclaims.com have been if you couldn't have gotten that name?

Well, the company is actually called Cargo Claims Solutions, and then I'm DBAing as FreightClaims.com, because I wasn't sure I could get that URL. I actually had to go through a broker to buy it, but it was an affordable price. Back then, when the Internet first came on, people were just buying URLs. 

I was going to say, yeah, is that the GoDaddy days?

Yes, absolutely.

That's right.

I use GoDaddy's broker to find it for me and to contact the owner. So, it's pretty neat.

I like that. All right. So, without getting too far ahead of ourselves. Mike, you said you've been in the claims game for 25 years. I think when I talked to you, I was like, where did you come from to get to this point? What's your logistics background? Who are you and why should I listen to you if I am unfortunate enough to be a regular follower of this podcast?

Well, I've been in the freight business since I was 19 years old. I started as a dock worker at Overnite Transportation back in the day. It was my first real man job where I got dirty. I worked 60, 70 hours a week. We went through the strike of '95, and it was an incredible amount of work. Literally, we would go sleep in our car, and then, turn around, and go back, and load, unload trucks again. It was a grueling time in the freight business. But from there, I got into – I didn't want to be a dock worker my entire life, so I got into OS&D and distressed freight. So, at the local terminal level, every carrier typically has, at the local level, somebody that's in charge of finding lost freight, and returning damaged cargo to shippers to mitigate loss.

So, is that a little bit like being the guy at the end of Indiana Jones going through that giant warehouse looking for the Ark of the Covenant that's not labeled correctly? What did that look like in a day in the life there? It's like, here's a pile of things we don't know where they go. Good luck.

Well, that's exactly right. I mean, you do have a TMS that you can search for things and you really have to be creative. I mean, the thing with an OS&D clerk is, you're a detective, so to speak, of freight. So, you got to find where overages belong and you got to find lost freight. There's a series of things that you can do. I mean, starting with the shipping manifests, and then – some of the techniques that we used was, looking at the manifest of the doors that were loaded, next to the door where that cargo was supposed to be, and finding like shipments to apply shortages to and whatnot

Yes, as you say, because chances are, it's out somewhere else. It's not necessarily just, "Hey, we have extra boxes or freight, or pallets here. We're not sure where they go." It's more of like, "Someone says this is missing. We don't know." Yes, I can see that being very detective-like. How long did you do that for?

I did that for about five years, and then everybody from the terminal – I've always been based in Arizona, so I worked out of the Phoenix Arizona terminal at Overnite. They were all going to this new yellow-owned company startup called WestEx, which was yellow back in the day, bought up a bunch of regional carriers, and they wanted a non-union network of regional carriers to distribute freight across the United States. So, I went over to WestEx, and I was

in W&I to begin with. Then, there was an opening in freight claims. So, that was

my first step into the freight claims world.

What's W&I?

Weight and research. So, that's where the guys go out with tape measures, and rulers, and make sure that the freight is classified correctly.

I was just saying, you're the reclass that everybody loves getting right now.

Absolutely. That's a whole another story we could save for another day.

Yes, exactly.

Yes. That was an interesting – I mean, that was – I guess, in claims and W&I, they always called me sales prevention, which is not the title I wanted. But it was literally, you know, with freight claims, you're literally dealing with all the mistakes that your fellow employees make. 

I like sales prevention. It's one of the things as someone who is an account manager, one of the things I realized because, like you in those positions, you put on all the different hats. You're like, I'm more of an expectation manager half the time." Whether it's the client, the carrier, or my own internal team, it's like, "Whoa, all right." It's not quite the title of the role. It's what everybody ends up calling you that you know is really what you're supposed to be, isn't it?

Yes, amen to that. I mean, I would have sales guys, "Well, you should just pay the $50,000 claim." I'm like, "Well, what if it was coming out of your pocket?"

Whoa, whoa, whoa. You know what? Maybe not, yes. I could see that a lot. "Hey, hey Mike, why has this thing taken so long?" "Oh, I don't know, because there's money involved, and we may or may not owe it. That's probably why."

Yes, exactly. Exactly.

So, you're doing that, and then what? You just realized there should be a better way or there was a catastrophic, cataclysmic event where you were struck by radioactive claims form. What happened?

That's funny. A variety of things. I mean, freight claims is such a unique niche, and not a lot of people know about it. It really is not thought about until you have one. Then, you don't really have a place to turn. I mean, unless you're going to hire an attorney, which is cost prohibitive, there really is no resource for you to figure out how to manage and successfully submit a claim to a carrier, and hopefully get paid.

What does FreightClaims.com do? From a high level, without letting you press buttons in front of me here, what does it do? What does it do to the process?

Yes, that's a great question. Essentially, in layman's terms, it's a CRM for freight claim management. So, as I mentioned, my background is freight claims, and I work for two carriers back in the day. I was a director of cargo claims. With all due respect, we had drawers full of claims that we knew that we owed, but we just didn't pay them, unless people inquired about them. I mean, there's some claim prevention techniques behind that. But on the flip side of that, we also encourage you to work closely with the carrier. The carriers are our partners too, and there are some carrier declinations that stand. So, we kind of help walk through that process. Our system is a CRM to keep you on point, to follow up with carriers. Then, we also give some guidance on freight claim management. So, how to overcome a declination or why the carrier declined it.

Now, the claims process as a whole is what I just assumed by definition painful. Is it something like you said that – and maybe this is before FreightClaims.com, just that the processes is kind of painful by definition. Is it something that the carriers would have an active strategy to deny claims or it's more of just the burden of proof lies solely on the shipper?

Well, it's a variety of things.

Okay, never an easy end. I always ask the questions that never have a yes or no answer. That's right.

No. I mean, there's certain tricks that people need to realize when they're tendering freight to a carrier and then also receiving freight from a carrier at time of delivery. One of the things I always talk about is piece counts on a bill of lading. The bill of lading is the contract of carriage. It is a legal document. Then, the carrier takes that document and then recreates it in the form of a delivery receipt. So, everything you put on that bill of ladings should translate over to the delivery document in the exact same way. What's leading me to that is verifying piece count at time of pickup. But let me pause by saying, you have to be realistic with that. So, you can't tender 10 pallets and expect a driver to count a thousand boxes.

At the same time, if you can indicate piece count on number of handling units. That gives more clarity on what's expected at time of delivery. Does that make sense?

It does.

Yes. So, you've got 10 pieces on a pallet, have the driver sign for 10 pieces on one pallet, not just one pallet. Because then, if it shows up with nine pieces, the driver did validate. 

He goes, "I got one pallet, man." Yes, exactly. Okay, I get that. So, the more granular a data you can put through and have them basically agree to, the better off you're going to be from a claims process perspective.

That's correct. But on the flip side of that, I mean, the claimants also have an obligation to mitigate loss as much as possible. So, the misconception about freight claims is, if the carrier damages it, they're just going to pay the whole claim. Kind of the analogy I give with that is, you're at the grocery store, and a cart rolls into your car, you're not getting a brand-new car. You know what I mean? So, you do have a duty to mitigate the loss to the carrier as much as possible. Quite frankly, if we didn't, then, you can expect freight charges to go up 100%. 

Yes. There's a reason I drive a beater day in and day out for that exact cart reason you said. So, within claims and FreightClaims.com as being kind of a, I'll call it a love child of yours. Is this something that has grown as a need because there's more claims now or what? How does that look?

Yes, I definitely think there's more claims now. I mean, we're seeing theft and fraud just rampant across the industry. I think there'll be some tools that come out in the very near future that help prevent some of that. But at the same time, it's lack of awareness in freight claims. What really is my right to file a claim against a carrier? What truly is the carrier's obligation in order to compensate me to put me in the same position of what have occupied had that loss or damage not occur?

Okay. Is something like a freight claim going to be a different process if I'm a shipper or if I'm a third-party logistics person carrying this out for another shipper? Is there any nuance of that or is it basically the same pain?

Certainly, some nuance. I think the shipper, they feel the pain. It's their cargo, it's their unhappy customer. From a broker's perspective, of course, they have an unhappy customer. Brokers are not legally responsible for freight claims. The goods are never in their care custody and control. They do manage claims on behalf of their customer as a value add. But I also don't think, a lot of the brokers with all due respect, don't know a whole lot about freight claims, much like shippers don't. So, they need that additional guidance in order to get that claim paid. And also, communicate with their customer on what the expectations are when a claim is filed, and those are some things that we provide.

Is that something that's done by generally, obviously, there's going to be a minority or an exception to every rule? Is that something that, this is a specific job for someone in a logistics department or at a broker? Or is this whoever just happens to be working with that load or shipment in question?

It depends on the size of the brokerage. Some have their own claims department with claim personnel that are experienced in the ins and outs of freight claim management. Most don't. So, it's typically, maybe the dispatcher filing it or even the sales guy. I don't really like to get sales involved in the freight claim process because –

I'm sure they don't want to get involved either.

Yes, that's for sure. And they don't really know what to say. I mean, from a broker's perspective, you really need to be careful on the things that you share, where you don't want to misspeak. What I mean by that, is when a carrier is providing information on their position of the claim, whether it's a declination or a request to mitigate or whatever, the broker should never interpret what the carrier is saying. Share specifically what the carrier is saying, because you don't want to say something that will implicate yourself.

I got you. I got you. So, within some of the pain points we've talked about, and some of the more – and I guess, here's a question before I get to that. Much like a lot of the logistics world, is this a place where people are getting thrown in to do claims, because the person who's done it for 30 years has retired and no one really knows how it got done before? Or is that something that on the execution brokerage side is unique?

I think the freight claim seat is rotating. I think there's people that really get into it and don't like it. It's simply because they don't understand it. So, they move on to other things. I think, in some cases, you might have the operator or the customer service person trying to file a claim. They just simply don't know anything about it. So, our software really guides you through what's expected in order to get a claim successfully submitted to the carrier.

So, in that exact situation, let's talk about someone like me who has never done a claims process, doesn't have a lot of freight execution background, other than from the technology side. What does FreightClaims.com do that makes it so I could be successful with that?

Yes. So, we guide you through a three-step process in order to get a claim entered into the system, which guides you through, what documents are required to successfully submit a claim to the carrier, what's required versus convenient. Some carriers ask for some pictures. Pictures are always very valuable when you're filing a freight claim specifically for damages, but are not necessarily required. But what we've done is we developed this software with different document categories. So, you can – we have some standard required right out of the gate, but you can customize those document categories for your brokerage or your shipper. What are some of the things you want to collect on behalf of a claim that makes sense for your business? But we have the standard ones as required. So, you can't advance the claim if you don't have specific documents in order to substantiate the claim.

Is that something you work directly with carriers to get, or there's a level of standardization as a bare minimum between anyone you're working with? There's a level of standardization. So, there isn't really freight claim law per se. I mean, there's the Carmack Amendment, and there's different case laws that, you know, just like anything, there's case laws that can support your case or not support your case. People will typically pick the ones that benefit them.

Yes. Are you going to be an attorney and find enough precedents to get it, so you get your $5,000 back when it just took you how many man hours of research to figure out whether or not you have a case.

Yes, you spent six grand to try to get five grand back. Yes, there's certainly some of that. But I can't stress enough that you have to mitigate the loss as much as possible. So, I'll tell you a quick claim story when I was working on the carrier side. So, customer files this claim for a chandelier, and this chandelier was like $20,000, and they filed against us as the carrier. Now, the carrier is required to put you in the position you would have occupied if that loss or damage didn't occur. So, I went on eBay, and I bought the chandelier for five grand, and I sent them a brand-new chandelier. It's not my fault you paid 20 grand for something I could buy for five. But I put you in that same position you would have occupied. So, as far as the carrier's concerned, that's their obligation.

Now in that situation, did you even look into what happened or you just started with, "Hey, I found this at five grand, so let's start from this number to begin with."

Typically, the carriers will try to pinpoint where that damage or incident occurred. It's usually through a series of manifests on how that trailer is received from one location to the next, where they indicate the conditions of the goods as it's getting unloaded. In that particular case, the forklift operator literally drove over the top of it. So, there was no denying that claim, that's for sure.

It was one of those ones where people throughout the warehouse probably heard that noise, and just went like, "Whoop." 

Yes, it took them a couple hours to sweep up all the glass and make sure that there was no safety hazards left behind.

I was just going to say, is that one where in your OS&D or W&I that someone would ring a bell as soon as it happens, like, "Hey, this is going to come down the pipe, just letting you know"? Was there something like that where you got a warning before you might get a claim in?

Yes, you do get notified. It's not quite as bad as sticking a drum of gasoline with a fork blade, and then happened to get the kitty litter to kind of soak all that stuff up.

I imagine some of those fun – I mean an LTL terminal has to have so many different things coming in and out and moving, that it's impressive to me that this is more of an exception in a claim. The claims is an exception, not more of a, hey, this happens multiple times a shipment, every shipment type of thing.

Yes, things have gotten a lot better. I mean, when I first started in the industry, it was rarely that things were palletized. So, they literally would just stack stuff up. The motto back then was, high and tight. Load that trailer as full as you can, no empty space. So, you did that. In some cases, they would put up pallets behind the trailer, and back up the forklift into it to try to push more. So, you can only imagine –

It's me putting my clothes away when I was a kid in my closet, just slamming it back in. Then, when the doors don't go, getting a little extra muscle into it to make sure the door is closed. Yes, I can visualize this. The only difference is, there is a lot of freight, instead of just a bunch of dirty clothes. I like that.

Yes, exactly.

That is a crazy thought to just jam it in with pallets. I kind of like –

I'm not saying that happens now.

No, no, I know. I'm just – just the visual of it is, is amazing, because I'm like, yes, I can see how someone's like, "Well, it's got to work and we need it all in there. So, what's the problem?"

Not enough to fill a second trailer, so get it in the first one.

That's right. So, you said something on the fact that with fraud and theft, that it's kind of, it's going up and that's become more of a cause of the claim. Is that the only reason we're going to see probably more claims in the future, or are shippers more cognizant of the condition that they ship things and how they get them, or that's really not a part of it?

No, I think it's all the above. I mean, the reality is, I'm hopeful that the economy kind of rebounds going into next year. I think FreightWaves just posted last week that the recession is officially over, the freight recession. I guess that remains to be seen, but –

They announced it, it's done.

Yes, right. I hope so. But I think, in all reality, when you think about yellow freight going out of business, they brought down five carriers with them, the USF group, and roadway, There's so much capacity that has left the marketplace. That when things do rebound, you're going to have less capacity. So, you're going to have more handling, and you're going to have to put more cargo on that trailer. So, I anticipate that we'll see an uptick in freight claims. But with our system too, is we give you some insights on when and where your damages are happening to help you make some business decisions to ultimately prevent the freight claim. We know freight claims are going to happen. I know that sounds counterproductive that we want to help you prevent them. But ultimately, the power is in the data. We also provide some information on, what carrier is really paying the claim and how long is it taking them to pay it? So, when a carrier comes in and asks for an excessive rate increase, you have some data to better negotiate those increases with. That's what we want to provide.

Yes. You're not just looking at the scorecard of pick up and drop off, and even the price. Now, you're looking at, hey, if there is a problem, how fast until we get it resolved. That's interesting. Then, you probably have this from an ROI perspective. Without a system like Freightclaims.com, what was the average claim to resolution timeframe?

Yes. So, we figured, our research has shown that it takes on average seven to eight hours to work a claim from file to settled. Not in an eight-hour time period, but over in total.

I was going to say, that doesn't sound so bad. I was going to say, that probably happens over like what could be a six-month span.

Could be, yes, or years. I mean, there are carriers and I won't name any names. Not the household names, but there are carriers out there that will delay, delay, delay. 

And it's part of the strategy.

Yes. One thing, when I started in freight claims, most all carriers had a release value of $25 per pound. Now, you're seeing that tiered, so the release value is tiered based upon the freight class. So, our system kind of helps walk through that as well on what your expectations are, once that claim gets put in the system. So, we're working on some things behind the scene that I can't speak to just yet.

Don't worry, we got to have a reason to talk later anyways.

Yes. But no, I mean, getting back to it, I definitely think we'll see an uptick in freight claims coming as the economy starts picking back up again. But I also think, part of our education is, again, mitigating that loss to the carrier. The carriers are our partners. We don't want to upset them, but the carriers also, as a partnership, it works both ways, right?

Right, it hold the accountability. So, when you said that what you found was, sorry, the seven to eight hours total, what does that look like with something like Freightclaims.com? 

Yes. So, we've gotten it down to about two hours. It's mostly keeping you on task to make sure on when you're following up, what the expectations of the carrier are as far as those timeframes are concerned. More or less, one customer feedback they got is, before they had FreightClaims.com, they would have their monthly meeting and they would come up and say, "Hey, whatever happened to that $10,000 claim?" And they'd have to go search through their email program to figure out the last time they got an email. Now, with Freightclaims.com, all your emails and everything are contained underneath that individual claim. So, everything is at your fingertips.

It's almost like a ticket system where you've got that entire story of everything going on just at the grab. Now, I love that because within our Banyan TMS, we've always had the ability to mark a claim, whether it's operational or market issue, whether it's operational, whether it's rate-wise, or different reasons. But like you know, no carrier via API really does anything with that. So, up until this point, it's much been for an internal note or a ding like, "Hey, take a look at this shipment again. Something was wrong with it." What I'm super excited for is, once I hit that button in the TMS, and if I'm using FreightClaims.com, which you should if you're not doing anything, I can have that data sent right there and start that process. So, now, if I go into Freightclaims.com, I don't even have to go back into the TMS to figure out what BOL that was or not. It's going to have that ready for me to do the next steps within that process.

Yes, that's correct. Then, the pushback would be as far as the, as the claim gets updated in freight claims, it should push it back into the TMS to give that status update. So, you don't have to give every sales rep access to Banyan to figure out. You don't need to field emails and phone calls asking for status of a claim. As soon as it gets updated in FreightClaims, it'll push back into the TMS.

You see, that seems so important to me, not only because, like you said, there's money on the table here that just nature of the beast. But this is, as all of us are wearing more and more hats in each of our roles, you need something to keep you on task. Because, say it's me that somebody pulls me aside, hey, go look at those claims there. A day later, I'm on to the next three or four things I have going. I'm not going to necessarily be ready to follow up on those, and see where they're at, and grab the next steps. I mean, what kind of results and case study, what are the people that are using it saying about the process, about the change it's made?

Yes, visibility is the biggest thing. I mean, to your point. In Freightclaims.com, is you have the ability to flag a claim of stagnant if it hasn't been updated within a certain time frame that you choose. So, you set your own expectation behind that. If it hasn't been touched in seven, 15, 30, 60 days, then you'll get that flag, and it will become predominant on your dashboard that this one needs to be –

Hey, go do something with this. Yes, this one resurrected from wherever it's buried.

Yep, absolutely.

I mean, within that, are you using AI or any of the new technologies to power any of these pieces? What's the cutting edge of this other than just having it all in one place?

Yes. So, we brought in some AI. We're developing some additional AI right now to help more specifically on kind of those case laws that we were talked about earlier to quote back some information for you to use. But it's a little too soon to speak about that. But we do have some AI functionality in there right now with helping you write certain letters and email templates back into the carrier. We utilize a lot of templates. So, my background is freight claims. I literally have hundreds and hundreds of letters that would help with just about any freight claim that would ever get filed. With that, we can paste those into FreightClaims.com for you to use them over and over and over again.

So, standardizing that process that didn't used to have a real process before, that's a big win.

Yes, absolutely. AI is all the buzz right now. I guess it remains to be seen how far that'll go. Depending on who you talk to, everybody's got a different opinion. Some are saying, learn it or – some are saying, run towards it, don't run away from it. Then, some are saying, it's Y2K all over again. 

Yes, this is how SkyNet happens. Yes, I don't know. If the terminator is coming, it's my fault. It's because I didn't want to take those notes. I just wanted it done for me.

Yes. I think not to go off on that, but I think the biggest challenge to AI is the power use. Now, they're talking about bringing back nuclear energy and all that stuff.

I actually, I heard about like how much energy it takes to do some of the AI processing. It's like, I can't think of that, because all I can think about is how much time I just saved by not having to reformat all of this data here. So, I'm pretty bad at that. I'm a little like, "Yes. "Well, that's tomorrow Patrick's problem."

It's coming on quick though. 

It is.

One article I read though, that talked about even the use of power is that the transmission lines in the United States can't even handle that much energy going through it. So, I don't know how overhyped it is.

Maybe this is the excuse to get some of our infrastructure that has not quite been up to snuff for a while, up to, up to code per se. So, let's all get, let's all get some better bandwidth and infrastructure. I mean, I'm in Cleveland, Ohio, our, our potholes are – we're generally going up and down in a flat place. But I'll take some consistent bandwidth and transformers across the way. That seems like a good reason to do it. 

Yes, no kidding, huh?

No. Mike, I love what you guys are doing with the product. I love where it fits and saving people time, keeping their eyes on where the money is at, and how it's going. This is the part in the conversation where I kind of leave it open to you. What's your message to anyone listening now? Whether it's on freight claims, whether it's on the claims process as a whole, or just you to everybody at the holiday season of '24. What do you got to say to, I always joke, all 17 people watching this right now. 

I think you ought to request a demo. I mean, the thing about freight claims that you got to think about is, who does it affect when that cargo doesn't get where it needs to be? And then, how are you being compensated in taking care of your customer? Because ultimately, at the end of the day, whether you're a shipper or a broker, there is an end user of that product. How does it affect that user when that product's not getting there. And the holidays are coming up, and that freight is damaged. And now, suddenly, Christmas is ruined. 

It's ruined Christmas. That's right.

Yes. It's more about, freight claims is an extension of customer service. Whether you're a carrier or a broker, you still have to provide that service. Nobody likes to deal with freight claims. It's a very emotional topic. From my perspective, you got to take the emotion out of it, and look at the facts behind that freight claim. I keep pressing to make sure you're working with your carrier partner to mitigate the loss. They're doing their part too in offering you a way to putting you back in that position you would have occupied if that loss or damage didn't occur.

You hit a lot of good points there, Mike. Thank you, Mike, for talking to me today. I know I'm going to see you on some virtual calls coming up soon here. Eventually, I'm sure we'll have an opportunity to show whether in a webinar or another podcast, a little more of the software. But until then, guys, you heard it from Mike. Ask for a demo, whether that's – go to FreightClaims.com to let you know. It's going to lock into your brain there, you'll never forget it. Or if you're already using Banyan, talk to one of your Banyan reps, and we'll get Mike in front of you, and see how we could be making this a little easier for you. But Mike, thank you so much for talking with me today. I really appreciate it.

Thank you very much. And happy holidays, everybody. 

Hey, happy holidays to you. It's also my birthday today. I had to look up how old I actually was unironically, because someone asked, and I didn't have that answer on hold.

Are you going to share? How old are you?

I'm 37. All right. 

All right. Happy birthday.

You can't tell with just the beautiful hair like this that I'm still in the young, in my prime.

You don't have any grays.

I don't have any grays. They're coming in down here. I got one for each of the years of my children now.

I love it.

But yes, Mike, thanks so much. It was great meeting you in Atlanta. It's great talking to you now. I'm looking forward to putting you in front of a lot of people that I work with day in and day out to make it a little easier for them.

Thank you so much. Have a great day and happy birthday.

Hey, thanks, man.

To everybody else watching. If you like it, subscribe. If you don't, watch it anyways, and thanks for watching another Banyan Technology's Tire Tracks podcast. I'm Patrick Escolas. We'll see you out there. Thanks.