USPS OIG – Manually Adjudicated Indemnity Claim Payments


Our objective was to determine whether the U.S. Postal Service properly processed and paid manually adjudicated indemnity claims.

The Postal Service offers up to $5,000 of insurance coverage as protection against the loss of or damage to a customer’s package. When an insured item is lost or damaged, the customer may request compensation by filing an indemnity claim online, by mail, or at a postal retail unit. If an indemnity claim is domestic and valued at [redacted] or less, it is automatically adjudicated; otherwise, it is manually adjudicated. All international indemnity claims are manually adjudicated.

From fiscal year (FY) 2018 to FY 2020, the Postal Service paid [redacted] million related to about [redacted] million domestic and international indemnity claims, which includes nearly [redacted] million paid on [redacted] manually adjudicated claims.

To determine whether certain international destinations received disproportionate amounts of indemnity claims payments, we analyzed over [redacted] international indemnity claims from FY2018 through FY 2020 where the mail originated in the U.S. Based on our analysis the international destination with the most indemnity claims was [redacted], with over 3,000 claims, followed by [redacted] with over 2,100 claims. We noted eight countries each with over 1,000 claims filed.


Although domestic indemnity claims were processed effectively, Postal Service personnel did not always properly process and pay international indemnity claims. We statistically selected and reviewed 207 manually adjudicated indemnity claim payments consisting of 137 domestic and 70 international claims and identified no systemic issues with domestic indemnity claim payments. However, we found that Postal Service personnel did not have required documentation for 16 international claims in our sample. Further, they did not obtain the original receipt of the shipping invoice for Global Express Guaranteed, an international expedited delivery service, indemnity claims as evidence of indemnity coverage as required. Finally, they paid a bulk indemnity claim twice. Specifically:

The Postal Service processed and paid 16 insured mail indemnity claims without the customs form required by policy. Accounting Services personnel processed, and paid indemnity claims based on the International Indemnity Claims Form that does not require the customer to provide the customs form. They relied on information captured in the International Inquiry Claims System record as evidence of required postage and insurance coverage but declared value information from the customs form is not included in the International Inquiry Claims system for use during adjudication. In those instances, where declared value information is not provided by the customer or included in the international claims system, the Postal Service did not ensure the [redacted].

Global Business Office personnel did not obtain the original receipt of the shipping invoice for Global Express Guaranteed indemnity claims as evidence of indemnity coverage as required. Instead, they followed a service guide that states the original shipping receipt may be required when filing a claim. A transportation contractor adjudicates Global Express Guaranteed indemnity claims and submits an electronic file to the Postal Service to allow them to reimburse customers for loss or damage. Global Business office personnel did not validate the electronic claims data before payment. They reconciled paid claims data quarterly with historical and postage rates data for applicable countries. While this quarterly reconciliation may identify rate exceptions, it could not ensure that the Postal Service did not pay more than the insured amount.

Personnel paid both the requested amount and the approved amount for the same bulk indemnity claim. This occurred because, according to Postal Service personnel, this was the first time they processed and paid a claim to this bulk mailer and they used an undocumented manual process to make the payment. Soon after making these payments, management standardized the approval email and better identified the requested versus the eligible amount for payment. As a result of our audit, management recovered the erroneous amount from the mailer.


We recommend the Managing Director, Global Business:

Update and communicate manually adjudicated international indemnity claim processing policy to ensure it aligns with the Product Tracking and Reporting System and the International Inquiry Claims System.

Modify the International Inquiry Claims System as appropriate based on updated policy to capture and maintain declared value information for processing international indemnity claims.

Implement procedures to [redacted] the Global Express Guaranteed indemnity claims [redacted].

Update the International Mail Manual and Global Express Guaranteed Service Guide to align with policies and procedures to pay Global Express Guaranteed indemnity claims, including [redacted].

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