Shipments in transit are subjected to numerous perils. Goods may be damaged in a storm or fire, stolen, involved in a collision or just mishandled. To protect against financial loss, consider obtaining Shipper’s Interest Cargo Insurance.
In addition to covering loss or damage, Cargo Insurance also protects against General Average, pays for the costs to minimize a loss and pays for damage inspection (survey). Carriers also have limited liability and are provided legal defenses which absolve them of responsibility entirely. Cargo Insurance pays covered claims without the need to prove fault. So, the question is Why not insure?
How are carriers liable?
Carriers do not pay claims unless they directly cause or contribute to the loss. Even when carriers are legally liable for loss or damage, however, the amount they will pay is limited based on the mode of transport.
The Carriage of Goods by Sea Act (COGSA) governs carrier liability for goods shipped via ocean to/from the United States. Recovery is limited to $500 per customary freight unit, and only when the carrier is negligent. A “freight unit” can vary from one container to one pallet.
For air carriers, two liability conventions exist. The Warsaw Convention limits liability to $9.07 per pound or $20 per kilogram. The Montreal Convention (used in the United States), changed this limitation to 19 Special Drawing Rights (SDRs), or about $30 per kilogram.
Many domestic air, intrastate road carriers and warehouse operators limit their liability to $0.50 per pound or $50 per shipment, based on their bill of lading or warehouse receipt. Interstate truckers are governed by the Carmack Amendment, which dictates full value, but allows for limitations of liability in bills of lading, tariffs or contracts. Some carriers will also have inadequate or no liability insurance and may be unable to fund a loss out of pocket.
How CargoTrans can help…
We can offer comprehensive “All-Risk” coverage for cargo in transit, including Free of Particular Average and With Average alternatives.
CARGO INSURANCE COVERAGE OPTIONS
- “All-Risk”: Provides the broadest form of protection available. Goods are covered for loss or damage without the need to prove liability. An easy way to remember “All-Risk” coverage is “everything is covered, except what is excluded.” Typical exclusions include improper packing, inherent vice or rejection of goods by Customs.
- Free of Particular Average (FPA): Offers less protection than “All-Risk” coverage, but is a good option for commodities like used goods, waste materials and scrap metal. A good way to remember FPA coverage is “the only covered losses are specifically named.” Perils covered under FPA include: sinking, collision, General Average, fire and washing overboard, to name a few.
- With Average (WA): Extends FPA to cover heavy weather. Many shippers choose to add theft, pilferage and non-delivery to WA and FPA.