Cargo Freight Insurance. Cases Insurance will never pay.

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Shippers hire Freight Insurance throught a freight forwarder, wich provides an important function as a person or company that organizes shipments of freights for their customers, helping them to transport their goods either from the producer or manufacturer to the market or any other desired distribution point. Freight forwarders are responsible to their shipping clients with respect to the services and advice they provide to them. 

If a physical loss or damage to their cargo is encountered, the freight Forwarder has to defend their liability based on the terms of the agreement. This could also mean a reimbursement to the cargo owner for the experienced loss or damage to their cargo. 

Freight Forwarders and other shipping agents are more vulnerable today than ever before. If errors and mistakes are involved, they could amount to costly financial settlement for the cargo owner.

About Freight Insurance and Coverage

Freight Insurance is an Insurance policy which protects Freight forwarders offering services such as carrying, storage, or facilitating the transportation of third party cargos. If Freight Forwarders are deemed liable under the specific terms and contractual obligations they entered into with their client, they may reimburse the shipper for the loss or damage to their shipped cargo. This type of insurance pays for covered damages or loss for which the Freight forwarder is found liable for, including claims and other cost made against the Freight agent.

What is the Legal Liability of Freight Forwarder Insurance?

The freight forwarder has some legal liabilities for loss or damage of shipper’s cargo subject to the terms of the insurance policy. The shipped merchandise will be automatically covered through the legal liability limits provided under the governing Freight shipping laws.  When a freight forwarder enters into a contract with a shipper, the forwarder is liable if they fail to use diligence in handling the shipping and delivery of the customer’s goods. Under such terms, if the freight forwarder fails to exercise such required due diligence they are required to compensate the shipper for any loss, or damage of their goods subject to the limitations of the policy liability often referred to as SDR. The Freight Forwarder should also pay back the shipper for any direct financial loss resulting from the Freight Forwarder’s breach of their duties and responsibilities.

Non Liability Insurance conditions

According to the rules of  FIATA Model, no freight insurance will be effective unless instructions are provided in writing by the customer or the Shipper. The Freight insurance policy shall be effected subject to the conditions and limitations of the insurance policy.  Unless these conditions are agreed upon in writing, the Freight Forwarder shall under no condition be bound by an obligation to effect new insurance for each assignment. They may declare this condition on an existing and open policy which is held by the freight forwarding Company. The freight forwarder has no liabilities in cases involving acts or omissions resulting from third party transactions including:

  • Carriers
  • Warehousemen
  • Stevedores
  • Port authorities

Nevertheless Freight Forwarders may be held liable involving the above listed cases if they fail to also use due diligence in the handling of such third Party deals. The freight forwarder has legal liability when they take the role of a Principal, when they are performing the carrier’s responsibility through the use of their own transportation means. Such situation mandates Freight Forwarder liabilities particularly when they issue their own transportation document meaning they have in effect assumed carrier’s responsibilities. In situations where the shipper has received or has been issued a transport document from other agents other than the Freight forwarder, then Freight Forwarder may not be held liable under this situation. Freight forwarder shall be held liable when:

  • They perform principal’s services by themselves, using facilities which they own or performing work through their employees
  • When the Freight Forwarder undertakes liability as the principal

Freight Insurance. Freight Forwarder.

Financial Limitations of Freight Forwarders Insurance

Under normal circumstance the freight shipper may get reimbursed for all their freight damages or loss of their cargo on transit. Generally these items are covered through the Freight insurance policy provisions. At times, the Carrier insurance may reject some settlement claims due to certain conditions not addressed or not covered as part of the policy. The shipper will hold the shipping broker or shipping agent as some call them still responsible for the loss or damage of their goods and merchandise which may be lost or damaged during the course of the transportation process. Realizing their exposure to risk, the freight brokers and agents may also realize their risk exposure under this scenario and the needs to guard and protect themselves against such risk and possible claims when certain situations result in the carrier refusing to settle the claim. Contingent insurance comes to play when the insurance carrier refuses to pay for all the loss. Freight Forwarders may not be held liable for a loss or damage of goods if the total amount exceeds 2 SDR per each kilogram of the total gross weight of the lost or damaged goods, unless the greater amount is recovered from the primary shipper. All goods not delivered within 90 days of the expected delivery date, the owner of the goods may consider the goods as lost.  There are limitations for liability for delay, which is limited to an amount not exceeding the total value of the service which necessitated such delay. The Freight Forwarders liability for any other type of loss shall not exceed 10.000 SDR for any occurrence of such incident but if a larger amount is received from the person to whom the Freight Forwarder is primarily responsible, total payment may exceed 10.000 SDR.

Freight Forwarders Liability exclusions

Freight Forwarder will not be held liable for the following:

  • Undeclared Valuables
  • Undeclared Dangerous goods by the Forwarder up to the contract conclusion time
  • No compensation from loss associated from delay unless such loss is agreed in writing
  • Indirect loss from consequential circumstances
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