Cargo Insurance

The importance of cargo insurance.

Avoid the risks of an uncovered loss.

  • If your cargo is damaged or destroyed while in transit and not insured, your company will probably incur a financial loss unless proper insurance had been obtained. Our “all-risks” policy covers domestic and international shipments from the time the goods leaves the seller’s premises until the cargo reach’s the buyer’s warehouse, subject to policy terms and conditions.  

Avoid the uncertainty of recovery from carriers.

  • If you think you can recover your losses from a carrier, you should consider the risks involved you must:
  • *Prove the cause of the loss.
  • *Prove the loss occurred while your cargo was in the carrier’s possession. 
  • (You have no legal recourse against the carrier if your goods were not in the carrier’s possession when damaged.)
  • *Prove the carrier is liable and directly caused the loss.
  • (You have no legal recourse against the carrier for losses caused by storms and other acts of nature.)
  • *Prove which carriers were liable.
  • In addition, even if you can prove liability, the amount you can recover on international shipments is limited to:
  • Air shipments: 17 Special Drawing Rights (SDR) per kilogram: Ocean shipments: $500 per Customary Shipping Unit: Trucking $0.50 per 100 pounds

Vessel Owner’s Limited Liability

The Hague/COGSA Act was developed to protect vessel owners against legal liability to shippers for circumstances out of their control. It was conceived during the post World War 1 era when vessel owners had little jurisdiction over their ships once they left port. COGSA, the Carriage of Goods by Sea Act, limits vessel owners’ liabilities to $500 per shipping unit. It also relieves all their liability to shippers in 17 situations known as the 17 Hague/COGSA Defenses. This means shippers have no legal recourse against vessel owners when their goods are lost or damaged by these 17 causes.

 

The 17 Hague/COGSA Defenses

Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from:

  • Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship
  • Fire, unless caused by the actual fault or privity of the carrier
  • Perils, danger, and accidents of the sea or of other navigable waters
  • Act of God
  • Act of war
  • Act of public enemies
  • Arrest or restraint of princes, rulers or people, or seizure under legal process
  • Quarantine restrictions
  • Act or omission of the shipper or owner of the goods, his agent or representative.
  • Strikers or lockouts or stoppage or restraint of labor from whatever cause, whether partial or general: Provided that nothing herein contained shall be construed to relieve a carrier from responsibility for the carrier’s own acts
  • Riots and civil commotions
  • Saving or attempting to save life or property at sea
  • Wastage in bulk or weight or any other loss or damage arising from inherent defect, quality, or vice of goods
  • Insufficiency of packing
  • Insufficiency or inadequacy of marks
  • Latent defects not discoverable by due diligence
  • Any other cause arising without the actual fault and privity of the carrier without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit of this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage

Air Carriers’ Limited Liability

  • The Warsaw Convention was developed to protect air carriers against liabilities to shippers.
  • Air carriers’ liabilities are limited to 17 Special Drawing rights (SDR) per kilogram for international shipments. To recover the actual value of their lost or damaged goods, shippers decide many times to declare value with air carriers. Even when value is declared with the airline, there are provisions, which can still make recovering losses from air carriers difficult and time consuming. “All-Risks” insurance protects shippers against physical loss or damage to cargo from external causes subject to policy terms and conditions. With “All-Risks” insurance, shippers receive protection from warehouse to warehouse without needing to prove carrier liability.
  • Your open policy allows you to insure airfreight shipments of approved general merchandise at a minimal cost, so you can provide your customers with more comprehensive coverage than that offered by the airlines. Can you really afford not to insure your cargo?

 “All-Risks” Insurance vs Declared Value

 “All-Risks” Insurance

 “All-Risks” insurance protects the shipper against physical loss or damage to their cargo from external causes, subject to policy terms and conditions. It is not necessary to prove   the carrier’s liability.

Declared Value

Declaring value to a carrier is not the same as providing insurance protection for merchandise in transit. If there is a claim against a carrier, the shipper has to prove the carrier caused the damage. This makes recovering losses very difficult.

What this means to you as a client If merchandise is damaged in transit and the carrier didn’t cause the damage, you won’t be able to recover the loss. “All-Risks” insurance provides protection without having to prove carrier liability.

General Average Protection

Not only can ocean carriers limit their liability, they can actually hold the shipper/consignee liable under certain circumstances by declaring a General Average. General Average is based on equity and from antiquity has been recognized by the laws of all maritime nations. It has been defined by the United States Supreme Court as follows:

  “General Average is a contribution by all the parties in a sea adventure to make good a loss sustained by one of their number on account of sacrifices voluntarily made of part of the ship or cargo to save the residue and lives of those on board from an impending peril, or for extraordinary expenses necessarily incurred by one or more of the parties, for the general benefit of all the interest embarked in the enterprise.”

 If a General Average is declared, your may have to share in all losses incurred to   the property involved in the voyage. This includes loss or damage to cargo and/or damage,   repairs to the vessel itself. If you have no insurance or if you are relying on other insurance, you may not have adequate coverage. Your “All-Risks” policy covers General Average losses, including the cash deposit, which may be required to get the goods, released.

The classic example of General Average sacrifices is jettison to lighten a stranded vessel.

Jettison is the throwing overboard of cargo or ship’s material, equipment or stores. Most general averages are caused by stranding, fires, collisions or when a vessel is engaging in salvage assistance or putting into a port of refuge due to an accident during the voyage.

Under the proper conditions a vessel owner will declare the vessel under General Average. In view of its complexity, the adjustment of a General Average is entrusted to professionally trained average adjusters and quite frequently takes two years or more to complete.

Without “All-Risks” or FPA cargo insurance you as an importer/exporter would be forced to post cash deposit with the vessel owner to have the cargo released. This deposit would likely be tied up for two or more years until the General Average adjustment could be complete.

Make your premium dollars work harder.

  • With other insurance, you may be paying full coverage rates for insufficient coverage. With the high volume of insurance we purchase, we can secure lower rates than individual shippers can. That’s how we provide complete warehouse to warehouse coverage at competitive rates.

Reduce your paperwork.

  • We handle all the administrative paperwork from completing the application to issuing the insurance certificates of insurance. You’ll avoid the paperwork and administrative costs associated with securing insurance.

Avoid the risks of exporting without insurance.

  • When selling goods under FOB, FAS, or C&F terms of sale, the buyer is responsible for loss or damage to the goods, once they are loaded on the vessel. However, if goods are sold under an open account and the buyer failed to insure or properly insure the cargo, the buyer is less likely to pay the seller.
  • Under certain FOB, FAS, and C&F terms of sale, the seller may be responsible for loss or damage to the cargo until the cargo passes the ships rail and is loaded on the vessel. Therefore, the seller may still need to secure cargo insurance for the first portion of the voyage. With the buyer’s insurance in effect for the remainder of the voyage, two insurance companies would be involved if a claim occurs. If questions arise over when the loss occurred, claims payment could be delayed.
  • Since the additional cost for insuring warehouse to warehouse rather than just insuring warehouse to port is usually minimal, why not sell CIF and control the cargo insurance all the way to the final destination?

Avoid the risks of importing on Cost Insurance Freight (CIF) terms.

  • If your insurance is with a foreign insurance company, your claims handling may be difficult and time consuming.
  • Coverage conditions and restrictions may not be apparent.
  • Your insurance cost may be hidden in the product and shipping charges. You may be paying more than you should.
  • Your foreign insurance may not cover a general average deposit.
  • Your foreign insurance may not be warehouse to warehouse.

Receive excellent service.

With our access to your claims documentation and a strong working relationship with the insurance company, we’ll facilitate a fair and timely settlement. We’ll eliminate the inconvenience and paperwork involved in the claims process.

How can I get my cargo insured?

It is better to reach your shipper to include the insurance charges along with shipping rates as we do with our clients here in Dubai; where we consult our clients if they might require insurance for their cargo.

 

For more details; please don’t hesitate to contact our customer services department for further details.

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