Cargo Insurance Claims Can Become Very Complicated
When you have a business which involves shipping goods to your customers, such as if you are a manufacturer, retailer, or distributor, one of the things that can become a major headache is cargo insurance claims. If something is damaged in transit and has a value of £1,000, if your business’s net profit is 2.5% and you are unable to recover that £1,000 you are going to have to make another £40,000 in sales to recoup the cost.
Most business people only have a very vague knowledge of how claims for lost or damaged cargo work, if indeed any at all.
The first thing to note in a claim for damage or loss to cargo is that the claim has nothing to do with whether or not the carrier was negligent but is based upon breach of contract by the carrier. The carrier agreed to take goods from point A to point B and the shipper agreed to pay his fee. The carrier failed to do so. Either that or he failed to deliver them in the same condition in which they were handed to him, and that puts him in breach of contract.
Now in order to establish a claim it is usually the shipper who has to prove the claim, and this means that he must be able to prove that the goods were in perfect condition at point A and damaged when they arrived at point B. Either that, or they did not arrive at all. He must also prove the amount of the damages. Having done this, the problem then becomes that of the carrier.
However, that is by no means the end of the problem because when dealing with a claim there are different rules for different modes of transport. So there are rules regarding road transport, rail transport, domestic water transport, international ocean transport, and domestic or international air transport. Not only are there different rules but there are varying time limits for filing a claim if the carrier denies liability.
It gets even more complicated because back in the day, a carrier would only operate in one of the various modes. So a road transport company would only carry goods by road, an air freight company by air, and so on. Today, a lot of operators work in a variety of different modes which means that it is now necessary to ascertain in which mode the carrier was operating when the damage or loss occurred in order to know which rules apply. This can get very tricky when dealing with international cargo insurance claims that may involve multiple different carriers operating in different modes.
Now there is also the question of cargo insurance. There is a difference between cargo insurance and cargo liability insurance. A carrier has cargo liability insurance which covers for loss or damage while in his possession, but he may also have a tariff limit. So for example, there may be a limit of, say, £2 per kilo by weight of goods carried. This may bear no relation to the actual value of the goods if, say, an extremely high value piece of electronic equipment was destroyed.
For this reason, if you are a shipper, you may want to purchase shipper’s interest cargo insurance which we can help you with at The Insurance Broker. Such a policy is not based on fault, so the carrier’s limit of liability is irrelevant. However, as with all insurance policies there will be exclusions and possible deductions, so we will work with you in order to make certain that the goods you are shipping are indeed insured.