Things you need to know about Insuring Goods in Transit

goods insurance

When shipping goods from one place to another, there is always an element of danger. The goods may get damaged on the way, or there may be some sort of disaster and they don’t arrive at all. This is why insurance is essential, both for the shipper and the carrier.

When making a claim for damaged or lost cargo, it is necessary to understand the law. A claim for lost or damaged goods begins with the understanding that it is the carrier who is in breach of contract, and a claim is based on this, not upon negligence by the carrier.

The essence of the matter is that, when shipping goods, the carrier agrees to move them from point A to point B. In return, the shipper pays an agreed fee to the carrier. Implicit in the arrangement is that the goods will indeed arrive at point B and will be in good condition. If the goods fail to arrive, or arrive in a damaged condition, the contract has been breached, and this is what the shipper’s claim must be based on.

The contract for carriage can either be individually negotiated between the shipper and the carrier or may be the bill of lading or another document issued by the carrier. If the latter, they will typically incorporate by reference the carrier’s terms and conditions. This simply means that the contents of one document are incorporated into the other just by referring to it.

In most cases of lost or damaged goods it is up to the shipper to prove that they were in good condition at the point they were handed over to the carrier, the damaged condition at the point of delivery, and the amount of damages. After that, it is up to the carrier to defend, if it is going to.

This is where things can get very tricky because there may be more than one mode that the carrier operates in. For instance, the goods may be shipped by truck to a warehouse, loaded into a container, the container shipped by sea to a port, and then the container unloaded and the goods transported by truck to the final point of delivery. This means that the carrier was operating in several different modes and it is necessary to establish which mode the carrier was operating in at the time of loss or damage because different rules apply.

Motor, rail, international shipping, international air freight, domestic water, and domestic air freight all have different time limits for making claims and different time limits for filing a claim if the carrier disputes it.

For example, for international air freight, shipments are covered by the Montreal Convention of 1999 which sets time limits and limits of liability. A claim must be filed within 14 days for goods delivered damaged, and 21 days for delayed delivery. There is no set time limit for non-delivery, but airlines usually set a limit of 120 days from the issuing of the air bill for non-delivery. A lawsuit may not be brought after two years.

Ocean cargo is different again. For instance, shipments to and from the US are covered by the Carriage of Goods by Sea Act (COGSA) and the timeline to file a damages claim is just three days from delivery, while the timeline to file a lawsuit is one year from the delivery date.

All of this is why transit insurance coverage is so important both for carriers and shippers, and at The Insurance Broker we can help you with the right product. It is important to distinguish between cargo insurance and cargo liability insurance.

A carrier will have cargo liability insurance which only covers the liability of the carrier according to its’ terms and conditions. This is often a figure by weight, such as £2 per kilo. What that means is that if you ship a very expensive piece of equipment that only weighs, say, 10kgs, the carrier’s insurance would only pay £20.00.

If that item is worth £3,000, you, as the shipper are going to be considerably out of pocket. This is why you need to ensure that you are covered for the full value of all items to be shipped.